Chinese Automotive Investment Beyond Vehicle Exports
For Chinese automotive manufacturers building a presence in Europe, the location decision extends beyond a sales subsidiary. R&D centres, local production and regional spare-parts supply each require a different investment model. Serbia deserves consideration for all three.
Chery’s recently announced R&D centre in Bedfordshire, UK, illustrates the growing role of local engineering. According to Chery, the centre is due to open in late autumn 2026, initially focusing on chassis dynamics and driver-assistance systems for UK-specification vehicles.
The strategic case for localisation is further reinforced by the changing trade environment in Europe.
In October 2024, the European Commission imposed definitive countervailing duties on new battery electric passenger vehicles originating in China. Depending on the producer, the additional duties range from 7.8% to 35.3% and apply in addition to the applicable conventional customs duty. Approved price undertakings may provide an alternative for qualifying imports.
These measures have changed the economics of direct exports and increase the strategic importance of local production, partnerships and use of existing production capacity.
Serbia as a Manufacturing, R&D and Logistics Base
For investors, Serbia offers a combination of competitive operating costs, technical and engineering talent, full foreign ownership, free-zone opportunities and preferential trade arrangements. Investment grants and R&D tax incentives strengthen the case for eligible projects. Industrial zones, greenfield locations and warehouse facilities, together with connections along Corridor X and the Danube, provide options for both manufacturing and regional logistics.
Serbia is not entering this discussion as a newcomer to the automotive sector. It has developed a substantial automotive manufacturing and supplier ecosystem, including vehicle production, international Tier 1 suppliers and manufacturers of automotive components and systems.
The opening of SHAC’s first European production facility in Kać in December 2025 provides a recent example of this trend. The investment, exceeding EUR 30 million, illustrates the growing interest of Chinese automotive companies in establishing physical production capacity within European supply chains.
According to the Development Agency of Serbia (RAS), Serbia has attracted more than EUR 55 billion in foreign direct investment since 2007, including approximately EUR 5.2 billion in 2024. This track record provides Serbia with substantial institutional experience in supporting international manufacturing projects.
For manufacturers already selling in Southeast Europe, a regional spare-parts distribution centre in Serbia is also worth assessing. Consolidating stock could improve availability for dealers and authorised repairers in neighbouring markets and parts of the EU. An appropriate customs warehousing or free-zone procedure can suspend Serbian import duties while foreign goods are stored for re-export. The commercial case depends on delivery times, border procedures, stock levels and warranty returns; destination-market duties and product requirements still apply.
State Incentives, Tax Benefits and R&D
Depending on the structure, location, number of jobs and investment value, investment projects may qualify for various forms of state support. These may include direct investment incentives linked to eligible investment or employment costs, subject to the applicable State aid framework and project-specific eligibility requirements.
Grant eligibility depends on the activity: a standalone trading or spare-parts warehousing business should not assume it qualifies for manufacturing investment incentives. Applications must be submitted before the investment project starts.
Serbia’s standard corporate income tax rate is 15%.
For technology-intensive automotive projects, R&D incentives may provide an additional advantage. Subject to the applicable requirements, eligible costs of R&D carried out in Serbia may be recognised at twice their actual amount for corporate income tax purposes.
The IP Box regime allows 80% of qualifying income from eligible copyright and patent rights to be excluded from the corporate income tax base, subject to the applicable deposit or registration, documentation and qualifying-expenditure requirements. Certain payroll tax and pension contribution incentives may also apply to employees directly engaged in R&D activities, effectively reducing these costs by up to 70%.
For a Chinese group establishing an R&D centre, the allocation of development risk and ownership of the resulting IP should be settled early. A Serbian entity performing R&D as a service for its parent should not assume that the same reliefs are available.
Taken together, these measures can materially affect the economics of a project and may form an important part of the location decision for an investor comparing Serbia with alternative markets.
Access to the EU Market and the Importance of Rules of Origin
Serbia’s trade position is another important element of the investment case. The Stabilisation and Association Agreement provides preferential treatment for goods originating in Serbia. Serbia also maintains preferential trade arrangements with CEFTA partners, EFTA states, Turkey, the Eurasian Economic Union, the United Kingdom, the United Arab Emirates and Egypt, although product coverage and tariff treatment vary by agreement. The Serbia–China Free Trade Agreement, in force since 1 July 2024, may reduce duties on qualifying imports from China according to the relevant tariff schedule. It does not give those goods preferential access to the EU.
However, the fact that a product is completed or dispatched from Serbia does not automatically mean that it has Serbian preferential origin. Origin depends on the applicable rules, including tariff classification, the materials incorporated into the product, the processing carried out and, where relevant, applicable cumulation rules. Simple operations such as packaging, labelling or minimal assembly will generally not be sufficient to confer preferential origin.
For this reason, rules of origin should be considered at the investment-planning stage, including when designing the supply chain and production process.
At the same time, merely relocating final assembly is not necessarily sufficient to eliminate customs or trade-defence risks. EU non-preferential origin and anti-circumvention rules require a separate assessment from preferential origin under the trade agreement. Genuine investment and local value creation matter, but do not replace the applicable legal tests.
For a spare-parts hub, this distinction is straightforward: storing, repacking or dispatching Chinese-origin parts from Serbia does not make them Serbian-origin goods. Its value lies in inventory management and service coverage, rather than a change of origin.
Legal Planning as Part of the Investment Strategy
Serbia may therefore be relevant not only for vehicle and component manufacturing, but also for software and electronics development, engineering, supplier management, distribution and aftersales activities.
Before establishing a Serbian operation, investors should assess the corporate and financing structure, State aid eligibility, customs classification and rules of origin, supply-chain and free-zone arrangements, transfer pricing, IP ownership, employment and immigration requirements, and applicable automotive regulatory requirements, including destination-market approvals.
The practical starting point is to define what the Serbian operation will do and which markets it will serve. For a plant, site permits, power capacity and supplier inputs need early attention; for R&D, IP and project documentation; for a parts hub, delivery commitments and arrangements for defective returns. These decisions should inform the location and incentive analysis before major commitments are made.
These considerations are particularly important where the investment is intended to serve the EU market or form part of a broader European supply chain.
Conclusion
Localisation can be phased. A manufacturer may start with a parts distribution centre or engineering team and add production as regional demand develops. The legal structure should accommodate that sequence and the commitments made to dealers, customers and the parent company.
For Serbia, this creates an opportunity to position itself not merely as a cost-competitive manufacturing location, but as a broader European platform supported by an established automotive ecosystem, investment incentives, R&D support, engineering talent, logistics capacity and preferential trade arrangements. For investors, however, the success of such a project will depend on whether localisation is structured from the outset as a genuine and commercially viable long-term business strategy.
