EU's Tender Maneuver Against Chinese Companies: The "European Preference" Era Begins

The European Union (EU) is taking a radical step to prevent Chinese manufacturers from dominating the European market through public tenders. The EU Commission has presented a new draft law reforming public procurement legislation to make it easier for member states to directly exclude Chinese-based companies from tenders for electric buses, municipal vehicles, and charging infrastructure.

"We will no longer be responsible"

Stephane Sejourne, EU Commissioner for Industry Strategy, made no secret of who the targets were when introducing the new regulation, stating, "Once this reform is adopted, if you see BYD buses on the streets of Berlin, the EU Commission will not be responsible for it," directly pointing to BYD. With this statement, Sejourne alluded to the recent loss of a 200-unit electric bus tender by German railway operator Deutsche Bahn to BYD, which drew criticism from German politicians.

The "European Preference" Rule is Coming

The new draft law relaxes the obligation for the company offering the lowest bid to win public tenders. Instead, new rules are being introduced under the heading of "European Preference."

In tenders, not only price but also strategic criteria such as energy consumption, cybersecurity, local service network, and production within the EU will be legally prioritized. Companies from countries like the USA and the UK, which open their markets to EU companies, will be able to participate in tenders with equal rights. China, however, will remain outside this list.

BYD's "Hungary" Card: Will the Ban Work?

However, this war declared by the EU Commission against BYD is about to hit a major legal loophole. BYD has been producing the electric buses it sells to the European market in its factory in Hungary, an EU member state, since 2017.

The company participates in tenders not through its Chinese parent company, but through its Hungarian-based subsidiary, which employs hundreds of EU citizens. Since the draft law distinguishes between the "origin of the company" and the "origin of the product," it seems almost impossible for a BYD bus, whose major parts are assembled within the EU and are considered "European origin" according to customs rules, to be automatically excluded from a tender.