The global automotive hierarchy is undergoing a quiet but profound realignment, as legacy European manufacturers begin selling off production capacity to the exceptionally Chinese rivals currently eating their market share. This shift, driven by a combination of plummeting domestic sales and a desperate need to avoid mass layoffs, has created a paradoxical scenario where the “old guard” of the industry is effectively holding the door open for its competitors.
The tension of this transition was captured recently at a Financial Times conference, where Elvis Cheng, managing director for north-eastern Europe at Xpeng, offered a blunt assessment of the facilities available from Germany’s industry leader, Volkswagen. When discussing the potential for a deal, Cheng described the plants on offer as “a little bit, I would say, old.”
For Volkswagen, which is both a shareholder and technology customer of Xpeng, the comment is more than just an awkward social exchange. We see a symptom of a broader industrial crisis. While Chinese carmakers are on the march, EU carmakers paving the way for Chinese rivals is becoming a pragmatic strategy for survival in a market where the balance of power has shifted decisively toward the East.
The scale of the intrusion is evident in the data. According to Berlin-based automotive analyst Matthias Schmidt, Chinese imports accounted for 8.6% of the western European market in the first three months of the year—nearly double the share they held during the same period a year prior.
The Great Factory Handover
For many European firms, the motivation to partner with Chinese rivals is financial and social. European car sales have plummeted from 15.3 million in 2019 to a projected figure of less than 13 million by 2025. This decline, exacerbated by US tariffs that have hampered export sales, has left Europe with a massive surplus of factory space.
Rather than navigating the political and social minefield of closing plants and firing thousands of workers, manufacturers are opting to offload underused capacity. The result is a series of strategic handovers across the continent:
- Nissan is currently in negotiations with Chery to transfer part of its sole European factory in Sunderland, England, following a previous sale of a plant in Barcelona to the same company.
- Ford has reportedly reached an agreement to sell a portion of its Valencia plant in Spain to Geely.
- Stellantis, the conglomerate behind Peugeot and Fiat, has already partnered with Leapmotor, announcing that two of its Spanish facilities will produce vehicles for the Chinese brand.
Despite these deals, finding buyers is not a guaranteed process. Thomas Schäfer, CEO of the Volkswagen brand, recently dismissed reports that its Dresden factory—the first in Germany to close in 88 years—had found a new owner as “nonsense,” stating, “I don’t have anybody knocking on the door.”
A Clash of Corporate DNAs
While some Chinese firms are happy to step into existing infrastructure, others are wary of the constraints that come with partnerships. Stella Li, executive vice-president of BYD—the world’s largest electric vehicle maker—has signaled a preference for total autonomy over joint ventures.
In a recent interview with Bloomberg, Li emphasized that BYD’s speed of execution is incompatible with the bureaucratic nature of partnerships. “I think it’s better to run by ourselves,” Li said. “It’s very hard to ask permission by another. We don’t have this DNA working for us. We run very fast. We make decisions in five minutes.”
This drive for independence is evident in BYD’s current project near Szeged, Hungary. However, the expansion has not been without friction. subcontractors on the project have faced allegations of violating EU labour laws. A company spokesperson responded by stating that BYD places the “highest priority on the protection of labour rights and the strict compliance with Hungarian and European laws and regulations.”
The Policy Shield and the Path to ‘Fair’ Competition
The European Commission is currently attempting to mitigate the impact of Chinese dominance through a combination of tariffs and “Made in Europe” requirements. Current electric car tariffs range from 17% to 35.3%, depending on the manufacturer, intended to offset Chinese government subsidies.
Some European executives argue that inviting Chinese firms to build locally is actually the best way to ensure a level playing field. Markus Haupt, CEO of Seat and Cupra, suggests that when Chinese rivals produce within Europe, they face the same infrastructure, labour, and material costs as domestic brands.
Haupt believes the EU should actively encourage the localization of components. “I think for Europe, looking where we are standing now on our industrial base, it will be super-attractive because this would create employment, this would attract investment to Europe,” he said.
| European Partner/Site | Chinese Counterpart | Status/Agreement |
|---|---|---|
| Nissan (Sunderland/Barcelona) | Chery | Partial transfer/Sale |
| Ford (Valencia) | Geely | Reported sale of part of plant |
| Stellantis (Spain) | Leapmotor | Production partnership |
| Stellantis (China) | Dongfeng | Production of Peugeot/Jeep in China |
The UK as a Testing Ground
The shift is particularly aggressive in the United Kingdom. Gary Lan, the UK CEO of Omoda and Jaecoo (brands launched by Chery), has stated an ambition to place the company in the “top three” of the British market, which would require overtaking established players like Hyundai and Kia.
The momentum is already visible; in March, the Jaecoo 7 became a top-selling vehicle in the UK. Lan has outlined a four-step strategy for the region, moving from initial launches to the establishment of a research center, and finally to full UK-based production. While the company is currently in the second stage, Lan indicated that by next year, there will be “more to talk” regarding domestic vehicle manufacturing.
Disclaimer: This article is intended for informational purposes only and does not constitute financial or investment advice.
The next critical checkpoint for the industry will be the European Commission’s final determination on “Made in Europe” incentive rules, which could further dictate whether Chinese firms build their own “greenfield” sites or continue to acquire the aging assets of European incumbents.
Join the conversation: Do you think European carmakers can survive by partnering with their rivals, or is this a surrender of industrial sovereignty? Share your thoughts in the comments.
