Germany’s embattled carmakers are desperately seeking solutions for their underused plants, with speculations in recent months swirling around the idea that Chinese manufacturers or weapons makers could move in.
Across Europe, carmakers are in trouble due to growing Chinese competition, weak demand, and a choppy transition to electric vehicles (EVs), leaving many plants operating well below capacity.
One solution is to open up factories for Chinese manufacturers to produce cars in Europe as they seek to get around EU tariffs on EVs, a step recently taken by Stellantis, which owns Jeep and Fiat.
Chinese brands, including BYD, MG, and Chery, are gaining ground in Europe fast and now account for around 9% of the region’s overall sales, according to consulting firm Dataforce.
Germany’s Volkswagen (VW) – Europe’s biggest automaker – said in April it is also open to the idea of partnering with Chinese manufacturers at its plants.
VW, in the process of slashing thousands of jobs as profits and sales suffer, is seeking to reduce global production capacities by around 1 million vehicles – half in China and half elsewhere, particularly Europe.
Officials in regions hosting Volkswagen plants have welcomed the idea of bringing VW’s joint venture partners from China onto the production lines of German factories.
Dirk Panter, economy minister of the state of Saxony, whose VW plant in Zwickau faces an uncertain future, noted that other Chinese manufacturers are starting to produce cars around Europe, including through such partnerships.
“To secure the future of the automotive industry in Saxony and in Germany, it is essential not to ignore this reality,” he told Agence France-Presse (AFP).
The Handelsblatt financial daily reported that VW already held talks in 2024 with Chinese carmakers, but they ended without a result.
VW has more recently sought to dampen talk of imminent deals, with a spokesperson telling AFP that “there are currently no plans or discussions regarding the production of Chinese vehicles in the German plants of the Volkswagen Group.”
While some analysts believe there could be reluctance to give Chinese carmakers easier access to Europe, others think it is the Chinese firms themselves that are hesitant due to high production costs in Germany.
“I think that the hesitation on the part of the Chinese manufacturers is very great,” Frank Schwope, an auto industry consultant and lecturer at FHM Berlin University, told AFP.
“The offer would have to be very attractive.”
Stellantis’s announcements so far have mainly focused on Spain and France, where production costs are lower.
German manufacturers are also said to be considering opening up or even selling plants to defense companies, which are expanding rapidly as Germany and other European countries increase defense spending.
Der Spiegel recently reported that French-German defense company KNDS is in talks to take over a Mercedes-Benz plant at Ludwigsfelde, south of Berlin, that produces vans and convert it to manufacture armoured personnel carriers.
A KNDS spokesperson would not confirm the report, telling AFP only that it was “seeking suitable partner companies for the planned ramp-up in the defense sector.”
Mercedes said that “our goal is to develop a future-ready solution for Ludwigsfelde.”
Volkswagen has confirmed it is in talks with defense companies about taking over one of its smaller plants in Osnabrück, where production is due to end as part of its cost-cutting strategy.
Reports say the group has held talks with Rafael Advanced Defence Systems about producing components for the Iron Dome air defense system, including heavy-duty trucks and electricity generators, but not the projectiles themselves.
Discussions have also reportedly taken place with KNDS regarding the factory.
Still, entering the defense sector could prove controversial for Volkswagen.
The group was founded during the Nazi era, produced military equipment for Germany during World War II, and used forced labor.
“In historical terms, it’s not an easy issue for Volkswagen to share locations with defense companies,” Stefan Bratzel, an automotive industry expert at the Center of Automotive Management, told AFP.
