BYD agrees $1bn deal to build electric vehicle plant in Turkey

BYD has agreed a $1bn deal to build an electric vehicle plant in Turkey, as China’s largest carmaker looks to increase its European production and continue its overseas expansion.

The plant will be capable of producing 150,000 vehicles a year, the Turkish government said on Monday. It is expected to begin production at the end of 2026 and create about 5,000 jobs.

The pact comes as Warren Buffett-backed BYD, the world’s second-largest EV maker after Tesla, looks to tap the large EU market at a time when Brussels is clamping down on access for cars imported from China. BYD is also building a plant in Hungary that will begin production next year and is considering a second plant in that country.

Europe is finalising higher tariffs on China-made EVs to protect local carmakers. BYD will face a total tariff rate of 27.4 per cent on EVs imported from China. Ankara has also taken steps to defend domestic car manufacturers, recently imposing an additional 40 per cent tariff on all Chinese vehicle imports.

Turkey has a large automotive industry, with foreign groups including Hyundai, Toyota, Renault and Ford operating in the country, often through joint ventures. Automakers produced about 1.5mn vehicles in Turkey last year, according to the Turkish Automotive Manufacturers Association. The country’s primary export market is the EU.

Turkey is part of the EU’s Customs Union, meaning vehicles can be exported to the bloc without additional duties.

Analysts at UBS said local production in Europe was always a “possible consequence” of EU tariffs. “BYD is already investing in a plant in Hungary for that reason,” they said, adding that Chinese cars produced in eastern Europe still have a roughly 25 per cent cost advantage over cars made by their big European rivals.

Mehmet Fatih Kacır, Turkey’s industry minister, said on Monday the BYD deal was a sign of the country’s “potential to be not only a centre for international investments, but also a centre for innovation and advanced green technology”. Turkish President Recep Tayyip Erdoğan and BYD founder Wang Chuanfu attended a signing ceremony unveiling the deal in Istanbul on Monday, according to Turkish state media.

Kacır added that Turkey was in “intensive talks” with other automakers in Europe and Asia about investment, at a time when Ankara is seeking to attract foreign capital to give impetus to sweeping economic reforms.

BYD did not respond to requests for comment on the deal or the structure of its investment. The new plant would be capable of making electric and hybrid vehicles, and include a research and development centre, Turkey said.

Analysts pointed to the investment as evidence that Chinese automakers are looking to adapt their strategies to avoid protectionist measures.

In a sign of Turkey’s EV ambitions, Erdoğan last September asked Elon Musk to build a Tesla factory in Turkey. The country is also developing its own EV through a state-backed project.

BYD’s top executive in Europe told the FT’s Future of the Car Summit in May that the company was looking to increase local production in its target markets: “To ship cars from China to Europe is not going to be long term. The long term is to produce locally,” Michael Shu said.

Additional reporting by Andy Bounds in Brussels