Chinese automaker Xpeng is actively seeking a production facility in Europe, while Volkswagen is focusing on reducing its factory numbers. However, a potential collaboration between the two faced hurdles when Xpeng’s managing director for north-eastern Europe, Elvis Cheng, described one available plant as “a little bit old.” This candid assessment, shared during a recent conference, underscores the evolving dynamics in the global automotive industry, where European manufacturers are experiencing setbacks and Chinese companies are making significant advancements.
The influx of Chinese cars into Europe has been striking, with imports capturing 8.6% of the western European market in the first quarter of this year, nearly doubling from the previous year, according to automotive analyst Matthias Schmidt. Companies like BYD, Changan, Chery, Dongfeng, and Geely are not only keen on exporting but also contemplating local production. This has led to European carmakers considering the sale of underutilized plants, despite the risk of bolstering their competitors. For instance, Nissan is negotiating with Chery to share its Sunderland plant in England, having already sold a facility in Barcelona to the Chinese company. Similarly, Ford is reportedly selling part of its Valencia plant to Geely, and Stellantis announced plans to have its Spanish plants produce cars for Leapmotor.
The decline in European car sales from 15.3 million in 2019 to under 13 million by 2025, compounded by US tariffs impacting exports, has left manufacturers with excess factory capacity. Selling these facilities to Chinese companies offers a solution to avoid plant closures and layoffs. However, as Volkswagen brand CEO Thomas Schäfer pointed out, finding buyers isn’t always straightforward, dismissing rumors of a buyer for its Dresden plant, the first in Germany to face closure in 88 years, as “nonsense.”
Xpeng’s Cheng indicated that a partnership with Volkswagen remains a possibility if a suitable location in Europe can be found, though this is just one option among several, including the construction of a new facility. Despite these developments, European carmakers are privately worried about the competition. An executive from a leading manufacturer acknowledged the credibility of Chinese producers, noting their potential threat across all market segments, from budget to luxury vehicles.