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File photo of cars traveling between Germany and Switzerland. Image has been used for representational purpose. (REUTERS)
File photo of cars traveling between Germany and Switzerland. Image has been used for representational purpose. (REUTERS)

How Europe plans to check Chinese investments in automotive companies

  • Investments made to acquire more than 10% stake by foreign companies could come under scanner and may require permissions.
  • Many in European countries have highlighted national interests as reasons to possibly keep a tab on Chinese investors, some of whom may be backed by the Chinese government.

Several big and widely known European brands in the automotive world have had Chinese investors pump in money over the last several years. Some Chinese companies even took over control of these brands. Across the continent now, there appears a conscious effort afoot to check Chinese investments, stemmed perhaps from the fact that some of the investors may be backed by the Chinese government itself.

While the check expands across sectors, the automobile industry in Europe is likely to attract maximum scrutiny. Germany, for instance, is considering amendments to existing laws that would make getting approvals mandatory for foreign investors looking at taking more than 10% stake in an automobile company, apart from pharmaceuticals and AI as well. "We have learned in recent years that we need tools to protect the German economy and Germany from undesirable investors," Andreas Lammel, an MP, was quoted as saying by New York Times. "But it can’t be an impermeable shield."

(Also read: How restrictions on tyre imports will curb inflow from China, help Indian units)

Other countries like Poland, Czech Republic and Austria are also reportedly looking at ways to keep a close watch on Chinese investments, especially in the automobile sector as there is a perceived threat to national interests.

Automotive and automotive component-making companies which are controlled by Chinese companies/nationals include Sweden's Volvo Cars and Italian tyre-maker Pirelli. China's Geely Motors controls Volvo and almost as notably, the company bought a little less than 10% stake in Mercedes-maker Daimler as well. Geely also has controlling shares of Lotus. State-owned SAIC Motor is the parent company of UK's MG brand which was first purchased from MG Rover by Nanjing Auto in 2005.

Despite the more serious look into Chinese investments in Europe-based companies, analysts say there is no denying that such investments are still considered a necessity. The figures, however, have been coming down steadily in recent years. Reports suggest Chinese investments in the continent in 2019 was only a third of investments made in 2016. These figures may continue to slide further as the global economy paddles the murky waters created by Covid-19 pandemic and also in part by a closer look by countries into Chinese investments.

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