Earlier this year, Chinese company Leapmotor decided to produce its electric vehicles (EV) in Tychy, southern Poland, at the plant of its partner Stellantis. It stood out as a major investment win for the country. Leapmotor would become the first Chinese EV manufacturer to produce in Europe, with plans to grow Tychy into its regional base. 

A few months later, the whole vision hit a roadblock. In the wake of the EU’s decision to introduce import tariffs on EVs produced in China, Reuters reported that Beijing pressured its EV producers to halt investment into EU member states that voted in favour of the new tariffs. That list features Poland, among nine others. Leapmotor fell in line and is now rumoured to be considering a new site in Germany or Hungary, which were among the five countries that opposed the move (another 12 abstained).

“It’s been frustrating to see them change plans for reasons outside our control after so much work,” a contact of mine familiar with the negotiations revealed. 

Frustrating as it may be, it’s the new normal. At this moment in time, FDI has a three-body problem: geopolitics, sustainability and digitisation. When these three forces come into play all at once, they produce an unstable system. 

The Leapmotor saga is a case in point. The EU’s net-zero ambitions prompted the region to pivot towards electric mobility. Soon, though, it became clear that Western producers weren’t equipped to compete with heavily subsidised Chinese EV players. With automotive being a backbone of the European industry, the issue rapidly assumed the contours of an economic security priority.

That was not the only problem. EVs are tech-heavy products — effectively “smartphones on wheels”.  At first glance, swapping legacy cars with EVs is a sensible thing to do in the new digital era. But not all technologies are created equal — particularly those that could be used for military purposes (see semiconductors or artificial intelligence, among others) or pose a cyber security threat, like highly connected EVs. For these strategic technologies, origin matters.

US officials recently toured Europe to reiterate this very message. They discussed the “national security risks associated with connected vehicles” and explored options with “like-minded” nations, according to a July release by the state department. It’s safe to assume that Chinese EV producers were the elephant in the room in any of those conversations, particularly in light of the EU’s fragmented approach to Chinese tech and investment. 

Against this backdrop, the European Commission imposed duties on  Chinese EVs and triggered the tit-for-tat escalation with China that unfolded over the following weeks — on paper, both remain committed to resolve the issue before the WTO. 

What started as a sustainable mobility policy with a pronounced digitisation component has rapidly descended into a geopolitical headache. With those three forces at play, the outcome of investment decisions — particularly in strategic sectors — becomes unpredictable. 

Risk management can help, but reducing the gravitational pull of one of them is the only way forward in the long run. With net zero being a matter of survival, and digitisation seemingly irreversible, geopolitical tensions have to come down. If they don’t, cross-border investment just adds to the collateral damage. They know it well in Tychy, along with any other geography where economic competitiveness alone is no longer enough to grease the wheel of FDI.

Jacopo Dettoni is the editor of fDi.

Do you want more FDI stories delivered directly to your inbox? Subscribe to our newsletters.

This article first appeared in the December 2024/January 2025 print edition of fDi Intelligence