European carmakers turn to Chinese rivals to salvage struggling plants

European carmakers, struggling with severe headwinds and halted assembly lines across numerous plants, are turning to Chinese rivals to salvage their operations.

A report by the Financial Times outlines the perilous situation facing factories across the continent, particularly in Italy.

The sprawling Fiat automobile plant in Cassino, located 130 km southeast of Rome and once an engine of the local economy, has taken on a desolate, near-abandoned atmosphere.

The facility’s 2,200 employees are summoned to work only a few days a month. In the first half of 2026, the plant produced just 6,700 cars, representing a minuscule fraction of its annual capacity of 300,000 units.

Denise Tisci, a 40-year-old mother of three who has worked at the plant since 2007, has not worked a shift since May and relies on a government temporary lay-off scheme alongside her colleagues.

“We have cut back on many things, even basic, simple things like taking the children out for a pizza,” Tisci said. “Having to look our children in the face is deeply humiliating.”

Fiat workers expect Stellantis, the automaker’s parent company, to seek a Chinese solution for the Cassino plant, mirroring its recent agreements in Spain and France with Leapmotor and Dongfeng.

This situation is not unique to Fiat, as a growing number of European carmakers turn to Chinese competitors to resolve issues caused in part by their rapid expansion into the region.

Emanuele Cappellano, head of European operations at Stellantis, told the Financial Times regarding the company’s recent partnerships in China:

“This is not just a way to survive and catch up with our new rivals, but also an opportunity to boost sales volume and achieve growth in Europe.”

A total closure of the group’s Italian factories has been ruled out, and Cappellano noted that a solution for Cassino will be found by the end of the year.

As the company seeks a partner to revitalize its struggling Maserati brand, a likely scenario involves collaborating with a Chinese group with which it already maintains ties.

This could involve either its electric vehicle (EV) joint-venture partner Leapmotor or state-owned Dongfeng.

“Any partner that moves its production to these factories is not a problem for us. The crisis in the automotive sector is impacting the entire economy,” said Enzo Salera, Mayor of Cassino, adding that local retailers and restaurants have also been severely affected.

European automotive production accounts for approximately 7% of the continent’s GDP and provides employment to roughly 14 million people.

With regional car sales remaining roughly 3 million units below pre-pandemic levels and Chinese rivals capturing market share, other companies have begun adopting new strategies to survive.

Nissan is collaborating with Chery in the UK, Volkswagen continues discussions with Xpeng, and Ford has signed an agreement with Geely in Spain.

Jim Baumbick, head of Ford in Europe, remarked last week while announcing the collaboration with Geely: “The environment in Europe has changed forever. The objective is to achieve the lowest possible cost.”

According to AlixPartners, plant utilization rates in the European automotive sector are running below 60%, leaving a total production capacity of approximately 2.5 million vehicles potentially idle.

Stellantis is doubling down on a strategy that some industry executives view as a short-term fix, but one that could prove self-destructive if local supply chains and technological know-how are not reinforced.

Stellantis has invited Leapmotor and Dongfeng to manufacture models at its facilities in Spain and France.

The Dongfeng agreement was broadly welcomed by French workers because it could help save a 1960s-era plant in Rennes, Brittany.

Like many other Stellantis plants in the country, the Rennes facility had been reduced to a single assembly line, with surrounding land sold off.

Laurent Oechsel, a representative of the French CFE-CGC union at Stellantis, asked: “Right now, Chinese-made cars are sitting in our ports. Do we want to keep fighting against this as the textile sector once did, or do we want to continue producing cars in France alongside the Chinese?”

The challenge for European policymakers, carmakers, and trade unions is to ensure that manufacturing partnerships preserve employment while bolstering the region’s supply chains with Chinese technology.

Currently, many Chinese vehicles marketed as being produced in Europe are equipped primarily with parts manufactured in China and shipped to the EU for final assembly.

Adolfo Urso, Italy’s Minister of Industry, told the Financial Times:

“If the objective is to establish a technological industrial partnership that can fill the factory, keep it viable, and help protect the supply chain, that is welcome. Provided, of course, that people come to Italy to produce, not merely to assemble.”

While partnerships are common among carmakers, European manufacturers hope to learn how to produce cars faster and more cheaply through Chinese alliances.

In return, Chinese brands want to scale up European manufacturing ahead of strict new local content rules that Brussels plans to enforce in mid-2027, aimed at driving investment into the continent, creating new jobs, and enabling technology and skills transfers.

Under the Industrial Accelerator Act, the EU proposes a 70% local content threshold for car parts to qualify for subsidies or public procurement. Local battery production is also expected to commence in the future.

Major uncertainties remain regarding the extent to which Chinese companies will transfer technological know-how and intellectual property rights, as well as how quickly they will begin utilizing European-sourced components.

In Spain, where the government successfully persuaded Chinese companies such as battery maker CATL, Chery, and SAIC (owner of MG) to set up factories, no guarantees have yet been secured regarding technology transfers or the proportion of local labor and components to be used.

Deep concern prevails across the automotive supply chain, where component manufacturers employ twice as many workers as carmakers.

“Those of us working in the supply chain could be at risk,” said Marco Leone, 62, an employee at a firm manufacturing sheet metal fenders for the Cassino plant.

Similar concerns surround Nissan’s agreement to share production at its Sunderland plant with Chery starting next year.

Sources familiar with the discussions stated that three models would be produced for the Chinese group, which also owns the Jaecoo and Omoda brands.

Ian Henry, an automotive manufacturing expert who leads the consultancy AutoAnalysis, warned: “Suppose that in the first year, the cars are essentially produced from kits originating in China. That is great for workers on the assembly line, but not necessarily as beneficial for employees in Nissan’s press shop, body shop, and paint shop, or for local tier-one suppliers.”

Henry added that Chery would need to rapidly increase its localization rate to export to the EU, but the timeline remains uncertain, and discussions continue over whether UK-produced cars will be included within the “Made in Europe” framework.

A source close to the talks noted that the higher cost of utilizing UK suppliers also presents an obstacle.

Chinese automotive executives stress their commitment to using local supply chains, while acknowledging that the transition will not occur overnight.

Charlie Zhang, executive vice president of Chery International, told the Financial Times:

“Localization is a gradual process; it is measured not by the calendar, but by the maturity of supply chains, cost structures, and our readiness to become part of the local industrial ecosystem.”

Analysts argue that sluggish demand in China and the pressure to boost exports represent the primary obstacles to localization in Europe.

With the government pressing manufacturers to utilize idle capacity, China’s global exports are projected to rise by 41% this year, exceeding 10 million units.

Thomas Besson, head of automotive research at Kepler Cheuvreux, noted: “Because domestic demand in China has fallen well short of expectations, the pressure on Chinese automakers to export is far greater. Despite frequently expressing their intentions, Chinese carmakers have not yet begun producing significant volumes of vehicles in Europe.”

The “Made in Europe” proposals will further drive up car manufacturing costs in Europe, potentially forcing some Chinese producers with smaller sales volumes to forgo European subsidies and continue exporting in the near term.

A senior executive at a Chinese carmaker stated: “If it becomes financially too expensive, we will pay the tariff and continue shipping cars [from China].”

For certain Chinese carmakers like BYD, joint ventures make little strategic sense.

Stella Li, top executive for international operations at BYD, described a joint venture as “impossible,” stating: “I think it is better to manage on our own. Asking for permission is very difficult. We make our decisions in five minutes.”

BYD plans to commence mass production of its vehicles in Hungary by the end of this year. However, the “Made in Europe” proposal has prompted the company to seek a second site in Spain or France before completing its factory in Türkiye as previously announced.

Not all European carmakers are pursuing Chinese partnerships. Some analysts argue that companies operating independently can react faster to market shifts, with no guarantee that Chinese partners will succeed in Europe.

“I believe companies that remain independent retain far greater control,” said JPMorgan analyst Jose Asumendi.