European governments though wary of budget Chinese electric vehicles flooding their markets, but they’re also fiercely competing for a share of the manufacturing investment and jobs the new competitors bring.

While the European Union investigates China’s auto subsidies and considers tariffs on imports, national governments across the bloc are dangling their own incentives to attract Chinese automakers looking to build European factories.

Manufacturing costs for Chinese EV makers including BYD, Chery Automobile and state-owned SAIC Motor are much lower at home, but they are nonetheless keen to set up in Europe to build their brands and save on shipping and potential tariffs, said Gianluca Di Loreto, a partner at consultancy firm Bain & Company.

“Chinese automakers know their cars must be perceived as European if they want to bear interest among European customers,” he said. “This means producing in Europe.”

On the one hand, import taxes could help European automakers better compete with their Chinese counterparts, but they may also spur on Chinese automakers that are already heavily investing, and for the long-term, in Europe.

Sales of Chinese-brand cars comprised 4% of the European market last year and are forecast to hit 7% by 2028, according to consulting firm AlixPartners.

Hungary produced around 500,000 vehicles in 2023 and secured the first European-factory investment by a Chinese automaker, which EV giant BYD announced last year.

BYD is also considering a second European plant in 2025.

Budapest is also negotiating with Great Wall Motor for its first European plant, local media have reported, with the country offering cash for jobs creation, tax breaks and relaxed regulation in targeted zones to attract foreign investment.

Hungary has spent more than $1 billion in recent years to support the new battery plants of South Korean groups SK On and Samsung SDI, along with Chinese battery giant CATL’s planned factory.

China’s Leapmotor will use the existing capacity of Franco-Italian partner Stellantis, with Reuters reporting the pair have chosen the Tychy plant in Poland as a manufacturing base.

Poland has a number of programs currently supporting more than $10 billion of investments, the country’s development and technology ministry said, including one favoring the transition to a net-zero economy and another offering corporate income tax relief of as much as 50% in high-unemployment regions.

Spain, Europe’s second-largest car-making country after Germany, has secured investment from Chery, which will start production in the fourth quarter at a former Nissan facility in Barcelona with a local partner.

Chery is expected to benefit from Spain’s €3.7 billion ($3.98 billion) program launched in 2020 to attract electric-vehicle and battery plants.

China’s Envision Group has already received €300 million in incentives under the plan for a 2.5 billion battery plant creating 3,000 jobs.

Spain might also host Stellantis’ planned fourth gigafactory in Europe, with CATL.

Chery plans to have a second, larger facility in Europe, a source with knowledge of the company’s plans said, and has held talks with governments including Rome, which is keen to attract a second automaker to rival Fiat-maker Stellantis.

Italy can tap its national automotive fund, worth €6 billion between 2025 and 2030, for incentives for both car buyers and manufacturers. China’s Dongfeng is among several other automakers that have held investment discussions with Rome.

Italy’s industry ministry declined to comment.

Dongfeng and Chery did not respond to requests for comment.

SAIC, owner of the venerable MG brand, aims to build two Europe plants, two sources familiar with the matter said.