Chinese automaker Xpeng is actively seeking a manufacturing facility in Europe, while Volkswagen is looking to downsize its number of factories. This situation seemed ideal for a partnership, but as Elvis Cheng, Xpeng’s managing director for northeastern Europe, pointed out, the proposed plant was “a little bit old.” His assessment of the German carmaker’s facility highlights the evolving dynamics in the global automotive industry, where European brands are experiencing a downturn and Chinese companies are gaining ground.
The expansion of Chinese car sales across Europe is significant, with imports fueling this growth. In the first quarter of the year, Chinese-made vehicles captured 8.6% of the Western European market, almost twice the share from the previous year, according to automotive analyst Matthias Schmidt. Companies such as BYD, Changan, Chery, Dongfeng, and Geely are now exploring the possibility of manufacturing cars in Europe. While some are contemplating building their own facilities, they are also eyeing opportunities to acquire underutilized factories from European carmakers, who see it as a way to manage excess capacity amid declining sales.
Nissan, for instance, is negotiating with Chery for part of its only European plant in Sunderland, England, having previously sold another facility in Barcelona to the Chinese company. Similarly, Ford is reportedly in talks to sell part of its Valencia, Spain plant to Geely. Stellantis, the parent company of brands like Peugeot, Fiat, and Vauxhall, has been collaborating with Chinese automakers and recently announced that its Spanish plants will start producing vehicles for Leapmotor.
For European carmakers, partnerships with Chinese firms offer a solution to dwindling sales, which have dropped from 15.3 million in 2019 to under 13 million in 2025. This decline, coupled with the impact of U.S. tariffs on exports, has left European manufacturers with more production capacity than necessary. Selling parts of their operations to Chinese competitors allows them to avoid the politically and socially challenging process of closing plants and laying off workers.
Despite these opportunities, finding buyers remains challenging. Volkswagen brand CEO Thomas Schäfer denied any potential sale of its Dresden factory, the first in Germany to face closure in 88 years, stating that no interested parties have come forward. While Xpeng’s Cheng mentioned that a deal with VW could still happen if a suitable European location is found, the company is also considering other options, including building a new facility. Privately, European automakers are concerned about the rise of credible Chinese competitors, who could pose a threat across all market segments from mass to luxury cars.