The news quickly gained traction: In July, the Chinese electric vehicle (EV) manufacturer BYD (Build Your Dreams) announced its intention to invest USD 1 billion in Turkey. In the western part of the country, in the industrial city of Manisa, BYD intends to build a manufacturing compound capable of producing 150,000 electric and hybrid vehicles. Moreover, BYD also plans to establish a research and development centre near Izmir.
BYD’s choice of Turkey is an industrial policy success for Turkey’s president, Recep Tayyip Erdoğan. In addition, it further cements the growing economic cooperation and logistical linkages between Ankara and Beijing.
A stepping stone into the European market
BYD’s investment signals the entry of the world’s leading EV manufacturer into the Turkish market. This development has major implications for European competitors in the sector and the European Commission in Brussels. Turkey’s customs union with the European Union (EU) plays a decisive role for BYD’s manufacturing and export capacity. Because it will be producing automobiles in Turkey, BYD can expand its supply chains in Europe without having to pay the additional custom duties on Chinese EVs that were introduced by the Commission in July 2024. With such strategic “tariff jumping”, BYD obtains pricing advantages on EU markets.
Selecting Turkey as the location for a new EV manufacturing plant is an acknowledgement of the changing production potential of the Turkish automotive industry. Chinese investors such as BYD are taking advantage of the sector’s growing export capacity. In recent years, the industry has expanded its innovation ecosystem with the manufacture of Turkey’s first domestic EV, the Togg.
It is equally noteworthy that BYD’s decision to invest in Turkey contained a key “sweetener”. The government in Ankara suspended import levies totalling 40 per cent (on top of the purchasing price) for EVs from China. Suspending tariffs to encourage manufacturers such as BYD to invest and produce in Turkey is paying off for both sides. Ankara leveraged its position because BYD does not have to pay Turkish levies now or EU tariffs in the future.
The Sino-Turkish agreement also has another notable characteristic: The joint venture is being welcomed across the party spectrum in Ankara. Given the political polarisation in Turkey, this is not a given. It underlines the significance of the bilateral agreement, which constitutes the single-largest Chinese foreign direct investment in Turkey of the past decade. BYD’s commitment will invigorate the Turkish automotive supply industry and trigger a technological windfall in the country’s manufacturing sectors.
Global implications and European challenges
BYD’s choice of Turkey is unchartered territory for the EV manufacturer. In the medium term, it will establish a valued-added network for electric mobility and lead to the import of raw materials for battery production, and ultimately the final assembly of various EV models within the growing BYD portfolio.
The joint venture further opens European export markets and provides access to destinations in the Middle East, neighbouring Turkic states, and on the African continent. In sum, BYD’s Turkish initiative is more than a regional manufacturing project – it reinforces the global expansion strategy of the Chinese EV manufacturer.
This raises the question as to how the EU should react to such a challenge. Apart from the focus on Turkey, BYD’s European manufacturing expansion also includes the EU member stat Hungary, where a second EV production facility is being built. Investments by the Chinese EV industry in countries such as Turkey and Hungary are based on a strategic calculation. Both countries’ bilateral relations with China are not defined by trade disputes and the potential imposition of sanctions.
BYD’s investments illustrate how Chinese EV manufacturers are implementing strategies to circumvent protectionist measures through the back door. Turkey is a key corridor to that end. The future of EV mobility is increasingly being decided at the crossroads between East and West, with Turkey playing a central connecting role.
Avoiding EU tariffs on Chinese EVs opens the door for BYD to make lucrative sales in the Single Market. In light of this challenge, the EU must reconsider its trade policies towards non-EU countries. In that respect, the current discussions about a modernisation of the customs union with Turkey should receive added urgency and relevance. Expanding the customs union should therefore include issues such as the transparency of supply chains and revised subsidy regulations regarding the manufacture of Chinese EVs in Europe.
