Chinese car manufacturer Xpeng is actively searching for a European facility to expand its operations, while Volkswagen, on the other hand, is looking to cut down its factory numbers. This scenario seemed like a potential match for collaboration, yet an obstacle emerged regarding the condition of the facilities available. Elvis Cheng, Xpeng’s managing director for north-eastern Europe, remarked on the situation at a recent conference, describing the plant on offer as “a little bit, I would say, old.” This candid assessment of Germany’s automotive giant’s facilities might cause some discomfort, considering Volkswagen is not only a shareholder but also a technology customer for Xpeng.
The situation highlights the changing dynamics within the global automotive industry, where European carmakers are retreating while China’s influence is growing. Chinese car sales in Europe have surged, with imports reaching 8.6% of the western European market in the first quarter of the year, nearly double the figure from the same period the previous year, as noted by automotive analyst Matthias Schmidt. Companies from China, such as BYD, Changan, Chery, Dongfeng, and Geely, are now eyeing production opportunities within Europe. While some are contemplating building new factories, the continent’s struggling carmakers see a chance to offload underutilized plants, even if it aids their competitors in gaining market share.
Nissan is reportedly in discussions with Chery to transfer part of its Sunderland facility in northern England, having previously sold another plant in Barcelona to the same company. Similarly, Ford is said to have agreed to sell a portion of its Valencia, Spain, plant to Geely. Stellantis, which owns brands like Peugeot, Fiat, and Vauxhall, has long recognized the potential of partnering with Chinese firms and recently announced that its Spanish plants would start producing cars for Leapmotor.
For European manufacturers, this influx of Chinese investment offers a solution to a pressing issue. The decline in car sales from 15.3 million in 2019 to less than 13 million anticipated by 2025, coupled with US tariffs impacting exports, has left many with excess manufacturing capacity. Selling parts of their operations to Chinese rivals helps avoid the difficult process of closing facilities and laying off workers. However, Volkswagen’s brand chief, Thomas Schäfer, acknowledged the challenges in finding buyers, dismissing rumors of a new owner for its Dresden factory, which would mark the first closure of a German plant in 88 years, stating, “I don’t have anybody knocking on the door.”
Despite these challenges, Cheng from Xpeng indicated that a deal with Volkswagen could still materialize if a suitable location in Europe is identified, though building a new factory remains an option. Meanwhile, European carmakers are privately concerned about the increasing credibility of Chinese producers, who pose a substantial threat across the entire market spectrum, from mass-market vehicles to luxury cars.