Is Spain or China the First Stop for the Automotive Industry's Expansion into Europe? - Examining Industrial Opportunities from CATL's Foundations and New EU Regulations

On November 26, 2024, local time, CATL and Stellantis Group officially broke ground on their joint venture battery factory in Spain. This €4.1 billion investment is not only the largest-scale investment by a Chinese enterprise in Spain but is also regarded as an important milestone for Chinese companies entering the European new energy vehicle market.

Graph StellantisThe scene of the group signing an agreement with CATL (source: Shanghai Securities Journal)

However, almost simultaneously, the EU plans to introduce new investment rules aimed at curbing Chinese companies from benefiting from EU subsidies in countries like Hungary and Spain.

Image source: Aikesen Environmental Technology

These two incidents reflect the new opportunities and challenges faced by the Chinese automotive industry in the European market and raise a key question: In the current international environment, is Spain still the first stop for the Chinese automotive industry to enter Europe?

I. Strategic Value of Spain: Irreplaceable Geographical Advantage and Industrial Foundation

Spain, as the second largest automobile producer in Europe, occupies a unique position in the strategy of Chinese automotive enterprises expanding into Europe.

The perfect combination of cost advantage and industrial ecology.Spain's ability to attract Chinese enterprises lies in its core advantages. Compared to other Western European countries like Germany and France, Spain has significant advantages in key production factors such as energy, labor, and land: industrial electricity prices are only a quarter of those in Germany, the minimum wage is 40% lower than in Germany, and the average price of industrial land is less than 150 euros per square meter.

This cost advantage, combined with Spain's mature automotive industry ecosystem, creates a unique competitive edge. Spain is home to 18 factories of 9 multinational automotive companies, including Volkswagen, Ford, and Stellantis, as well as over 3,000 automotive parts suppliers, forming a mature "automobile manufacturers + parts suppliers" industrial cluster.

Regional radiation capacityAnother major advantage of Spain is its status as a member of the European Union. Electric vehicles produced in Spain benefit from the EU's single market, enjoying zero tariffs and no quota restrictions, allowing free circulation across the markets of the 27 member countries. Additionally, Spain's proximity to North Africa and its linguistic and cultural ties make it a natural bridge to the Latin American market. This ability to "establish a presence in one location and reach three major markets (Europe, Africa, and Latin America)" is unmatched by other European countries.

Policy supportAccording to El País, in April 2025, the Spanish Council of Ministers approved the extension of the previously expired "Moves III Plan," which will continue until December 31, 2025. According to the regulations, users who purchase an electric vehicle and scrap an old fuel-powered vehicle can receive a subsidy of up to 7,000 euros. If it is a commercial vehicle, the subsidy can reach 9,000 euros. In certain specific cases, the subsidy amount can increase by 10%, such as for vehicles used by people with disabilities. Additionally, the plan provides funding for charging infrastructure construction, ranging from 20% to 80%. Spain has also launched a 1.7 billion-euro special loan and subsidy bidding for electric vehicle manufacturers. These policies provide critical support for Chinese enterprises to reduce initial investment risks.

From the perspective of actual results, Chinese car brands have performed remarkably well in the Spanish market. From January to October 2025, MG sold 38,989 vehicles in Spain, a year-on-year increase of 58.5%; BYD sold 19,423 vehicles, a year-on-year surge of 497.8%. These figures confirm Spain's status as a bridgehead for Chinese car brands in Europe.

Image source: Zhien Auto

II. EU New Regulations: Changes in the Policy Environment Facing Chinese Enterprises Going Abroad

The EU's upcoming new investment rules mark a profound change in the policy environment facing Chinese companies in Europe.

EU Industry Commissioner Thierry Breton's statement clearly conveyed the direction of the new regulations: future foreign investments must contribute to the "operation of the entire European value chain," rather than merely being an "entry point into the European market."

Among them,Technology Transfer RequirementsPossible main challenges facing Chinese enterprises.

Sejourne clearly stated that in industries such as batteries, foreign investors must transfer technological know-how. This requirement potentially conflicts with the technology protection needs of Chinese companies. Yin Xiaoying, Director of Overseas Public Affairs at CATL, has emphasized that "battery production involves advanced technology and operational expertise accumulated over many years," implying the importance of technology protection.

Localization content requirementsAnother major challenge will be ensuring that new regulations guarantee foreign investments are not just used for assembling components outside of Europe, but truly promote the development of the local European industrial chain. This means that future Chinese investments in Spain will require a higher degree of localized operations, including hiring local workers and increasing the proportion of local procurement.

Subsidy Acquisition RestrictionsThe investment returns of Chinese enterprises are directly affected. CATL's factory in Spain has received support from an EU fund amounting to 300 million euros, but similar subsidies in the future may come with stricter conditions. An EU official confirmed to the Financial Times that although the legislation will not explicitly mention China, considering the rapid growth of Chinese investment flows into the EU (an 80% increase from 2023 to 2024, reaching 9.4 billion euros), the targeting of these measures is quite evident. It is worth noting that the EU simultaneously plans to establish a critical raw materials hub with the aim of reducing dependence on China. This indicates that the EU is constructing a comprehensive industrial chain protection policy system, and Chinese enterprises need to adapt to this new reality.

Three, The Path of Balance: The Sustainable Development Strategies of Chinese Enterprises in Spain

In the face of both opportunities and challenges, Chinese automotive companies need to develop more refined strategies for the Spanish market to achieve sustainable development.

Localization Deep DiveThe key to success or failure.Ningde TimesThe correct path has already been demonstrated: planning to collaborate with local universities to train Spanish workers and eventually reduce the proportion of Chinese employees to below 10%. This deep localization not only complies with the new EU regulations but also helps build community trust.

By acquiring and transforming the original Nissan factory, the initial investment cost was reduced by more than 30%, demonstrating how to quickly localize operations by revitalizing existing resources.

Technical Cooperation and InnovationIt is an effective way to balance the protection of technology and the demand for transfer. David Romero, the General Director of the Automotive Enterprise Network of the Aragon Autonomous Community in Spain, acknowledged that Chinese battery technology is "years ahead" of Spain, and what Spain can do is observe and learn. This provides Chinese companies with an opportunity window to exchange technology for market access. By establishing joint research and development centers and collaborating with local research institutions, Chinese companies can protect their core technologies while meeting the EU's requirements for technological cooperation.

Supply Chain IntegrationEnhancing risk resilience. Spain is forming an industrial closed loop of "complete vehicles - batteries - charging stations," and the layouts of Chinese enterprises such as Envision AESC and CATL are filling the technological gaps in Europe regarding lithium iron phosphate and other areas. Chinese companies should leverage this trend to strengthen their supply chain layout in Spain and even Europe, reducing reliance on long-distance transportation and improving their ability to respond to trade barriers.

Differentiated competitionIn a saturated market, finding growth points is a necessary choice. Spain's charging infrastructure score (13.1 points) is still significantly below the EU27 average (25 points), providing opportunities for Chinese companies in the field of charging equipment and services. Meanwhile, Spanish consumers have a high acceptance of smart technology and place more importance on locally produced models, offering a differentiated breakthrough for Chinese companies with smart advantages and localized production.

Spain, with its cost advantage, industrial base, regional influence, and policy support, has maintained its position as the first stop for the Chinese automotive industry to enter Europe. CATL's investment decision of 4.1 billion euros is based on a strategic assessment of Spain's long-term value, rather than short-term considerations.

However, the introduction of new EU regulations means that Chinese enterprises need to adjust their operating models in Spain. The simple approach of "exchanging market access for subsidies" or "exchanging technology for market access" is no longer sustainable. Instead, a comprehensive strategy of deep localization, technological cooperation, and supply chain integration should be adopted. Spain's strategic value to the Chinese automotive industry is upgrading from being a "stepping stone to the European market" to becoming a "hub for global deployment."

In the foreseeable future, Spain will remain the preferred destination for the Chinese automotive industry's expansion into Europe. However, the key to success lies in whether companies can shift from "speculative expansion" to "strategic deep cultivation," creating new value while adhering to new regulations. The journey of Chinese automotive companies in Spain is entering a more complex yet strategically valuable new phase.

Editor: Lily

Sources: Observer Network, Reuters, Financial Times, CCPIT Overseas Representative Offices, Ecoson Environmental Technology, Spanish Ministry of Industry, Trade and Tourism, Aragon Autonomous Region Automotive Business Network (CAAR Aragon), UGT Union, Volkswagen Official Website, Zhinen Automotive, AI Empowered Automotive, Macquarie Securities, Ocvistas, Spanish Investment Promotion Agency, Eurostat, Chuangxiaolv, ANFAC, China Passenger Car Association, etc.