Chinese car manufacturer Xpeng is actively seeking a factory location in Europe, while Volkswagen is looking to downsize its existing manufacturing facilities. This scenario could have potentially paved the way for a mutually beneficial agreement between the two companies. However, Xpeng’s managing director for north-eastern Europe, Elvis Cheng, expressed reservations about the age of the available plant, describing it as “a little bit old.” This critical assessment was made at a recent conference and highlights the evolving dynamics within the global automotive industry. As China’s car industry rapidly expands, European manufacturers are experiencing a downturn.
The surge in Chinese car sales across Europe is evident, with Chinese vehicles capturing 8.6% of the western European market in the first quarter of the year, nearly doubling from the same period last year, according to automotive analyst Matthias Schmidt from Berlin. Several Chinese companies, such as BYD, Changan, Chery, Dongfeng, and Geely, are now eyeing production in Europe. While some are contemplating establishing their own manufacturing facilities, others see an opportunity in acquiring underutilized plants from struggling European carmakers, even if it means aiding competitors in gaining market share.
Examples of such collaborations include Nissan’s discussions with Chery to share its Sunderland factory in northern England, having previously sold another plant in Barcelona to Chery. Similarly, Ford has reportedly agreed to sell a portion of its Valencia, Spain, plant to Geely. Stellantis, which owns brands like Peugeot, Fiat, and Vauxhall, partnered with a Chinese rival earlier than most and recently announced plans for two of its Spanish plants to produce vehicles for Leapmotor. For European manufacturers, Chinese investments offer a solution to excess factory capacity issues, which are exacerbated by declining car sales in Europe and US tariffs impacting exports.
Despite the benefits, finding buyers for these facilities isn’t always straightforward. Volkswagen’s brand chief, Thomas Schäfer, dismissed rumors about a new prospective owner for its Dresden factory, the first in Germany to close in 88 years, stating: “I don’t have anybody knocking on the door.” While Xpeng’s Cheng mentioned that a collaboration with Volkswagen was still a possibility if a suitable location in Europe could be identified, building a new factory remains an alternative option.
Behind the scenes, European carmakers harbor concerns about the growing presence of Chinese manufacturers. As one executive from a major manufacturer acknowledged, Chinese producers are “very credible” and pose a significant competitive threat across all market segments, from mass-produced vehicles to luxury models. The shifting landscape of the automotive industry continues to challenge traditional European manufacturers as they navigate these new dynamics.