The Chinese company Jiangling Group Electric Vehicle (JMEV) has approved the construction of an electric vehicle factory in Sremska Mitrovica, in northwestern Serbia, with a long-term plan to export vehicles to the EU duty-free, the company confirmed to RFE/RL.
"The amount of the investment will be decided in the next two months. Depending on whether we will produce three thousand or five thousand vehicles per year," Brankica Zjalić, the lead author of the JMEV Serbia project, told Radio Free Europe (RSE).
Zjalić adds that the Chinese company chose Serbia because it has good economic relations with both China and the EU.
"Serbia is a kind of bridge between China and Europe when it comes to the marketing of electric vehicles," she says.
The European Union approved high tariffs (up to 2024 percent) on electric vehicles manufactured in China in October 35 for a period of five years, according to the European Commission website.
The decision on tariffs was made to protect European car manufacturers from what is claimed to be unfair competition from Chinese manufacturers who benefit from China's state subsidies.
Serbia, on the other hand, has a Free Trade Agreement with China that entered into force in 2024, which has been criticized by the EU since Serbia is a candidate country for EU membership and has pledged to terminate all bilateral agreements upon accession to the EU.
Thanks to an agreement with the EU, Serbia can, under certain conditions, export cars to the EU without customs duties.
What is known about JMEV's plans in Serbia?
According to a representative of JMEV Serbia, this Chinese company plans to begin construction of a factory in Sremska Mitrovica during the summer, and the plan is to start operations in 2026.
"A minimum of 300 workers will be needed to produce three thousand vehicles. Chinese engineers would come to train the workers at the beginning of production," says Brankica Zjalić, adding that the company's plan is to employ exclusively workers from Serbia.
She also says that the city of Sremska Mitrovica has committed to providing the necessary infrastructure - electricity connections and other utility services.
"There was no mention of other subsidies," she claims.
According to her, the electric cars are intended for sale in the EU and Serbia, and some parts of the vehicles would be produced in Serbia, while others would be assembled from parts imported from China.
The mayor of Sremska Mitrovica did not respond to RFE/RL's calls and messages regarding this topic.
'Bypassing' EU customs duties via Serbia
Zjalić says that JMEV's long-term goal is to export vehicles to the EU without customs duties.
"The company wants to enter the territory of Serbia, start with a factory and, over time, look for partners from Serbia and the region so that parts can be produced in Serbia and no longer imported from China," she says.
Zjalić adds that the vehicle would then be produced in Serbia and "could be exported to the EU without high taxes."
She explains that a vehicle can be exported to the EU from Serbia without customs duties only if it is mostly manufactured in Serbia, while high customs duties are paid for vehicles from China.
The tariffs imposed by the EU in October 2024 are different for different Chinese manufacturers, so tariffs on Tesla vehicles produced in China amount to around 7,8 percent, while for the Chinese manufacturer SAIC, the tariffs amount to 35,3 percent, according to the European Commission's website.
Serbia has had a Stabilization and Association Agreement with the EU since 2008, which, among other things, established a free trade zone.
'Feeling the market'
Dušan Marković, a professor at the Faculty of Economics in Belgrade, believes that JMEV is "feeling out the market" with this factory announcement.
"Serbia already has a network of suppliers who have worked for European companies, that's a good thing. On the other hand, the problem in Serbia is finding production workers for a large volume of work," he believes.
Marković also estimates that Serbia is at a "sensitive moment" for investments due to mass protests that have been going on for months in several Serbian cities.
The protests are demanding that the authorities be held accountable for the collapse of a canopy at the reconstructed Novi Sad Railway Station, in which 15 people were killed and two seriously injured.
"Due to the tragedy that befell us, state authorities are now cautious about issuing construction and use permits," says Marković.
Dominika Remzova, a researcher at the international consortium of experts CHOICE based in the Czech Republic, believes that Serbia has an advantage over some EU countries when it comes to electric vehicles, because it possesses the raw material for the production of car batteries - lithium.
"As a result, there may be growing competition between EU and Chinese companies in the Western Balkans over access to these resources," Remzova tells RFE/RL.
In 2004, the international mining company Rio Tinto discovered the ore jadarite, a combination of lithium and boron, in western Serbia, which authorities estimated to contain 158 million tons in the Jadra Valley.
In Serbia, however, the announcement of the opening of a lithium mine has led to several mass protests and road blockades due to fears that the mine would have unforeseeable consequences for the environment.
The government, led by the Serbian Progressive Party, announced that the Rio Tinto lithium mine could open in 2028 if environmental regulations are met and the necessary permits are obtained.
Serbia signed a Memorandum on Critical Raw Materials with the European Union in Belgrade in 2024, during the visit of European Commission Vice President Maroš Ševčović and German Chancellor Olaf Scholz.
Chinese investments in Serbia and challenges
Dominika Remzova, from the CHOICE consortium of experts in the Czech Republic, says that Chinese investments are generally accompanied by problems related to meeting so-called ESG standards.
These are standards related to sustainable development in the areas of environment, social responsibility and corporate governance.
"This is a problem in countries with weaker regulatory frameworks because Chinese companies do not necessarily have to adhere to higher ESG standards unless the investment agreements themselves mandate it," says Remzova.
Dušan Marković, a professor at the Faculty of Economics in Belgrade, believes that Chinese investments are targeted for accusations of environmental pollution because these companies have "improved in industrial production."
"Industrial production is inherently polluting. The mining industry, for example, is inherently critical," he points out.
Some Chinese investments in Serbia have been accompanied by accusations of environmental pollution, but also of labor exploitation.
The tire factory of the Chinese company "Linglong" in Zrenjanin, in the north of the country, according to non-governmental organizations, does not have a unified environmental impact assessment.
In addition, several hundred workers from Vietnam worked on the construction of the factory in 2021 in very poor conditions, and some organizations claimed that they were victims of labor exploitation.
Similar doubts were raised in 2024 about the Indian workers who were also engaged in the construction of the factory.
Also, the mining company "Zidjin" has faced court proceedings and fines on several occasions due to environmental pollution in eastern Serbia.
Problems and lags in the electric car market in the EU
The electric car industry in the European Union is facing a crisis because it is late in the transition to battery-powered car production, according to Dominika Remzova, from the CHOICE consortium of experts in the Czech Republic.
The EU plans to ban the sale of fossil fuel cars by 2035, but, as she notes, European manufacturers are lagging behind Chinese manufacturers, who are currently the leaders in the global electric car market.
"Sales of electric vehicles in the EU are declining, while Chinese electric vehicles are outperforming European models due to significantly lower prices and high quality. One of the key factors is that, unlike China, the EU does not have its own battery supply chain," she believes.
Dušan Marković, a professor at the Faculty of Economics in Belgrade, agrees that the European Union is lagging behind when it comes to the production of vehicle batteries because European companies do not control the beginning of the supply chain.
Chinese companies supply 80 percent of the global battery market and account for nearly 60 percent of the electric vehicle battery market, the Washington-based think tank the Atlantic Council reported in January 2024.
Marković believes that there are problems on both the supply and demand side when it comes to electric vehicles in the EU. He also says that the problem is insufficiently developed infrastructure.
"There are also problems when it comes to the charging speed of electric vehicles, progress has been made, but it is still not comparable to internal combustion vehicles. Demand is negatively affected by buyers' concerns about how long the electric battery on the vehicle, which represents 40 percent of the vehicle's value, will last," says Marković.
According to data from the China Passenger Automobile Association (CPCA) in January, China is likely to be the world's largest car exporter for the second year in a row despite the EU tariffs.
Exports of electric cars and hybrids rose 24,3 percent to 1,29 million last year, the association said.
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