Magna will assemble SKD kit cars for Xiaopeng and GAC in Austria

Magna will assemble SKD semi-knocked-down kit cars for Xiaopeng and GAC in Austria to circumvent high EU tariffs. German media “Kleine Zeitung” reported that Xiaopeng and GAC will start production at Magna Steyr’s Graz plant in Austria from June, initially assembling special SKD models in a semi-finished state. This means that pre-produced parts will be shipped to Austria for final assembly by the Graz plant.

For Chinese automakers, local production in Europe avoids punitive EU tariffs; producing small batches of SKD products initially allows them to explore the European market while minimizing potential losses. Currently, Xiaopeng and GAC face a countervailing duty rate of 20.7%, plus a 10% base tariff, totaling 30.7%. If assembling whole vehicles in Europe via SKD, Chinese companies would only pay import tariffs on parts (typically less than 10%).

For Magna, collaborating with Chinese automakers also helps alleviate employment pressure. In May last year, the plant was rumored to lay off 500 workers, with the CEO stating that “Graz plant will face severe challenges over the next three years due to reduced business”.

Magna Steyr, originally part of Steyr-Daimler-Puch and now a subsidiary of Magna, is the world’s largest contract manufacturer in the automotive industry. As a whole vehicle manufacturer, Magna has produced 34 different models for at least 11 different OEMs, including Mercedes-Benz, Audi, Fiat, and Peugeot. The Graz plant has previously manufactured vehicles for BMW and Jaguar Land Rover under similar outsourcing models.