Chinese automaker Xpeng is actively searching for a manufacturing plant in Europe, while Volkswagen is looking to scale back its factory operations. On the surface, this situation seems ripe for collaboration. However, Xpeng’s Managing Director for north-eastern Europe, Elvis Cheng, expressed reservations about the offered facility, describing it as “a little bit, I would say, old.” This candid assessment, shared during a recent conference, underscores the evolving dynamics within the global automotive industry, where European manufacturers are seeing a decline, and Chinese companies are on the rise.
The influx of Chinese car sales in Europe illustrates this shift. Data shows that Chinese vehicles accounted for 8.6% of the western European market in the first quarter of this year, nearly double from the previous year, according to automotive analyst Matthias Schmidt. Chinese companies like BYD, Changan, Chery, Dongfeng, and Geely are not only exporting to Europe but also eyeing local production. Some are contemplating building new factories, while others see an opportunity in acquiring underutilized European plants, even if it aids their market competition. For instance, Nissan is negotiating with Chery to share space in its Sunderland facility, and Ford might sell part of its Valencia plant to Geely. Stellantis, which owns brands like Peugeot and Fiat, has already partnered with Chinese firms and plans to produce Leapmotor vehicles at its Spanish plants.
For European carmakers, Chinese investment addresses a pressing concern. Car sales in Europe have decreased from 15.3 million in 2019 to under 13 million in 2025, impacted by the pandemic and US tariffs affecting exports. This leaves manufacturers with excess factory space, and selling it to Chinese rivals offers a solution to avoid closures and workforce reductions. However, Volkswagen’s CEO, Thomas Schäfer, noted the challenge in finding buyers, dismissing rumors of a new owner for its Dresden factory, the first German plant closure in 88 years, as “nonsense” and remarked that no one was expressing interest.
Cheng from Xpeng suggested that a deal with Volkswagen might still happen if a suitable location in Europe is found, though it’s just one of several possibilities, including constructing a new facility. Despite these potential collaborations, there’s underlying apprehension among European automakers about the growing credibility of Chinese producers. As one executive from a large European manufacturer noted, the Chinese carmakers pose a significant threat across the industry spectrum, from mainstream markets to luxury segments.