XPeng is in discussions with Volkswagen about potentially acquiring or using manufacturing capacity in Europe, as Chinese electric vehicle companies accelerate efforts to localize production inside the region.
The talks come as XPeng’s exports continue growing rapidly and its existing European contract manufacturing arrangement approaches capacity limits.
Speaking at the Financial Times Future of the Car summit in London, XPeng’s managing director for northeastern Europe, Elvis Cheng, confirmed the company is exploring possible production opportunities with Volkswagen. According to the Financial Times, XPeng is evaluating whether an existing VW facility could support future EV production in Europe.
XPeng currently builds European-market vehicles at the Magna Steyr plant in Austria, where production of the G6 and G9 models began in 2025. The facility also completed pilot production of the company’s P7+ electric sedan earlier this year.
That strategy helped XPeng avoid the European Union’s tariffs on Chinese-made EVs, which can reach as high as 35.5%.
But demand appears to be growing faster than the company initially expected.
XPeng exported more than 6,000 vehicles in April alone, up 62% year-over-year and marking its strongest monthly overseas performance so far. During the first four months of 2026, exports rose 55% compared to the same period last year.
According to Cheng, the Magna Steyr production line is now nearing its available capacity, pushing XPeng to consider additional manufacturing options inside Europe.
The company is reportedly open to multiple approaches, including acquiring an existing factory or building an entirely new plant if necessary. Cheng also suggested some older European facilities may not fully meet XPeng’s technical requirements for next-generation EV production.
The discussions arrive at a time when Volkswagen is restructuring large parts of its European manufacturing network.
The automaker shut down its Dresden factory in late 2025 — the first closure of a Volkswagen production facility in Germany in nearly nine decades — and has announced broader plans to reduce excess manufacturing capacity across Europe. Volkswagen CEO Oliver Blume recently said the company was evaluating whether Chinese partners could potentially make use of some underutilized factory capacity.
Volkswagen and XPeng already maintain a close partnership.
In 2023, Volkswagen invested $700 million in XPeng to acquire a minority stake in the company, and the relationship has since expanded into software collaboration and joint vehicle development. More recently, Volkswagen became the first commercial customer for XPeng’s VLA 2.0 smart driving system, marking a rare example of a major legacy automaker adopting core software technology from a Chinese EV company.
The negotiations also reflect a broader shift happening across Europe’s EV industry.
Chinese automakers are increasingly seeking local manufacturing footprints to reduce tariff exposure, shorten supply chains, and improve access to European customers. Earlier this week, BYD confirmed it was also exploring factory partnerships in Europe, including discussions involving Stellantis facilities.
At the same time, companies such as Leapmotor are expanding production agreements with European partners, while BYD continues developing new factories in Hungary and Turkey.
The trend highlights a growing intersection between Europe’s excess industrial capacity and China’s expanding EV industry.
For European automakers, partnerships with Chinese manufacturers could help utilize underused factories and maintain employment at existing plants. For Chinese EV companies, producing vehicles within Europe offers a way to avoid tariffs and strengthen their position in one of the world’s largest EV markets.
Despite rising trade tensions, Chinese EV brands continued gaining market share across Europe throughout 2025, surpassing 10% of total EV sales in several months.
XPeng’s talks with Volkswagen suggest the next phase of competition may center less on exporting vehicles from China and more on embedding Chinese EV production directly within Europe’s automotive manufacturing ecosystem.
