Magna Steyr to build GAC and Xpeng EVs in EU tariffs dodge

Austrian contract manufacturer Magna Steyr is to start production of the GAC Aion Y and Xpeng G6 in June.

The move comes as Chinese car makers seek to establish operations in Europe to circumvent increased EU import tariffs on EVs from China.

Magna Steyr's Graz facility, which has an annual production capacity of around 200,000, has to date built more than four million vehicles for a diverse variety of brands.

But with current contracts (including those from BMW and Toyota for the production of the Z4 and GR Supra) winding down, Magna has been seeking new clients to maintain operations following a round of retrenchments in 2024.

Its new partnerships with GAC and Xpeng will involve production in a semi-knocked-down (SKD) process, wherein partially assembled G6s and Aion Ys are imported from China and completed in Austria.

This approach allows manufacturers to avoid full EU import tariffs (Xpeng currently faces a 21.3% tariff) while keeping investment costs relatively low.

It also provides Chinese car makers with an opportunity to test the European market before committing to larger-scale production facilities.

Magna Steyr is a subsidiary of Canadian firm Magna International. Its Graz plant, which traces its roots back to Steyr-Daimler-Puch, has been a cornerstone of its operations since 2001.

Notably, it has produced the Mercedes-Benz G-Class for over four decades.

In addition to its European operations, Magna has a significant presence in China. It has been involved in producing cars for BAIC EV brand Arcfox at a facility in Zhenjiang.

At the same time, Magna Steyr is also heavily involved in the development of the Volkswagen Group’s new Scout brand's Traveler SUV and Terra pick-up, including their Harvester range-extender drivetrain.

Magna Steyr has faced recent challenges, including the bankruptcy of Fisker, for which it produced the Ocean EV and held a stake.

The financial troubles of Fisker led to concerns about the future of the Graz plant, but the new contracts with Xpeng and GAC are expected to provide a solution to its excess production capacity.