The European automotive market is undergoing a significant transformation. While legacy manufacturers have historically dominated the continent with expansive factories and established supply chains, emerging players, particularly young Chinese manufacturers, are now expanding rapidly. A notable illustration of this trend is XPeng, a Chinese electric vehicle brand, which is currently in negotiations to acquire a manufacturing facility from Volkswagen.
XPeng is in need of additional manufacturing space due to a surge in international sales. In April 2026, the company exported a record 6,006 vehicles—reflecting a 62% increase from the previous year and a 28% rise from March 2026. Over the first four months of 2026, XPeng shipped a total of 17,563 units abroad, marking a 55% increase compared to the year prior. This accelerated growth has pushed the company’s production capabilities to their limits.
Currently, XPeng utilizes the Magna Steyr production facility in Graz, Austria, to manufacture vehicles for European customers. However, this facility is nearing its operational limits. Since September 2025, it has been producing the G6 and G9 electric SUVs, and in January 2026, it completed trial production of the 2026 P7+ electric sedan. Manufacturing within Europe enables XPeng to circumvent the European Union’s high import tariffs on Chinese vehicles, which can reach as much as 35.5%.
During the Financial Times' Future of the Car summit, Elvis Cheng, XPeng's managing director for northeastern Europe, confirmed that the company is actively negotiating with Volkswagen for a production site in Europe. Cheng remarked on the age of some of Volkswagen's factories, suggesting that they may not meet the stringent technical requirements necessary for producing advanced modern vehicles. Should the acquisition not materialize, XPeng is prepared to construct a new factory from the ground up.
This potential acquisition coincides with Volkswagen's need to streamline operations, as the company grapples with excess production capacity and significant structural changes, which are projected to lead to approximately 35,000 job cuts. The closure of the Dresden plant in December 2025 marked the first shutdown of a German facility in Volkswagen's 88-year history. By 2030, the company aims to reduce its annual production capacity by around 750,000 vehicles and plans to cut an additional 500,000 units across Europe by focusing on underutilized facilities.
Interestingly, XPeng and Volkswagen are not unfamiliar with each other. In 2023, Volkswagen acquired a 5% stake in XPeng for €598 million, establishing a financial link that has developed into a robust technological partnership. Volkswagen became the first major European automaker to purchase XPeng's second-generation VLA 2.0 smart driving system, marking a significant milestone in cross-border technology exchange.
XPeng is not alone in its quest for European manufacturing capabilities. Another Chinese automaker, BYD, recently announced its intentions to explore factory acquisition deals with companies such as Stellantis. BYD is already in the process of establishing its own manufacturing plant in Hungary, slated to commence operations this year, along with a €1 billion facility in Turkey expected to open by the end of December.
Traditional European brands appear willing to cede control of their facilities. Instead of resisting the entry of competitive newcomers, legacy automakers are actively seeking partnerships. For example, Stellantis plans to transfer ownership of its Madrid factory to Leapmotor's Spanish subsidiary and expand production lines at its Zaragoza plant to accommodate new electric vehicles. This strategy allows older brands to monetize factories that are no longer viable for their own production needs.
The global automotive industry is evolving rapidly. Just two years ago, in January 2024, XPeng exported a mere 398 vehicles. The leap to 6,006 units in a single month demonstrates a remarkable fifteen-fold increase within a short span. XPeng now boasts over 1,000 retail locations across 60 countries. Chinese manufacturers are no longer just exporting electric vehicles; they are actively transitioning into local European producers. Traditional carmakers grappling with underutilized factories must adapt to a new competitive landscape, wherein external challengers have established a local presence.
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