Europe’s Carmakers Are Turning to Chinese Brands to Fill Underused Factories — But What Happens to the Supply Chain?
A few years ago, Chinese automakers were mostly viewed as a competitive threat to Europe’s car industry. Today, the relationship is becoming much more complicated. Some European manufacturers with underused factories are now looking at Chinese brands as potential partners — and, perhaps more importantly, as a source of much-needed production volume.
According to the Financial Times, average capacity utilisation across Europe’s automotive manufacturing sector has fallen below 60%. That is not a comfortable number for an industry built around huge factories, expensive equipment and supply chains that depend on consistently high production volumes.
Demand has yet to fully recover to pre-pandemic levels, while labour, energy and manufacturing costs remain high. An assembly plant does not suddenly become cheap to operate simply because fewer cars are coming off the line.
Against that backdrop, letting a Chinese brand use European manufacturing capacity starts to look less strange than it might have sounded five years ago.
From competitors to production partners
Europe has spent much of the past few years trying to manage the rapid expansion of Chinese electric vehicles. Tariffs, local-production rules and concerns over subsidies have dominated the discussion.
But there is another side to the story. Chinese automakers need local manufacturing, distribution networks and market access. European carmakers, meanwhile, have factories that need more volume.
Put the two together and the commercial logic is fairly obvious.
That does not mean Europe has suddenly stopped worrying about Chinese competition. It simply means the relationship is no longer as simple as “European carmakers versus Chinese carmakers”. They can be rivals in one market and partners on the same factory floor.
Stellantis and Dongfeng are exploring a deeper European partnership
One of the clearest examples is the developing relationship between Stellantis and Dongfeng.
In May 2026, the two companies signed a non-binding memorandum of understanding to explore the creation of a European joint venture. Stellantis would hold a 51% controlling stake under the proposed structure, with the partnership potentially covering sales, distribution, manufacturing, purchasing and engineering.
There is also a plan under study to localise production of Dongfeng new-energy vehicles at Stellantis’ Rennes factory in France. Dongfeng products, including vehicles from brands such as Voyah, could also be distributed through the Stellantis network.
There is an important caveat here: none of this means Dongfeng vehicles are already rolling off the Rennes production line.
The agreement remains non-binding, and the proposed venture still requires definitive agreements, regulatory approvals and other conditions to be met. For now, Rennes production remains a possibility being explored rather than a confirmed manufacturing programme.
Leapmotor shows how quickly the model can develop
Stellantis already has another Chinese partnership that has moved considerably further.
Its cooperation with Leapmotor has given the Chinese EV maker access to an established European sales and distribution network, while plans for local European production continue to develop.
For Leapmotor, that removes some of the hurdles involved in building a European presence from scratch. For Stellantis, every additional vehicle produced within its manufacturing network can help improve factory utilisation.
It is not difficult to see why both sides are interested.
But filling a factory and protecting an automotive industry are not necessarily the same thing.
A busy assembly line does not tell the whole story
This is where the debate becomes more important than simply counting how many cars a factory produces.
Imagine a Chinese vehicle assembled in Europe using a large number of components imported from China. The European plant gains production volume and some jobs are protected, which is clearly valuable.
But what happens to the companies making the electronics, powertrain components, battery systems and software? What happens to engineering and research jobs?
If most of that value remains elsewhere, final assembly alone may not be enough to strengthen Europe’s wider automotive ecosystem.
On the other hand, a partnership that gradually brings component sourcing, software development, testing, engineering and supplier contracts into Europe could have a much deeper industrial impact.
That is why local-content discussions matter.
The modern car industry is no longer just about who owns the factory or where the vehicle receives its final bolts. Platforms, batteries, software, electronics and engineering can represent some of the most valuable parts of the entire vehicle programme.
A factory can be busy while the most important parts of the business are slowly moving elsewhere.
There is a lesson here for Malaysia too
This might sound like a very European problem, but Malaysia should be watching closely.
Malaysia has promoted CKD production and localisation for decades, and the arrival of more Chinese brands has made local assembly and regional manufacturing an even bigger part of the automotive conversation.
Getting another vehicle assembled locally is certainly positive. It creates activity, supports jobs and can build volume for the local industry.
But there is a big difference between assembling imported kits and developing a genuine local ecosystem.
The bigger prize is when manufacturers begin sourcing more components locally, training engineers, carrying out testing and development, building supplier capabilities and eventually using Malaysia as an export base.
That is the part that creates knowledge and industrial capability that can remain long after an individual model has disappeared from the showroom.
Europe’s current situation is therefore worth watching not because Malaysia is about to face exactly the same problem, but because the underlying question is universal: when a country attracts automotive production, how much of the industry is actually staying there?
An empty factory helps nobody. If another automaker can bring in production and keep people working, the business case is easy to understand.
What Europe should be careful about is confusing factory utilisation with industrial strength. Making the car is important, but so is knowing who designed the platform, wrote the software, supplied the battery and developed the next generation of the product.
The Stellantis partnerships with Dongfeng and Leapmotor could eventually become genuine win-win arrangements. The more interesting question will be what the picture looks like five years from now — not just how many cars are being assembled, but how much of the engineering and supply chain has grown with them.
Malaysia would do well to ask the same question whenever we talk about localisation.
Move Auto covers the cars, technology and business decisions shaping the automotive industry in Malaysia and around the world.
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