Chinese investments in Italy’s automotive sector: marginality or potential attractiveness of the Italian automotive production ecosystem?

Keywords:

Abstract:

Chinese companies have increasingly turned their attention to Europe’s automotive industry over the past two decades, driven by the need to access advanced technologies, strengthen global market presence, and align with global trends in electrification and sustainability. Geely has fully acquired Volvo Cars in 2010 and London Electric Vehicle Company in 2013, and has significant shareholdings in Lotus and Daimler. In April 2024, Chery and the Catalan company Ebro-EV Motors formed a joint venture to produce EVs under Omoda and Ebro brands. BYD’s EV production plant in Hungary was announced in December 2023 and scheduled to begin operations in 2025. In addition to complete vehicle production, investments from Chinese battery companies have also surged. CATL, the world leading producer of EV used lithium-ion batteries, has invested in battery plants in Germany and Hungary, and a recent joint venture with Stellantis in Spain. BYD is also building a battery factory in Hungary to produce high-quality lithium iron phosphate (LFP) batteries. AESC, an emerging leader in providing innovative and sustainable battery solutions for EVs and energy storage systems, is investing in France, UK and Spain. Even leading Chinese battery material suppliers such as Tinci, SEMCORP, GEM, Kedali and Huayou are accelerating their investments in Europe.

Meanwhile, the European public debate on the automotive sector has also increasingly focused on the potential for revitalising national production, frequently highlighting the prospect of investments by Chinese companies. This shift is driven by several factors, including the need to modernise aging industrial infrastructure, increase production capacity, and transition towards greener, more sustainable technologies. Chinese companies, with their significant expertise in electric mobility, battery technology, competitive manufacturing capabilities, and financial resources, are seen as key players in helping European countries meet these challenges. However, these proposals are also met with caution, with some stakeholders raising concerns about dependency on non-European firms for critical technologies and the impact on local industry dynamics.

Until now, the presence of Chinese investors in Italy’s automotive and components sector remains relatively limited, both in terms of direct investments and share ownership. This phenomenon can be attributed to several factors. Firstly, Italy has been experiencing a significant decline in national production over the past several years, which has likely contributed to the reduced attractiveness of the sector for foreign investors. Secondly, the electric transition in Italy is hindered by a combination of lower consumer demand, insufficient infrastructure, limited investment from key players, and less supportive policies. According to data from the National Institute of Statistics (ISTAT), at the close of 2022, there were only 147 foreign companies operating within Italy’s automotive sector, representing approximately 4.5% of the 3,500 firms within the broader industrial sector. Of these foreign companies, the number of Asian automotive companies, particularly those originating from China, was very limited, fewer than 20 entities. While this data provides a useful snapshot of the Chinese presence in Italy’s automotive industry, it likely underrepresents the actual level of involvement.

The objective of this study is to examine the increasing complexity and multifaceted nature of Chinese involvement in Italy’s automotive sector. Notably, engagement with Italian enterprises appears to be more prevalent than direct investment. This shift is particularly evident in two key areas. First, the value of car imports from China has experienced significant growth, rising from €400 million to approximately €800 million between 2017 and 2024. Second, Chinese automobile manufacturers have expanded their market presence through strategic agreements, such as the partnership between the Italian company Dr Motor and several Chinese firms, including Chery, JAC, BAIC, and Dongfeng. Additionally, emerging Chinese brands with a competitive price-to-value ratio and premium design are gaining traction in the Italian market through both online and offline channels, with notable examples including BYD, Omoda & Jaecoo, and Lynk & Co. Furthermore, there is increasing integration within the supply chain, as evidenced by BYD’s ongoing selection of Italian suppliers to support its newly established production facilities in Hungary and Turkey.

This study aims to offer a comprehensive mapping of Chinese industrial involvement in Italy’s automotive sector, focusing on both existing and emerging forms of value chain penetration. The primary objective is to analyse Chinese foreign direct investments (FDI) within the sector, identifying companies with significant stakes in Italian firms. To achieve this, the research will leverage data from the Automotive Ecosystem Transitions Observatory and the AIDA database, as well as additional insights gathered from sources such as the Chinese Chamber of Commerce in Italy, selected Italian Chambers of Commerce, and industry stakeholders, including employer associations and trade unions.

Building on Institutional Theory, this study will explore the extent to which formal and informal institutional factors shape Chinese investments in Italy’s automotive sector. The analysis will examine the role of Italy’s legal, regulatory, and policy frameworks, as well as the influence of social partners (such as employers and trade unions) and local public opinion on Chinese market penetration strategies. Specifically, the research will investigate whether the Italian institutional environment creates both opportunities and barriers for Chinese investors, influencing their investment choices and strategic decisions.

Additionally, applying the OLI framework, the study will delve into whether Chinese FDIs and acquisitions reflect strategic penetration decisions based on ownership, location, and internalisation advantages. The research will explore how Chinese firms’ ownership advantages, such as advanced EV technologies and competitive manufacturing capabilities, align with Italy’s location advantages, including its automotive ecosystem, skilled workforce, and EU market access. The study will also assess whether internalisation advantages, such as maintaining control over production processes or securing intellectual property, influence Chinese firms’ decisions to establish wholly owned subsidiaries or joint ventures in Italy.

Furthermore, the paper will assess the potential implications of an increased presence of Chinese investors on the broader Italian automotive supply chain. A key question is whether Italy’s automotive sector continues to hold strategic appeal for Chinese manufacturers and component producers seeking to penetrate the European market. In this context, the research will evaluate the role of Italy’s automotive component sector, focusing on its expertise, research and development capabilities, and whether these factors remain attractive to Chinese investors.

Although the presence of Chinese companies in Italy’s automotive sector remains relatively limited compared to other European markets, this study highlights the increasing sophistication of their engagement strategies and the mutual benefits that such involvement can bring. Italy’s automotive production ecosystem – rooted in a strong heritage of design, innovation, engineering, and manufacturing – offers an attractive environment for Chinese firms seeking to expand their footprint in Europe. At the same time, the entry of leading Chinese automakers and suppliers into the Italian market presents a valuable opportunity for Italy. As the global industry undergoes a profound transformation towards CASE (Connected, Autonomous, Shared, and Electric) technologies, this collaboration can drive economic growth, generate employment, and enhance Italy’s position in the global EV and sustainability race.