Chinese electric vehicle manufacturer BYD announced it has suspended its plans to build a production plant in Türkiye. The company decided to focus its immediate efforts on localization strategies within the European Union market. BYD Vice President Stella Li stated in an interview with Reuters in London that the establishment process of the production facility in Türkiye has been halted and no concrete timeline has been set for resuming operations.
Li emphasized a shift in the company’s internal operational priorities: “Currently, our number one priority as a company is our investments in the Hungarian market. Our second focus will be to find the right location for a second manufacturing facility within Europe.”
Terms of the Manisa agreement
BYD had previously signed an official agreement with the Turkish government to establish a production facility in Manisa, representing an investment of approximately 1 billion dollars. The project aimed to achieve an annual capacity of 150,000 vehicles and create around 5,000 jobs. In return for the production commitment, the Turkish government granted BYD significant customs duty exemptions and investment incentives, allowing the brand to import a specified quota of vehicles with tax advantages. However, no infrastructure or construction work has commenced at the Manisa site.
Potential penalties and legal consequences
The suspension of the investment before fulfilling the agreed commitments has raised the possibility of legal and financial penalties under Turkish regulations. According to the framework governed by the Ministry of Industry and Technology, investors who benefit from incentive schemes but fail to complete their commitments within the designated timeframe face specific sanctions.
The potential consequences for BYD include:
Revocation of incentives: Tax exemptions and customs advantages granted during the preliminary phase may be retroactively reclaimed along with non-compliance fines.
Forfeiture of guarantees: Performance bonds and letters of guarantee submitted to Turkish authorities during the contract signing could be forfeited.
Financial compensation claims: Industry analysts suggest that a total breach of the investment covenant could subject BYD to compensation claims reaching up to the initial 1 billion dollar commitment value.
Import quota restrictions: The cessation of the factory project is expected to terminate the special lower-tariff import quotas previously allocated to the company for the Turkish market.
Shift to European infrastructure
BYD is adapting its strategy to bypass the customs tariffs imposed by the European Union on Chinese-made electric vehicles. The company plans to activate its assembly lines at its first European factory in Szeged, Hungary, during the fourth quarter of this year. To accelerate its footprint and avoid the logistical delays of building from scratch, the management is also negotiating to acquire idle manufacturing plants from established European carmakers, including Netherlands-based Stellantis and Germany-based Volkswagen. The company’s shortlist for a second European location currently focuses on sites in Italy and France.
