Magna in Talks to Assemble EVs for Xpeng and GAC
Magna Steyr, a prominent contract manufacturer, is reportedly in discussions to assemble electric vehicles for two major Chinese automakers, Xpeng and GAC, in Austria. According to a report from the German publication Kleine Zeitung, assembly could begin as early as June at Magna’s Graz plant. This move is seen as a strategic attempt to circumvent the special EU tariffs imposed on electric vehicles manufactured in China. While Magna has not yet confirmed the reports, the potential deal highlights the evolving landscape of the electric vehicle market and the strategies manufacturers are employing to navigate trade regulations.
The Xpeng G6, one of the models Xpeng offers in Europe.
The Kleine Zeitung report suggests that Magna is on the verge of securing assembly orders for these two Chinese brands. The specific models slated for production in Graz have not been disclosed. Xpeng currently offers the G6 and G9 SUV models and the P7 sedan in Europe. GAC, or its sub-brand Aion, has yet to launch its electric SUV, the Aion V, in Europe. However, the exact model is of secondary importance, as the initial focus would be on small-scale assembly rather than large-scale production.
The strategy behind this potential deal involves a manufacturing process known as semi-knocked-down (SKD) production. This approach involves assembling vehicles in one country, partially disassembling them, and then exporting the components to another country for reassembly. In this case, components would be shipped to Graz, Austria. This method allows companies to take advantage of different customs rates. The primary motivation is to avoid the EU’s special tariffs on electric vehicles imported from China.
Xpeng, for example, would face a 21.3 percent special tariff in addition to the standard 10 percent import tariff, a substantial increase. By assembling the vehicles in Austria, these special tariffs could be avoided. This could provide a competitive advantage for Xpeng and GAC in the European market.
Magna Steyr’s contract manufacturing operations in Graz have recently experienced a decline. In 2023, the plant built over 105,000 cars, but this number dropped to 71,900 last year. Jaguar has already ceased production of its I-Pace at the plant. Contracts with BMW and Toyota are set to expire in 2026. Additionally, Fisker, who had engaged Magna to build its Ocean electric SUV, is now bankrupt. An order from Ineos to manufacture the electric off-roader Fusilier was withdrawn. This potential agreement with Xpeng and GAC could help revitalize Magna’s Graz plant and maintain its position in the automotive industry.
