Chinese carmaker Xpeng is actively searching for a factory in Europe, while Volkswagen aims to reduce its number of plants. This apparent match faces a hurdle: the age of available facilities. According to Elvis Cheng, Xpeng’s managing director for north-eastern Europe, the plant on offer is “a little bit, I would say, old.” His comment, made at a Financial Times conference, highlights the shifting power balance in the global car industry.
Chinese Imports Surge in Europe
Chinese car sales have soared across Europe, accounting for 8.6% of the western European market in the first quarter of 2025, nearly double the same period a year earlier, according to automotive analyst Matthias Schmidt. Companies such as BYD, Changan, Chery, Dongfeng, and Geely are now aiming to produce vehicles in Europe. Some are building their own factories, while others are taking over underused plants from struggling European manufacturers.
European Carmakers Open Their Doors
European manufacturers see Chinese investment as a solution to overcapacity. Nissan is in talks with Chery to cede part of its Sunderland factory; Ford has reportedly agreed to sell part of its Valencia plant to Geely; and Stellantis announced that two Spanish plants will build cars for Leapmotor. European car sales fell from 15.3 million in 2019 to under 13 million in 2025, leaving factories underutilized. Selling capacity to Chinese rivals avoids closures and layoffs.
However, finding buyers is not always easy. Thomas Schäfer, CEO of the Volkswagen brand, dismissed reports of a potential buyer for its Dresden factory, stating, “I don’t have anybody knocking on the door.” Xpeng’s Cheng noted that a deal with VW is possible if a suitable location is found, but building a new factory remains an option.
Worries and Partnerships
European executives privately express concern. One executive called Chinese producers “very credible,” posing a threat across market segments. Publicly, they emphasize mutual benefit. Stellantis CEO Antonio Filosa believes “a strong partnership is one that can be of benefit for both sides.” Stellantis is among companies in talks with BYD, the world’s largest EV maker. However, BYD executive vice-president Stella Li said the company prefers control: “I think it’s better to run by ourselves. We make decisions in five minutes.”
Regulatory and Competitive Challenges
BYD is nearing completion of a factory in Hungary, though subcontractors face allegations of EU labour law violations. The company denies wrongdoing. The European Commission is considering “Made in Europe” rules that could lock imports out of EV incentives, on top of tariffs ranging from 17% to 35.3% to counter Chinese subsidies. Seat and Cupra CEO Markus Haupt said Chinese rivals have an “unfair position” but added that local production would level the playing field: “if they start producing here with similar costs, then we start having a fair competition.”
Chinese Ambitions in the UK
Chinese brands are also targeting the UK. Gary Lan, UK CEO of Omoda and Jaecoo (Chery brands), aims for “top three” in Britain, overtaking Hyundai and Kia. The Jaecoo 7 became the UK’s top-selling car in March. Lan outlined a four-step plan ending with UK production, stating, “We are getting closer and closer to the full journey.”
The global car industry is undergoing a profound transformation as Chinese manufacturers expand their footprint, European players adapt, and regulatory frameworks evolve. The outcome will reshape the automotive landscape for years to come.
