XPeng (小鹏汽车) pushes to increase European manufacturing presence

EV-automaker XPeng is reportedly in talks with Volkswagen and other automakers to possibly buy a European factory, which would take the Chinese company a step further in localizing production in the EU. XPeng is currently shifting more production capacity to Europe, a move that helps it to circumvent EU tariffs on Chinese EVs. Already in 2025, XPeng partnered with contract assembly company Magna International’s Austrian plant to produce XPeng’s G6 and G9 models. More models are planned to roll off the assembly line in the near future, but whether these investments will lead to job creation in Europe, or even technology transfers, remains to be seen.

In the Magna deal, XPeng uses a semi-knocked down (SKD) approach, which means that car parts are produced in China and then shipped for final assembly to Austria, using already existing assembly lines. That way, XPeng avoids European tariffs that apply only to fully assembled cars while the technological know-how stays in China. This approach has been a lifeline for Magna as BMW and Toyota contracts approached their late 2026 expiration date and Magna’s factories in Europe were underutilized due to a decrease in orders. XPeng has hinted it might go beyond contract manufacturing in Europe and said it is following an “in Europe for Europe” strategy. The recent talks with Volkswagen could be a step in this direction, although Elvis Cheng, managing director for northeastern Europe remarked that Volkswagen facilities are a “little bit old” for building XPeng’s cutting edge EVs. 

XPeng is not just building EVs, but is an industrial conglomerate with global ambitions, venturing into all spaces related to autonomous movement. It is on the forefront of developing autonomous driving systems – with a performance that has been compared to the driving experience of a Tesla. To develop these systems, XPeng has produced the “Turing” AI chip, which, according to its CEO He Xiaopeng, has an effective computing power, three times greater than the state-of-the-art Orin-X chip by Nvidia. The chip and the driving system will be sold to other car manufacturers, most notably, Volkswagen which is also an XPeng investor. Moreover, like other major Chinese EV OEMs, XPeng has expanded into the humanoid robotics space. The technological overlap between autonomous EVs and humanoid robots has enabled this effort – possibly also to open up a new revenue stream.