Chinese electric vehicle maker Xpeng is in talks with Volkswagen about acquiring a plant to secure a production base in Europe.

Electrek, an electric vehicle news outlet, reported on May 14 that Xpeng is looking for a local production site in Europe as spare capacity at its contract manufacturing line in Austria declines.

Elvis Zheng (엘비스 청), Xpeng's head for northeast Europe, said at a Financial Times-hosted event that it is discussing with Volkswagen the possibility of securing a production site in Europe. Xpeng is currently producing the G6 and G9 for sale in Europe at the Magna Steyr plant in Austria. The plant began operations in September 2025, and it also completed trial production of the 2026 model-year P7+ electric sedan in January this year.

Xpeng's search for a new plant comes as demand in Europe rises quickly. Xpeng's overseas exports in April were tallied at 6,006 vehicles. That was up 62 percent from a year earlier and up 28 percent from the previous month. Cumulative overseas shipments for January to April stood at 17,563 vehicles, up 55 percent from the same period last year. Zheng confirmed that the existing contract production line is no longer sufficient.

Xpeng is also reviewing the option of building a new plant in Europe if there is no suitable acquisition target. Zheng, however, described Volkswagen's existing plants as "a bit old". That means that even if idle equipment exists, it does not necessarily meet all conditions for producing Xpeng's latest electric vehicles.

Volkswagen is pursuing cuts to excess production capacity in Europe. The company halted operations at its Dresden plant in December 2025. It was the first time in its 88-year history that a Volkswagen production facility in Germany has closed. Volkswagen plans to cut annual production capacity by about 750,000 vehicles by 2030, and Oliver Blume is also pursuing a plan to reduce an additional 500,000 vehicles, focusing on underutilised plants in Europe.

In that process, Volkswagen has also been considering transferring some European production capacity to Chinese partners. Volkswagen invested $700 million in Xpeng in 2023 to secure a stake of about 5 percent. The two companies have since expanded their relationship through joint vehicle development and cooperation on Xpeng's artificial intelligence-based smart driving technology. More recently, Volkswagen became the first commercial customer for Xpeng's second-generation VLA 2.0 smart driving solution.

Xpeng's plant talks also intersect with a broader push by Chinese electric vehicle makers to localise production in Europe. BYD is holding talks with Stellantis and others to acquire underutilised plants in Europe, and its Hungary plant is set to start operations this year. In Turkiye, it is also aiming to open a $1 billion plant by year-end. Stellantis plans to expand cooperation with Leapmotor by transferring ownership of the Madrid plant to its Spanish subsidiary and adding a new production line at the Zaragoza plant.

Xpeng also entered 5 new markets in the European Union in September last year. Its global sales network now exceeds 60 countries and 1,000 locations. As the EU imposed tariffs of up to 35.5 percent on Chinese-made electric vehicles, Chinese companies have faced a greater need for local production. Producing within Europe can avoid the tariff burden and also shorten distance to consumers.

The talks could be a way for Xpeng to expand production capacity and for Volkswagen to make use of surplus facilities. With their capital and technology cooperation already under way, whether a European plant deal is concluded is expected to be a turning point for their local production strategy.