Trade tensions drive Chinese auto investors from U.S. to Europe

Young journalists club

News ID: 24222
Asia » Asia
Publish Date: 14:31 - 11 June 2018
TEHRAN, June 11 - Chinese auto investors are increasingly pouring money into Europe rather than the United States because of intense U.S. scrutiny of their deals under the Trump administration, according to industry sources and M&A data.

Trade tensions drive Chinese auto investors from U.S. to EuropeTEHRAN, Young Journalists Club (YJC) -Chinese auto investors are increasingly pouring money into Europe rather than the United States because of intense U.S. scrutiny of their deals under the Trump administration, according to industry sources and M&A data.

More than a dozen leading M&A bankers, lawyers and consultants told Reuters the number of mandates from Chinese clients to make investments in the European auto sector were increasing, while those for the U.S. sector were declining.

“Given the way that things are tightening up in the United States, Europe for China is the most obvious non-domestic market that they’re pushing into,” said Charlie Simpson, who specializes in the auto sector for consultancy KPMG’s global strategy group.

The trend, which comes as Washington is locked in a trade battle with Beijing, is supported by an analysis of data of auto sector investment in the U.S. and European markets.

The United States accounted for 26 percent of the total number of Chinese deals in either of the markets in the first five months of this year, according to the figures from Thomson Reuters and research group Dealroom. That is down from 31 percent in the same periods of 2017 and 2016.

There have been 19 deals in total across both markets so far this year, worth more than $10 billion, according to the data.

At the center of the trade dispute are U.S. allegations that China has stolen American intellectual property. There has been increased scrutiny of investments in sectors including autos, where companies are developing technologies such as electric and autonomous vehicles, artificial intelligence and robotics.

Washington says it is looking to broaden the reach of the Committee on Foreign Investment in the United States (CFIUS), which examines deals for national security risks, to further limit Chinese efforts to acquire U.S. technology.

Thirteen of the 17 bankers, lawyers and consultants interviewed by Reuters, based in Europe, the United States or China, said their Chinese clients were increasingly choosing Europe over the United States because of growing difficulties with CFIUS.


This means a large group of investors are hunting assets in Europe, mainly Chinese state-owned auto firms, listed carmakers and private equity funds, the industry sources said.

They include state-owned SAIC Motor Corp, BAIC Group and FAW Group Corp; and listed players Guangzhou Automobile Group (601238.SS), and Ningbo Joyson Electronic Corp (600699.SS), the people said.

Samson Lo, head of Asia M&A at UBS, said all big Chinese carmakers who wanted to do overseas deals were steering clear of the United States.

“The immediate reaction is: ‘I don’t think in the current environment it is for me’,” he added.

FAW Group Corp and Ningbo Joyson Electronic Corp could not be reached for comments, while SAIC Motor Corp, BAIC Group and Guangzhou Automobile Group did not respond to emailed request for comments.


American officials say CFIUS reviewed about 250 foreign deals in total across all industries last year, an increase of 40 percent on 2016.

During the roughly 14 months of the Trump Administration to March 1, the committee has blocked 12 Chinese deals, or nearly half of the 27 transactions it has completed reviews of, and the fate of nine more are still undecided, according to an analysis by the law firm Pillsbury Winthrop Shaw Pittman.

By contrast, in 2016 only four Chinese deals were blocked out of 26 that were reviewed, partner Tom Shoesmith told Reuters.

Many more would-be investors are being deterred before the review stage, according to a lawyer who represents a major Chinese carmaker that has been investing in Europe.

He said a lot of deals were being ditched after informal talks with CFIUS officials who made it clear they would not pass muster. He declined to be named as this could identify his client and breach confidentiality.

U.S. President Donald Trump’s administration has made the auto industry central to its “America First” trade agenda. It cited national security concerns last month when it launched an investigation into vehicle imports that could lead to tariffs similar to those imposed on steel and aluminum.

This year, CFIUS blocked U.S. semiconductor testing company Xcerra’s (XCRA.O) purchase by China-based Sino IC Capital, which had expected the $580 million deal to help it benefit from automotive opportunities. State-owned China Heavy Duty Truck Group and UQM Technologies (UQM.A) was also forced to scrap a deal that would have hiked its stake in UQM to 34 percent from 9.9 percent and given it three out of eight board seats.


Your Comment