Volkswagen considers Chinese partners for excess European production lines

Volkswagen is open to allowing Chinese carmakers to take over surplus production lines in Europe as it grapples with falling demand and increasing competition.

Executives at Audi and VW told the Financial Times that partnering with Chinese electric vehicle makers looking to expand their influence in Europe was one option to cope with declining sales in the region.

“Of course this is conceivable,” said Gernot Döllner, Audi’s chief executive. “I believe in free trade,” he added, arguing that such a move would “lower the entry barrier for these competitors.”

Audi had partnered with MG manufacturer SAIC to produce electric vehicles in China to appeal to local consumers. This is a type of cooperation that Chinese brands could also try to recreate in Europe, Döllner said.

David Powels, chief financial officer of the VW brand, also did not rule out the idea of Chinese carmakers taking over idle production lines at the company’s plants in Germany. “We are open to discussions with any partner on any topic. In a dynamic world you have to keep all options open,” Powels said.

The comments come at a time when Europe’s legacy carmakers are racing to move into electric vehicles, a segment where Chinese brands such as BYD are producing more technologically advanced vehicles aided by both subsidies from Beijing and a lower cost base.

For decades, China was VW’s most profitable market, but over the past five years, the flagship brand’s market share has almost halved due to its weak position in the fast-growing electric vehicle market.

Europe’s largest carmaker has also been hit hard by the shrinking automotive market in its home region, where 2 million fewer cars were sold last year compared to five years ago. Last month, VW reached an agreement with workers to reduce production capacity across Germany and avoided a more drastic plan involving the closure of at least three factories in the country.

The German carmaker said the closure of production lines would mean reducing the annual capacity of the VW brand, which accounts for about half of the group’s sales by volume, from about 1.5 million cars to about 730,000 cars by 2030.

Excess capacity began to increase during the pandemic as VW began cancelling night shifts due to low demand, and the brand produced around 900,000 cars in Germany in 2024.

VW’s factories will have to meet new undisclosed efficiency targets to fight for remaining capacity, and those that fail to meet these targets will be considered for “alternative utilization,” which could include being put up for sale.

Some Chinese carmakers see utilizing excess production capacity in Europe as a way to increase their presence in the EU. Stellantis, for example, has acquired a 20 percent stake in Chinese startup Leapmotor, giving it the right to produce and sell Leapmotor cars outside China through a joint venture.

If Leapmotor sales increase in Europe, Stellantis can utilize more spare capacity at its own plants and avoid politically controversial plant closures.

Audi is also opposed to the EU’s high tariffs on electric vehicles imported from China and protectionist measures would ultimately damage its own position, Döllner said.

While China remains an important market for many non-Chinese car manufacturers, many companies, including Audi, produce vehicles in the country and then import them back to Europe.

“Tariffs will only block [competition] for a while and give you a false sense of security,” Döllner said. “We have to adapt,” he added.