Key facts
- BYD has paused its $1 billion electric vehicle plant project in Turkey.
- The company is prioritizing production in Hungary and seeking a second European facility.
- Turkey had granted tax breaks and expected 5,000 jobs from the BYD investment.
- BYD's sales in Turkey increased significantly due to tax incentives.
- Turkey is considering sanctions against BYD for breaching the investment agreement.
Chinese electric vehicle manufacturer BYD has reportedly paused its planned $1 billion investment in a production facility in Turkey, prioritizing its plant in Hungary and seeking a second European location. The decision marks a significant setback for Turkey, which had announced the deal with much fanfare in July 2024, anticipating substantial job creation and a boost to its electric vehicle manufacturing ambitions.
BYD had committed to establishing a facility with an annual capacity of 150,000 electric and plug-in hybrid vehicles, along with an R&D center, aiming for production to begin by the end of 2026. The Turkish government had offered generous tax breaks on BYD car sales even before construction commenced, contributing to a surge in BYD's sales in Turkey to over 45,000 vehicles in 2025, potentially yielding significant profits for the company.
However, BYD executive vice president Stella Li stated that Hungary is the company's "number one priority right now" for European production, with a second facility being the next focus. This shift has put the Turkish government in an embarrassing position, with Industry Minister Fatih Kacir suggesting potential sanctions and monetary fines for breaching the investment agreement. While Turkish media reported potential fines up to $1 billion, sources indicate these may not fully cover the tax losses incurred.
Several factors appear to have contributed to BYD's reconsideration. Reports suggest China's Ministry of Commerce advised domestic automakers to retain advanced EV technology within China, specifically mentioning Turkey and India. Historical tensions between China and Turkey, including the cancellation of a past defense deal and ongoing concerns over China's treatment of Uyghurs, have also complicated relations. Furthermore, upcoming EU legislation, such as the "Made in Europe" initiative, could restrict vehicles assembled in Turkey from accessing the EU market, undermining a key advantage of the Turkish manufacturing base.
Chinese officials also reportedly sought further concessions from Turkey, including measures to protect against foreign exchange rate fluctuations, additional tax advantages, and easier work visas for Chinese employees. Despite claims that Beijing was pressing BYD to proceed, the company's "private" status was cited, a justification that was met with skepticism in Ankara.