China, Turkey Relations Strained After EV Investment Fallout
By Alex Kimani - Aug 04, 2026, 6:00 PM CDT
China and Turkey spent years strengthening a strategic partnership built on trade, investment and access to European markets. The sudden collapse of a flagship $1 billion Chinese investment now threatens to slow one of Beijing’s most important economic relationships in the region.
For years, China and Turkey have maintained a cordial and strategic relationship, with Turkey’s access to the EU Customs Union making it an attractive destination for Chinese investments. Chinese goods produced in Turkey move into the EU without extra customs fees, helping companies beat new tariffs on Chinese products. Sitting directly on the Middle Corridor transport network, Turkey also enjoys a logistical edge, shortening supply chains and shipping times to Europe compared to the usual ocean routes. China is Turkey's third-largest global trading partner, with Turkey importing $45 billion worth of Chinese goods in 2025. Additionally, as a NATO member with long-standing ties to the US and EU, Turkey is able to leverage its growing cooperation with China to assert strategic independence and gain leverage over its Western allies. Turkey is also a partner of the China-led Shanghai Cooperation Organization (SCO).
Unfortunately, relations between the two countries have lately been strained following the sudden collapse of a highly anticipated $1 billion investment by China’s electric vehicle (EV) giant BYD Company Ltd (OTCPK:BYDDF). The high-profile deal was secured by Turkish President Recep Tayyip Erdoğan in July 2024, aiming to make Turkey an EV manufacturing hub.
Last month, BYD officially paused its planned $1 billion EV manufacturing plant in Manisa, Turkey, shifting its focus to ramping up production inside the European Union. According to BYD Executive Vice President Stella Li, BYD will begin assembling electric vehicles at its new plant in Szeged, Hungary, in the fourth quarter of 2026, with the plant targeting 150,000 units per year before later doubling capacity. Building cars within the EU allows BYD to sidestep the EU’s 27% tariff imposed on Chinese-made EV imports, with Turkey's Customs Union agreement proving insufficient to bypass "Made in Europe" protectionist regulations.
BYD snubbed Turkey despite the fact that Ankara granted it massive tax incentives on imported vehicles, allowing the company to sell over 45,000 vehicles in China in 2025 and pocket up to $1 billion in extra profits.
And now Beijing has launched a charm offensive and major propaganda campaign in Turkey in a bid to mitigate the backlash and safeguard its broader geopolitical objectives after the BYD about-turn left Ankara humiliated.
According to the Middle East Eye, the Chinese embassy in Ankara has been placing unsigned promotional articles in pro-government Turkish media outlets stressing high-level cooperation between the Chinese Communist Party (CCP) and Turkey’s ruling Justice and Development Party (AKP). The state-funded Turkey-China Friendship Foundation organized an eight-day, all-expenses-paid trip to the Xinjiang region for Turkish journalists, with the resulting coverage skipping over human rights concerns and instead focusing purely on local counter-terrorism and economic integration. Turkey is home to the largest Uyghur diaspora outside of Central Asia, with Beijing repeatedly accused of human rights violations on the Turkic-Muslim community in Xinjiang.
Back in 2022, a comprehensive United Nations human rights report found credible evidence that Beijing's actions in the Xinjiang region may constitute crimes against humanity. Experts estimate that over one million Uyghurs and other Muslim minorities have been held in re-education camps without due process, with detainees reportedly facing physical torture, political brainwashing, malnutrition and sexual violence. The Human Rights Watch has also documented systemic destruction of Uyghur heritage, with the government demolishing thousands of religious shrines and replacing historical Uyghur village names with generic Chinese communist terminology. To secure Chinese investments and swap lines during economic crunches, Ankara has previously muted its criticisms of China's human rights record in Xinjiang, blocked parliamentary inquiries into the Uyghur issue and avoided joining Western or UN calls to condemn Beijing's actions.
While these PR moves are attempting to alleviate the sting of a failed multi-billion-dollar project, experts point out that Ankara’s worsening economic struggles mean it will likely continue its balancing act between Beijing and its Western allies.
Turkey recently achieved a notable diplomatic win with Western allies, underscored by hosting a NATO Summit in Ankara and seeing the lifting of CAATSA sanctions by the U.S. The BYD saga, on the other hand, comes at a time when Turkey's economy is facing major headwinds, including high inflation, depleted international reserves and vulnerability to regional energy and conflict disruptions.
Nevertheless, the Turkish government has revealed plans to launch legal proceedings to claw back investment incentives from BYD after abandoning the EV project. Last month, the Turkish Ministry of Industry and Technology revoked BYD's import tax benefits, noting zero progress had been made on the project. Following the suspension of tax perks, BYD's local sales in Türkiye plummeted, causing it to lose its top spot in the plug-in hybrid segment to the domestic Turkish brand, Togg.
By Alex Kimani for Oilprice.com
