China is urging its automakers to hold off on expanding into the European Union (EU) due to growing trade tensions surrounding electric vehicles (EVs). According to sources, Chinese officials have advised manufacturers to temporarily pause their search for European production sites and hold back on signing new deals until the ongoing dispute over EU tariffs on Chinese EVs is resolved. Among the impacted companies, Dongfeng Motor Group has already suspended its plan to potentially establish a production facility in Italy.

The EU recently proposed increasing tariffs on Chinese-made EVs to up to 45%, claiming that Chinese automakers benefit from unfair government subsidies. China has countered these claims, warning of possible retaliatory tariffs on European products such as dairy, brandy, pork, and automobiles. Though China's advisory to automakers isn't a strict mandate, it reflects Beijing's concerns over both the trade dispute and potential overcapacity due to Europe’s uneven shift toward EVs and limited demand for Chinese cars.

Dongfeng reportedly communicated to Italian authorities that its decision was influenced by Italy's support for EU tariff hikes, suggesting how European nations’ alignment on the issue could impact China’s future trade and manufacturing plans within the region.