Italy is demanding Dongfeng Motor Group Co. agree to safeguards on cybersecurity and data protection as the price of support for a new plant by the Chinese automaker, according to people familiar with the matter.

As talks advance with Dongfeng, Prime Minister Giorgia Meloni’s government is requiring components such as infotainment units be provided by local suppliers for security reasons, the people said, asking not to be identified discussing confidential negotiations. Italian officials also want consumer data to be collected and managed within the country, they said.

Meloni’s government is seeking to capture the benefits of Chinese investment in an auto industry that’s shrunken steadily in recent decades, while also navigating concerns around data protection and cybersecurity. The prime minister met with Chinese President Xi Jinping in Beijing last week as she seeks to renew frayed trade ties with the Asian powerhouse.

“The arrival of a Chinese carmaker in Italy could help inject new life in a stagnant market, as long as local suppliers would play a crucial role in providing components and guaranteeing Western security standards - especially for next generation cars,” said Stefano Aversa, chairman for Europe, the Middle East and Africa at consultant AlixPartners.

The restrictions are part of a wider framework of rules also aimed at promoting Italian automotive suppliers. Italy has urged Dongfeng to source at least 45% of all components in each car from within Italy, which would qualify the Chinese firm for several hundred million euros in public incentives, the people said.

A representative for the Italian government declined to comment. Dongfeng didn’t immediately reply to a request for comment.

Italy is committed in boosting auto production in the country to 1 million vehicles by 2030. Output stood at 880,000 in 2023, according to the International Organization of Motor Vehicle Manufacturers. As recently as 2017, that figure stood at 1.14 million, and has declined from 1.74 million in 2000.

Meloni and Industry Minister Adolfo Urso are seeking to attract another major carmaker to Italy after Fiat maker Stellantis NV, the dominant player in the country, signaled it may move some production to lower-cost locations. Stellantis has an automotive partnership with Dongfeng in China, and agreed to sell assets to the Chinese company last year.

Italy has also had talks with other Chinese manufacturers, who are expanding in Europe to avoid new tariffs on electric vehicles. Attracting Dongfeng would give Italy a prominent role in Europe’s effort to jumpstart EV manufacturing, while helping the country rebuild its partnership with China after exiting Xi’s flagship Belt and Road Initiative.

--With assistance from Tiago Ramos Alfaro.

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