The Chinese carmaker Xpeng is on the hunt for a factory in Europe. Volkswagen is aiming to reduce the number of its factories. It seems like it should have been the perfect set-up for a deal.

Yet there was one problem with the plant on offer, according to Elvis Cheng, Xpeng’s managing director for north-eastern Europe: “It’s a little bit, I would say, old.”

The withering verdict on the facilities of Germany’s carmaking champion, delivered this week at a Financial Times conference, may cause some awkwardness between Xpeng and Volkswagen, which also happens to be a shareholder and technology customer.

However, it neatly encapsulates the shifting balance of power in the global car industry. Many of Europe’s carmakers are on the retreat, while China’s industry is on the march.

Chinese car sales have soared across Europe thanks to a wave of imports. They accounted for 8.6% of the western European market in the first three months of the year, nearly double the same period a year before, according to Matthias Schmidt, a Berlin-based automotive analyst.

Many of the Chinese companies, including BYD, Changan, Chery, Dongfeng and Geely, are now aiming to produce vehicles in Europe. Some are considering building their own factories, but Europe’s struggling carmakers have also spotted an opportunity to offload their underused plants, even if it helps the companies eating up their market share. Rather than worrying about letting the fox into the henhouse, they are holding the door open.

Nissan is in talks with Chery to give over part of its sole European factory in Sunderland, northern England, after previously selling Chery another plant, in Barcelona. Ford has reportedly agreed to sell part of its plant in Valencia, Spain, to Geely. Stellantis, the owner of brands including Peugeot, Fiat and Vauxhall, was earlier than most to partner with a Chinese rival, and last week announced that two of its Spanish plants would build cars for Leapmotor.

For European manufacturers, Chinese cash solves one problem. European car sales have fallen from 15.3m in 2019, before the coronavirus pandemic, to less than 13m in 2025. That, plus US tariffs that have hit export sales, has left manufacturers with more factory space than they can use. Selling capacity to Chinese rivals avoids the painful process of closing sites and firing thousands of workers.

Yet Thomas Schäfer, the chief executive of the Volkswagen brand, admitted that finding buyers was not always easy. Reports of a potential new owner for its factory in Dresden, the first to close in Germany for 88 years, were “nonsense”, he told the same conference, adding: “I don’t have anybody knocking on the door.”

Xpeng’s Cheng did say that a deal with VW was still possible if they could “find a location here in Europe that can work”. However, it was only one of several options, including building a new factory.

Privately, Europe’s carmakers are worried about losing out. One executive at a large manufacturer said the Chinese producers were “very credible”, and that they could be a threat to all traditional carmakers, from the mass market all the way through to luxury.

Publicly, European bosses insist it can work out. Antonio Filosa, Stellantis’s chief executive, said he believed “a strong partnership is one that can be of benefit for both sides”. He added that Stellantis would look at partnerships beyond just the Chinese.

Stellantis demonstrated what Filosa meant on Friday, announcing a deal for Dongfeng to build Peugeot and Jeep electric vehicles in China from next year.

Stellantis is one of the companies talking to BYD, the world’s biggest maker of electric cars, according to Stella Li, the Chinese brand’s executive vice-president. However, in an interview this week with Bloomberg, she added that the company wanted control by itself.

“I think it’s better to run by ourselves,” Li said. “It’s very hard to ask permission by another. We don’t have this DNA working for us. We run very fast. We make decisions in five minutes.”

BYD is nearing completion of a factory in Hungary, although subcontractors on the project have faced allegations of a series of potential violations of EU labour laws. A spokesperson for the company said it placed “highest priority on the protection of labour rights and the strict compliance with Hungarian and European laws and regulations”.

Markus Haupt, the chief executive of Seat and Cupra, two brands within the Volkswagen Group, said Chinese rivals had an “unfair position”, but “if they start producing here with a similar infrastructure, with a similar labour cost, with similar material cost, then we start having a fair competition”.

The European Commission is considering “Made in Europe” rules that would lock imports (potentially from the UK as well) out of some incentives for electric cars. That would come on top of electric car tariffs ranging from 17% to 35.3%, depending on manufacturer, that are aimed at making up for Chinese government subsidies.

Haupt said the EU’s strategy should be to “invite the Chinese to produce in Europe and also to localise components to a certain amount to be defined”. He said: “I think for Europe, looking where we are standing now on our industrial base, it will be super-attractive because this would create employment, this would attract investment to Europe.”

Chinese carmakers are happy to oblige if it means they can sell more. Gary Lan, the UK chief executive of Omoda and Jaecoo, two of several brands being launched in Europe by Chery, said the company wanted to be “top three” in Britain. That would mean overtaking the South Korean group Hyundai and Kia. It already caused a stir in March when the Jaecoo 7 became the top-selling UK car.

Lan laid out a four-step plan in the UK, starting with launching vehicles and ending with UK production. Chery is on stage 2, with a research centre imminent, but, he said, by next year “we have more to talk” about making vehicles in Britain. “We are getting closer and closer to the full journey,” he said.