According to German media kleinezeitung, in June this year, Magna Steyr's plant in Graz, Austria will begin assembling models of Xiaopeng and GAC.
Magna officials have not yet commented on the report, nor disclosed the ongoing negotiations or other details. But it is said that Magna Steyr's Graz plant is about to finalize assembly orders with the two Chinese brands.
For Chinese companies, this is undoubtedly an important breakthrough under the heavy pressure of EU tariffs; for Magna Steyr, it is also good news that can at least temporarily protect some jobs.
Image source: Magna
What models will be produced at Magna Steyr's Graz plant?
German media pointed out that Magna Steyr will use the SKD (Semi Knocked Down) model at the Graz plant to perform simple assembly for the models of Xiaopeng and GAC Group. Specifically, the two Chinese automakers will ship some pre-produced parts to Austria, and the Graz plant will only need to install a dozen core components including axles and engines to complete the final assembly of the vehicle in Europe.
This OEM model is a two-birds-with-one-stone approach for Chinese automakers. On the one hand, by partially localizing production in Austria, they can avoid the additional tariffs imposed by the EU on Chinese electric vehicles (for example, Xpeng Motors is expected to face an additional tariff of 21.3% from the EU); on the other hand, their investment scale in Europe can be controlled because they mainly produce small batches of models to test their sales potential in the European market.
Magna's presence in China
Since entering the Chinese market in 1996, Magna has been in business for 28 years. It has 65 factories and 21 engineering/R&D/sales centers, providing R&D and production support for almost all major automakers. In recent years, Magna Steyr Graz has been in in-depth negotiations with Chinese brands that plan to enter the European market. Xiaopeng and GAC are among the most ambitious brands, hoping to seize a place in the European electric vehicle market in the medium term.
Previously, there were reports that Magna had contacted Chery. However, Austria's high wages and high production costs have always been major obstacles, resulting in a huge gap in production costs between it and Chinese automakers.
Current status of Magna Graz plant
In the past two years, many models produced by Magna Steyr's Graz plant have been temporarily or completely discontinued, including Fisker's Ocean pure electric SUV, BMW 5 Series, and Jaguar E-Pace and I-Pace. In addition, the BMW Z4 and Toyota Supra, which use the same platform as the above models, will also be discontinued in 2026. In addition, the Graz plant's contract with Mercedes-Benz for the production of the G-Class off-road vehicle will also end in 2029. British startup Ineos has also canceled its plan to produce its electric off-road vehicle Fusilier in Graz.
Therefore, Magna must fill the gap in these production orders as soon as possible. In the current situation of sluggish sales in the European market, Chinese automakers have undoubtedly become the most important potential customers, and the Graz plant has also set its sights on China.
At present, Magna Steyr's business is still profitable, partly because its R&D department has sufficient orders. For example, the company is developing new models of Scout brand for Volkswagen Group, including Range Extender models. However, in order to cope with business challenges, the Graz plant has been gradually streamlined and continued to lay off employees.
