Chinese automaker Xpeng is actively seeking a production facility in Europe, highlighting a significant trend in the global automotive industry. While Volkswagen, one of Germany’s leading car manufacturers, is looking to downsize its number of factories, a potential collaboration between the two companies has hit a snag. According to Elvis Cheng, Xpeng’s managing director for north-eastern Europe, the plant Volkswagen offered is considered to be outdated. This candid assessment, made at a recent industry conference, underscores the shifting dynamics within the car market, where European manufacturers are retreating while their Chinese counterparts are advancing.
Chinese car sales have seen a notable increase across Europe, with imports accounting for 8.6% of the western European market in the first quarter of the year—almost double the figures from the previous year. This surge is largely driven by companies such as BYD, Changan, Chery, Dongfeng, and Geely, which are now setting their sights on establishing manufacturing capabilities within Europe. While some are contemplating building new factories, others are capitalizing on opportunities to acquire underutilized European plants, even if it means aiding competitors that are encroaching on their market share.
Several European manufacturers are already engaging with Chinese firms. Nissan, for instance, is in discussions with Chery to partially utilize its facility in Sunderland, UK, after previously selling another plant in Barcelona to Chery. Similarly, Ford is reported to have reached an agreement to sell part of its Valencia, Spain plant to Geely. Stellantis, which owns brands like Peugeot, Fiat, and Vauxhall, was among the first to partner with a Chinese company, recently announcing that its Spanish plants will produce vehicles for Leapmotor.
The influx of Chinese investment offers a lifeline to European carmakers grappling with declining sales, which have dropped from 15.3 million in 2019 to under 13 million projected for 2025. Combined with the impact of US tariffs on exports, many European manufacturers find themselves with excess production capacity. Selling these facilities to Chinese firms allows them to avoid the difficult task of closing plants and laying off workers. However, finding suitable buyers is not always straightforward. Volkswagen brand chief Thomas Schäfer dismissed rumors of a potential buyer for its Dresden plant, emphasizing the challenges involved in offloading such assets.
Despite the hurdles, Xpeng’s Cheng remains open to a potential deal with Volkswagen if a viable location in Europe can be identified. This situation is just one of several possibilities Xpeng is considering, including building a new factory. Meanwhile, there is a growing sense of unease among European manufacturers about the rise of Chinese competitors. A senior executive from a major European automaker privately acknowledged the credibility of Chinese producers, noting their potential threat across all segments of the market, from mass-produced vehicles to luxury models.