The Scoop

As European officials heighten their scrutiny of Beijing’s clean-tech imports, Chinese companies are setting up shop on the continent, bringing them closer to a lucrative market and helping them avoid trade restrictions.

One giant firm is going even further, trying to morph into more of a European operation.

CATL, the world’s largest electric-vehicle battery company, is taking pains to localize its German business by reducing its Chinese headcount, straying from Mandarin as the lingua franca, and serving local staples — in addition to Chinese fare — in the factory canteen, its HR coordinator in Germany told Semafor in a rare interview.

“The company’s become more and more local, or European, than Chinese,” said Constance Ulbrich, who was the first employee hired for CATL’s Germany plant and who now leads learning and development.

CATL began production of lithium-ion battery cells in Thuringia, a largely rural eastern German state, in late 2022, and operates a logistics center there as well. The plant aims to eventually make enough batteries to power between 185,000 and 350,000 electric cars per year.

It’s hiring aggressively as production ramps up: The factory’s workforce has grown to roughly 2,200, some 500 of whom are Chinese, a number that will be whittled down to about 100 in a “localization” push starting this year, Ulbrich said. Central to that effort is the integration of German cultural norms in the workplace and expanded training aimed at making Germans more comfortable working with their Chinese counterparts, and vice versa.

The localization drive comes amid an uncertain political and economic environment for Chinese EV-related companies in Europe: While governments have generally welcomed Chinese battery investments, analysts say slowing domestic EV demand and the prospect of heightened regulatory scrutiny from Brussels could threaten the future of Chinese clean-tech investment.

Know More

Total Chinese investment in Europe has dropped sharply in the last decade, but battery plants have been a bright spot. Instead of acquiring existing European companies, which can attract more regulatory scrutiny, large Chinese firms like CATL have built new facilities, often with the help of local government funds. For CATL, it’s part of an urgent global push to extend its already-considerable hold on the EV battery supply chain — the company has also announced factories in Hungary, Indonesia, and Thailand, and is supplying tech to Ford and Tesla for the automakers’ new US plants.

The US and Europe are aggressively raising tariffs on China-made EVs in order to protect their own automakers while at the same time subsidizing other high-tech companies from Asia to localize production: The US awarded billions of dollars in grants to Taiwan’s TSMC and South Korea-based Samsung to set up chip production facilities, and TSMC broke ground last month on a plant in Dresden, thanks to funds from Germany and the European Union.

As these companies navigate geopolitical tensions, they are also having to navigate new corporate cultures, and some global expansion endeavors have been rocky. TSMC’s Arizona plant reportedly saw clashes between US and Taiwanese workers over workplace norms: While American staff complained about long work hours, language barriers, and rigid hierarchies, Taiwanese employees bemoaned what they perceived as a lack of dedication and obedience from their US colleagues, Rest of World reported this year.

Differences in working habits between Germany and China can appear similarly stark: “The Chinese employees are so unbelievably flexible,” Ulbrich said, adding that they more easily changed course midway through a project. Germans, meanwhile, generally preferred to make, agree, and then execute a plan to the letter. Chinese staffers were also less likely than their German peers to lose faith in or talk negatively about coworkers, she said.

In many ways, the CATL factory has become a German workplace as it’s grown: While Chinese offices tend to have more hierarchical systems, the Thuringia plant practices a German custom in which employees address each other by their first name, regardless of rank. The factory also holds a classic German summer BBQ, and CATL added a canteen that serves both authentic Chinese food and German staples; previously, the closest lunch option by car was a BBQ that served bratwurst, Ulbrich said.

But the plant’s IT systems and infrastructure are Chinese, and “we are very strongly controlled and guided by our Chinese headquarters,” Ulbrich said. CATL also holds celebrations for the Mid-Autumn Festival and Lunar New Year.

In the town nearest the factory, locals were “very curious on the one hand, but a bit anxious” for the factory and influx of residents to come to town, Ulbrich said. “They didn’t know this culture as well.”

Those differences were largely echoed, albeit less positively, by a German ex-employee of CATL in Thuringia, who spoke on condition of anonymity in order to discuss internal workplace matters. He said it was sometimes difficult to communicate in English — CATL’s official workplace language in Thuringia — with many of his Chinese colleagues, because English was a second language for both sides. Many lower-level local workers only spoke German, but signs and instructions were mostly in English, he said, leading to friction.

“There were two different worlds touching each other,” he said.

And CATL’s relationship with neighbors and regional officials has been strained at times: Last year, authorities raided the factory on suspicion of workplace violations; the company later said some foreign construction workers’ visas had expired. And a citizens’ initiative opposed the power line connecting CATL to the grid, among other issues.

The former employee, who worked at the logistics center, said CATL’s local reputation was “very bad,” partially because of media reports that raised concerns about Chinese companies coming to Germany. He said he was once encouraged to take his company badge off in town.

In a statement, CATL said it continuously works to improve its internal communication to create an inclusive environment, adding that it “is widely acknowledged as a trusted partner and a good citizen and neighbour in the communities we operate in. However, we understand we are working in a critical environment and we need to do more to communicate our positive impact and our ambitions — also to help alleviate any concerns or prevent misunderstandings.”

J.D.’s view

Chinese companies operating overseas have shifted their approach over the years from a purely export-focused, less adaptive posture to a more integrated one. The ability of clean tech companies like CATL to successfully “localize” in Europe will be critical to their success there. European leaders have grown more critical of Chinese acquisitions of local companies, and analysts say the next frontier of regulation may focus on EV-related companies that build new EU locations from the ground up.

“Going forward, European policymakers will try to ensure that such investments produce jobs for their citizens and lead to a sharing of technological know-how,” the Rhodium Group wrote in a new report.

In this context, CATL’s localization is smart, because it signals to policymakers that the company has no problem with predominantly European staff. “They don’t want to be seen as a Chinese company, because then they run the risk of running into this whole kind of geopolitical mess,” said Niclas Poitiers, a research fellow at Bruegel focusing on international trade.

Room for Disagreement

There are a host of other economic and geopolitical factors that could determine the overseas success of Chinese EV-related companies, and they’re largely out of the control of local executives and HR bosses.

Germany specifically has seen disappointing demand for EVs, hurting battery companies. SVOLT, a battery maker and spinoff of Chinese car manufacturer Great Wall Motor, halted plans in May to build a plant in eastern Germany, citing the cancellation of a large order, reportedly by BMW. European firms aren’t faring much better: Swedish battery company Northvolt recently announced plans to cut 1,600 jobs and suspended an expansion plan.

CATL this year canceled plans to expand its Germany factory, a move that followed Volkswagen’s decision to reduce EV production in nearby Zwickau. Instead, CATL is focusing on its new Hungary plant, sparking speculation in Germany that it could pull out early in favor of Central Europe.

The View From China

In China, foreign firms are encouraged to localize operations, which improves their relationships with politicians and regulators. That “in China for China” strategy has seen large German firms cut local jobs in favor of cheaper production abroad, frustrating unions and work councils. It’s part of a bid “to remain relevant in a cut-throat market and to insulate their China operations from escalating geopolitical tensions,” ​​the Rhodium Group wrote this year.