The European automotive market is undergoing a significant transformation. For decades, traditional manufacturers dominated with expansive factories and established supply chains. However, recent trends indicate a shift, with young Chinese manufacturers rapidly expanding while established local giants downsize. A prime example is XPeng, a Chinese brand currently in negotiations to acquire a manufacturing plant from Volkswagen.
XPeng seeks additional production capacity due to surging international sales. In April 2026, the company exported a record 6,006 vehicles—marking a 62% increase compared to the same month last year, and up 28% from March 2026. Over the first four months of 2026, XPeng shipped 17,563 units overseas, representing a 55% increase over the previous year. This impressive growth is pushing the company’s production capabilities to their limits.
The automaker is currently utilizing the Magna Steyr plant in Graz, Austria, to manufacture vehicles for European customers. However, this facility is also nearing capacity. The Austrian site has been building the G6 and G9 electric SUVs since September 2025 and completed trial production of the new 2026 P7+ electric sedan in January 2026. Manufacturing within Europe enables the company to avoid steep import tariffs on Chinese-made vehicles, which can be as high as 35.5%.
Elvis Cheng, XPeng’s managing director for Northeastern Europe, disclosed the factory negotiations during the Financial Times' Future of the Car summit. He confirmed the company is actively engaging with Volkswagen to secure a physical production site on the continent. Cheng remarked that some Volkswagen factories are “a little bit old” and may not meet the stringent technical requirements necessary for producing advanced vehicles. Should the acquisition not proceed, XPeng is prepared to construct a completely new facility from the ground up.
This potential acquisition aligns with Volkswagen’s current restructuring efforts. The German auto group is grappling with excess production capacity and significant structural changes, which may lead to approximately 35,000 job cuts. In December 2025, VW shut down its Dresden factory, marking the first closure of a German plant in its 88-year history. The company plans to reduce its annual production capacity by about 750,000 vehicles by 2030, alongside an additional reduction of 500,000 units across Europe, concentrating on underused facilities.
Interestingly, XPeng and Volkswagen are not strangers. In 2023, Volkswagen acquired a 5% stake in XPeng for €598 million. This financial tie has evolved into a significant technological collaboration, with Volkswagen becoming the first commercial buyer of XPeng's second-generation VLA 2.0 smart driving system, marking a notable event in the importation of core AI technology from a Chinese brand by a major European automaker.
XPeng is not alone in its quest for European manufacturing. A wave of Chinese automotive localization is sweeping across the continent. Just one day before XPeng’s announcement, rival automaker BYD disclosed its own efforts to establish factory deals with Stellantis and other European companies to acquire idle assembly lines. BYD is already constructing its dedicated factory in Hungary, set to begin operations this year, alongside a €1 billion facility in Turkey scheduled to open by the end of December.
Traditional European brands are surprisingly accommodating in this endeavor. Rather than resisting competition from these emerging companies, they are willingly parting with their facilities. Stellantis is strengthening ties with another Chinese brand, Leapmotor, planning to transfer ownership of its Madrid factory to Leapmotor’s Spanish subsidiary and expand production lines at its Zaragoza plant to manufacture these new electric vehicles. This approach allows legacy brands to capitalize on idle plants that no longer serve their production needs.
The global automotive industry is evolving at an unprecedented pace. Just two years ago, in January 2024, XPeng exported a mere 398 vehicles. Achieving 6,006 units in a single month reflects a fifteen-fold increase over just 24 months. The brand’s global presence now spans over 1,000 retail outlets across 60 countries. Chinese companies are no longer merely exporting electric vehicles; they are actively establishing themselves as local manufacturers in Europe. Legacy car brands that struggle to fill their factories must acknowledge a new reality: competition has arrived in their neighborhood.
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