In a bid to expand its manufacturing footprint, Chinese automaker Xpeng is actively searching for a factory site in Europe. This quest comes at a time when Volkswagen is looking to consolidate its operations by reducing its number of factories, presenting a seemingly ideal opportunity for both parties to collaborate. However, as Xpeng’s managing director for north-eastern Europe, Elvis Cheng, pointed out, there is a significant hurdle: the existing plant is perceived as outdated. Cheng shared this candid assessment during a recent conference, potentially creating tension with Volkswagen, which is not only a shareholder in Xpeng but also a customer of its technology.
This situation highlights a broader shift in the global automotive industry, where Chinese car manufacturers are gaining momentum while many of their European counterparts face challenges. Recent data from automotive analyst Matthias Schmidt reveals that Chinese car sales in Europe have nearly doubled, accounting for 8.6% of the western European market in the first quarter of the year. Established Chinese brands like BYD, Changan, Chery, Dongfeng, and Geely are not only exporting vehicles but are also considering establishing production facilities in Europe. While some contemplate building new factories, they are also eyeing opportunities to acquire struggling European plants, even if it aids their competition in gaining a foothold in the market.
Several European carmakers are already in discussions with Chinese companies. Nissan, for example, is negotiating with Chery to allocate part of its Sunderland plant in northern England, having already sold a Barcelona facility to the same company. Meanwhile, Ford is reportedly in talks to sell a portion of its Valencia plant to Geely. Stellantis, which owns brands like Peugeot, Fiat, and Vauxhall, has been proactive in forming alliances with Chinese firms, recently announcing plans to produce vehicles for Leapmotor at two of its Spanish plants.
For European manufacturers grappling with declining local sales and the impact of US tariffs on exports, Chinese investment offers a respite. Since the pandemic, European car sales have dipped from 15.3 million in 2019 to an anticipated less than 13 million by 2025, leaving many with excess factory space. Selling these underutilized facilities to Chinese rivals provides a practical solution to avoid the difficult decisions of closing plants and laying off workers. However, Volkswagen’s brand chief, Thomas Schäfer, acknowledged that securing buyers can be challenging, dismissing rumors of a potential buyer for its Dresden factory, which would mark a historic closure in Germany.
While Xpeng remains open to a partnership with Volkswagen, Cheng indicated that they are exploring various alternatives, including the possibility of constructing a new plant. Despite this, there is an underlying concern among European automakers about the growing influence of their Chinese counterparts. Privately, executives acknowledge the credibility of Chinese producers and recognize them as formidable competitors across all segments of the market, from mass-produced vehicles to luxury models.