The global automotive industry is witnessing a significant shift as Chinese carmakers expand their presence in Europe, while traditional European manufacturers grapple with challenges. Xpeng, a prominent Chinese car manufacturer, is actively seeking a factory location in Europe. Meanwhile, Volkswagen, a major player in the automotive sector, is looking to downsize its European operations. This situation seemed ripe for collaboration, but Xpeng’s managing director for north-eastern Europe, Elvis Cheng, expressed concerns about the age of the facilities offered by Volkswagen, underscoring the shifting dynamics in automotive manufacturing.
Cheng’s candid assessment at a recent conference highlights the growing influence of Chinese carmakers in the European market. Chinese car sales in Europe have surged, accounting for 8.6% of the western European market in the first quarter of the year, nearly double the figure from the same period last year, as reported by automotive analyst Matthias Schmidt. Companies like BYD, Changan, Chery, Dongfeng, and Geely are eager to establish a manufacturing presence in Europe, either by constructing new factories or acquiring existing ones from European manufacturers facing excess capacity.
This trend has prompted European carmakers to consider selling their underutilized plants to Chinese competitors. For instance, Nissan is negotiating with Chery to allocate part of its Sunderland factory in northern England, having previously sold another plant in Barcelona to Chery. Ford is reportedly in talks to sell a portion of its Valencia plant to Geely, while Stellantis, which owns brands like Peugeot, Fiat, and Vauxhall, has already partnered with Chinese rival Leapmotor to produce cars in its Spanish facilities.
European manufacturers are motivated to sell off these facilities due to declining car sales, which have dropped from 15.3 million in 2019 to less than 13 million in 2025, combined with U.S. tariffs affecting exports. Selling factory space to Chinese companies offers a solution to avoid shutting down plants and laying off workers. However, Volkswagen’s brand chief, Thomas Schäfer, noted that finding buyers isn’t always straightforward. Rumors about selling its Dresden factory, the first potential closure in Germany in 88 years, were dismissed by Schäfer, who stated, “I don’t have anybody knocking on the door.”
Despite the challenges, Cheng remains open to a potential deal with Volkswagen if a suitable location can be found in Europe. However, he emphasized that building a new factory is also under consideration. Privately, European carmakers express concern over the competitive threat posed by Chinese manufacturers, who are seen as credible contenders across all segments, from mass-market to luxury vehicles.