The S&P Global Mobility AutoIntelligence service provides daily analysis of global automotive news and events. We deliver timely context and impactful analysis for navigating the fast-moving industry. Behind the Headlines offers a bi-weekly dive into recent top stories.

Chinese automakers increasingly shifting from export-led growth to a localization strategy centered on regional production. Chinese automakers’ European sales and ambitions have grown significantly since the start of the decade. During 2025, the top three bestselling Chinese automakers in Western and Central Europe—SAIC Motor, BYD and Chery Automobile—registered 617,600 passenger cars, up from 25,900 in 2020, when SAIC’s MG and Maxus were the only two available.

Other Chinese car brands have also made inroads during the past five years, notably Leapmotor, Xpeng, Dongfeng Motor, BAIC Group, FAW Group, NIO Inc. and Geely Holdings (excluding its European acquisitions and Europe-oriented vehicle brands like Volvo Cars, Polestar, Lotus and LEVC). 

A vast majority of passenger cars sold by these automakers in the region last year—99.3%—were exported from China. This has occurred despite obstacles that have been placed at the EU regional and market levels, such as the additional tariffs applied to Chinese-made battery electric vehicles (BEVs). As a next step, Chinese automakers are accelerating localization efforts, increasing the share of Chinese cars in Europe that are produced in the region. 

Why Chinese automakers are expanding in Europe

In the wake of Chinese automakers’ success in establishing a presence in Europe, many are now looking at a new phase that is likely to solidify their foothold in the region: localizing vehicle production and reaping the benefits of local manufacturing for EV companies.  

Why now? There has been talk of such moves for several years, but progress has been hampered by the Chinese government disputing the tariffs applied to imported BEVs. However, the European Commission’s upcoming Industrial Accelerator Act, which encourages automakers to localize BEVs and supply chains in return for access to certain benefits, may have provided greater impetus to act on this front.   

How Chinese EV companies enter European markets

How are Chinese car brands seeking to enter the European market to execute their localization strategy? Two approaches are being taken by Chinese automakers to establish a production foothold in Europe: construction of a greenfield facility or use of existing production capacity.  

With respect to greenfield facilities, there have been plenty of reports of possible investments in the past, but few Chinese OEMs have taken such a step. BYD has so far been the only manufacturer to proceed with plans to construct this type of facility, in Szeged, Hungary. At this plant, it plans to build sub-compact and compact products, a growth category thanks to sales volumes in the region. 

Another Chinese OEM that could create its own plant is SAIC Motor. In the first quarter of 2026, William Wang, CEO of MG Motor UK & Europe & CEE, was quoted as saying that the automaker had narrowed its plans down to five sites in Europe. More recently, reports have emerged that Spain has become the chosen location. It might not be a ground-up new site, however, but instead a takeover of an existing site currently occupied by a company in a different industry.

Many more automakers are looking to use existing vehicle production capacity as a more cost-effective way to start manufacturing. Typically, these plans involve unused or underutilized vehicle manufacturing facilities owned by global automakers that have long maintained a foothold in the region.  

Localization strategy brings benefits and challenges for Chinese OEMs in Europe

Europe’s growing pool of vehicle manufacturing capacity reflects longer-term challenges Chinese car brands face in Europe and stems from a range of factors, including the competitive environment both locally and globally, shifting market dynamics, the need for cost savings and decisions by some automakers to build their lower-value offerings outside the region.   

Although using existing capacity avoids the significant investment required to bring a new site online, not every facility is well-suited to vehicle production needs. Chinese automakers must weigh the investment required to update facilities as well as potential legacy labor costs. However they choose to localize production in Europe, Chinese car brands must also consider establishing at least some degree of local supply chain capacity.

Chinese automakers pursue localization strategy through existing European capacity

Surprisingly, several Chinese automakers have been open to executing localization strategies, despite the possible risk to their business strategies in the region given often-intense competition for sales.  

Stellantis so far has been the most open to localizing production in Europe. Not only has it recently confirmed that it will host partner Leapmotor at its Zaragoza facility in Spain, but it has also opened the door to its Leapmotor International joint venture taking over its Madrid facility, which had been at risk of closing. Stellantis also signed a memorandum of understanding with Dongfeng to produce Dongfeng products at Stellantis’ Rennes, France, plant under the Voyah brand.  

Neither venture is a one-way street though. Indeed, as part of the plans for Zaragoza, Stellantis will be able to add a Leapmotor-based Opel compact crossover to its range. It is also said to be aiming to benefit from the sales of mid-size Leapmotor and the Dongfeng Voyah products through its distribution. These would offer vehicles in categories where its own brands have very little presence.  

Despite Geely’s ownership of automakers that already have a production footprint in the region—like Volvo Cars and Lotus—reports suggest it has acquired a stake in Ford’s Valencia facility to produce new crossovers under the Geely vehicle brand. We forecast that this will open the door to Geely introducing new products, including the next-generation Ford Kuga. 

With its fast-paced growth in Europe, Chery has reportedly been exploring its options, though it already has vehicles based on its technology assembled by Ebro EV Motors at Nissan’s former Barcelona facility in Spain. In the UK, Chery has been linked with JLR’s Halewood and is also said to have held talks with Nissan regarding access to Sunderland.

Nissan is in the process of moving the three vehicles built in Sunderland to a single line because output is far lower than a decade ago. It has been open about seeking another automaker to use this soon-to-be freed-up capacity. Indeed, Nissan CEO Ivan Espinosa was quoted as telling the Financial Times Future Car Summit that the site “is very cost competitive. What it’s missing is volume.”  

While BYD has already built a facility in Europe, its Executive Vice President Stella Li has indicated that the Chinese OEM could also leverage available capacity to pursue its growth ambitions. However, it also has a commitment to build a facility in Turkey.

Although production at this site was scheduled to begin in 2026, reports suggest construction has not yet begun despite the automaker having fully leveraged import tariff exemptions that it received in return for its commitment to invest. The lack of progress has been controversial in Turkish political circles, with calls from some for sanctions and fines. Talk of accessing new capacity in the EU is unlikely to be helpful to BYD’s ambitions in Turkey.  

The future of Chinese electric vehicles in Europe hinges on local production growth

Whichever approach a Chinese OEM chooses to take, it will represent a significant contribution to their sales growth in Europe. S&P Global Mobility's automotive industry forecast expects the three biggest-selling Chinese automakers in Western and Central Europe to see their volumes grow to almost 1.177 million units by 2030. For the top 10 biggest-selling Chinese automakers, this volume will reach more than 1.584 million units.

The future of Chinese electric vehicles in Europe will increasingly hinge on how quickly automakers move from export-led growth to local production in the region. The pace and effectiveness of each Chinese OEM’s localization strategy will be a key determinant of their long-term position in the European market. 

The S&P Global Mobility AutoIntelligence service provides daily analysis of global automotive news and events. 

We deliver timely context and impactful analysis for navigating the fast-moving industry, with insightful series such as Behind the Headlines, offering a bi-weekly dive into recent top stories.

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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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