European automotive suppliers are set to benefit from an influx of Chinese carmakers, thanks to growing demand for electric vehicles (EVs) and persistent local protectionism, according to Vulcan Energy Resources, a lithium and renewable energy producer in Germany.

Chinese EV makers – from BYD to Xpeng – are planning to aggressively expand into Europe in search of higher profit margins, even as Brussels advances measures to protect local manufacturing amid a slower pace of electrification.

On Friday, the China Association of Automobile Manufacturers, a government-backed industry consortium, described certain terms in the proposed Industrial Accelerator Act as “systematic discrimination”. In March, the European Commission outlined potential restrictions on foreign investors, including capping foreign investment at 49 per cent, requiring that at least half a firm’s workforce be European and mandating technology-sharing provisions.

But Francis Wedin, executive chair at Vulcan – an Australian company developing a lithium-brine project in Germany – said Chinese carmakers would bring opportunities to local supply chains, spanning automotive parts and batteries to raw materials such as lithium.

“On the downstream side – like batteries and EVs – Chinese entry is a massive opportunity for Europe because China is the clear leader in technology and production costs,” Wedin said. “The trade-off is that they must form local joint ventures with European companies to protect domestic champions.”

To cut costs, European carmakers ranging from Volkswagen to Stellantis have partnered with Chinese companies in car manufacturing, autonomous driving and R&D. Renault, despite having no direct sales in China, set up a research and development centre in Shanghai that helped halve the production time of its Twingo model to 21 months.