In a notable shift within the global automotive industry, Chinese carmaker Xpeng is considering expanding its footprint in Europe by acquiring a factory. This move comes as Volkswagen, a significant player in the sector, aims to downsize its number of production facilities. However, a potential deal between the two has encountered hurdles, with Xpeng’s managing director for north-eastern Europe, Elvis Cheng, remarking on the outdated condition of the German car giant’s available plant. Despite Volkswagen being both a shareholder and technology partner for Xpeng, the candid assessment highlights the changing dynamics where Chinese automakers are gaining traction as European manufacturers face challenges.
The surge in Chinese car sales across Europe underscores this shift, with imports capturing 8.6% of the western European market in the first quarter of this year, almost doubling their presence compared to the previous year’s same period, as noted by automotive analyst Matthias Schmidt. Several Chinese automotive companies, including BYD, Changan, Chery, Dongfeng, and Geely, have set their sights on producing vehicles directly in Europe. While some contemplate constructing new factories, others see an opportunity in acquiring underutilized plants from Europe’s struggling carmakers, who are opting to sell rather than shut down and incur significant layoffs.
Nissan, for instance, is in discussions with Chery to allocate part of its only European plant in Sunderland, northern England, having previously sold a facility in Barcelona to the same company. Similarly, Ford is reportedly in talks to sell a portion of its Valencia, Spain plant to Geely. Stellantis, the parent company of brands like Peugeot, Fiat, and Vauxhall, has embraced partnerships with Chinese competitors earlier than others, recently announcing that its Spanish factories will produce vehicles for Leapmotor. This influx of Chinese investment offers European manufacturers a reprieve from declining car sales, which have fallen from 15.3 million in 2019 to under 13 million expected by 2025, further exacerbated by US tariffs impacting exports.
Despite the potential benefits, Volkswagen brand chief executive Thomas Schäfer expressed skepticism about the ease of selling plants, refuting rumors of a buyer for its Dresden facility, Germany’s first plant closure in 88 years, as “nonsense.” He emphasized the lack of interest by noting, “I don’t have anybody knocking on the door.” Meanwhile, Xpeng remains open to negotiations with Volkswagen if a suitable location in Europe can be identified, although they are also considering the possibility of establishing a new factory.
Privately, there is concern among European automakers about the competitive edge of Chinese manufacturers. An executive from a major company acknowledged the credibility of these Chinese entrants, recognizing them as potential threats across various market segments from mass production to luxury vehicles. As the automotive landscape evolves, this growing Chinese presence poses both challenges and opportunities for the traditional European carmakers.