The global automotive industry is witnessing a profound shift in power dynamics as Chinese electric vehicle manufacturers aggressively expand into Europe, while traditional European carmakers struggle with overcapacity and declining sales. This transformation was highlighted at a recent Financial Times conference, where Chinese executives candidly assessed the aging facilities of European giants.
Chinese Expansion into Europe
Chinese automakers including BYD, Xpeng, Changan, Chery, Dongfeng, and Geely are actively seeking to establish production bases in Europe. Xpeng's managing director for north-eastern Europe, Elvis Cheng, described a potential plant from Volkswagen as "a little bit old," underscoring the technological gap. Despite Volkswagen being a shareholder and technology partner, Cheng noted that a deal remains possible if a suitable location is found. Chinese car sales have surged across Europe, accounting for 8.6% of the western European market in the first quarter, nearly double the previous year, according to analyst Matthias Schmidt.
European Carmakers' Retreat
European manufacturers are grappling with falling sales from 15.3 million in 2019 to under 13 million in 2025, compounded by US tariffs. This has left them with excess factory capacity. To avoid the painful process of closures and layoffs, many are selling or leasing plants to Chinese rivals. Nissan is in talks with Chery over its Sunderland factory, Ford reportedly agreed to sell part of its Valencia plant to Geely, and Stellantis has announced that two Spanish plants will build cars for Leapmotor. However, Volkswagen brand CEO Thomas Schäfer dismissed reports of a buyer for its Dresden plant, stating, "I don't have anybody knocking on the door."
Strategic Partnerships and Concerns
Privately, European executives worry about losing market share. One executive noted that Chinese producers are "very credible" and pose a threat across all segments. Publicly, they express optimism. Stellantis CEO Antonio Filosa believes "a strong partnership is one that can be of benefit for both sides." The company is in talks with BYD, the world's largest EV maker, but BYD's executive vice-president Stella Li emphasized a preference for independent control: "It's better to run by ourselves. We make decisions in five minutes." BYD is nearing completion of a factory in Hungary, despite allegations of labor law violations by subcontractors, which the company denies.
Regulatory and Competitive Landscape
The European Commission is considering "Made in Europe" rules that would restrict incentives for imported EVs, alongside tariffs of 17-35.3% to counter Chinese subsidies. Seat and Cupra CEO Markus Haupt suggested inviting Chinese firms to produce locally, which would create employment and attract investment. Chinese brands like Omoda and Jaecoo, under Chery, aim for ambitious targets. Gary Lan, UK CEO of Omoda and Jaecoo, stated a goal to be "top three" in Britain, with a four-step plan culminating in UK production. The Jaecoo 7 became the UK's top-selling car in March, signaling the rapid pace of this transformation.
