Volkswagen weighs building China-developed models at its European plants
Volkswagen is examining whether to use its European factories to build models developed in China or share production capacity with Chinese partners. No decision has been made, but the discussion shows how strongly the group is being affected by underused factory capacity and competition from China.
Volkswagen Group CEO Oliver Blume told Handelsblatt that the company is considering new ways to make better use of its factories. He said the central goal is to reduce plant costs. The options include bringing Volkswagen models produced in China or developed in China to Europe, and using production capacity together with Chinese partners.
At the same time, Blume stressed that no decision has been made. Volkswagen is currently analysing which VW models created for the Chinese market could suit European customers. The group's priority would still be its own models, rather than opening factories to partners.
Volkswagen's China strategy is entering a new phase. The group has long-standing joint ventures with SAIC and FAW, as well as a partnership with EV maker Xpeng. Handelsblatt notes that SAIC is most visible in Europe through MG, while Xpeng is preparing its own expansion in Europe.
That means Volkswagen no longer sees China only as a sales market. Models developed in China, local software development and a lower cost base could become part of its competitiveness in Europe. The conclusion appears clear: if a European factory can no longer secure enough volume from the traditional model line-up, Volkswagen will look for that volume elsewhere.
The financial figures also provide strong context for the debate. Volkswagen's first-quarter 2026 revenue was 75.7 billion euros, down 2.5% from a year earlier. Operating profit fell 14.3% to 2.46 billion euros, and the operating margin was 3.3%. The group itself linked the result in part to US tariffs, one-off effects and weaker sales volume.
Volkswagen's sales fell especially sharply in China and North America. According to the group, vehicle sales dropped 20% in China and 9% in North America, while Western Europe grew 1%. That helps explain why management is speaking ever more directly about production network efficiency, model range complexity and more regional value creation.
According to Reuters, Volkswagen is reviewing underused plants, model range complexity and its business portfolio. Management has already said that the cost cuts made so far may not be enough to secure the group's future. The plan includes cutting about 50,000 jobs in Germany by 2030.
One example is the Osnabrück plant. According to Reuters sources, Israeli defence company Rafael signed a memorandum of understanding to acquire Volkswagen's Osnabrück factory. Volkswagen and Rafael did not comment on the deal, but Blume said on an investor call that the group is in advanced talks with defence industry companies over the plant. The factory employs about 2,300 people, and Volkswagen has previously said it wants to sell it or repurpose it.
