Chinese Car Makers Move Production to Europe to Bypass Tariffs

The Rise of the Automotive ‘Subtenant’: A New Era of Factory Sharing

The global automotive landscape is shifting. In a surprising twist of industrial strategy, legacy automakers are beginning to open their doors to the very competitors disrupting their market share. The most striking example is the reported dialogue between Nissan and China’s Chery.

Nissan is currently exploring a partnership that would allow Chery to manufacture vehicles at Nissan’s Sunderland plant in the UK. This isn’t just a simple partnership; it’s a strategic move to address a critical problem: underutilization.

The Sunderland facility, one of the UK’s largest automotive employers with approximately 6,000 staff, is reportedly operating at only about 50% capacity. For a massive industrial site, running at half-speed is a financial drain. By bringing in a partner like Chery, Nissan can boost utilization rates and share the overhead costs of the facility.

Bypassing the Tariff Wall: Why Chinese OEMs are Moving Local

For Chinese automakers, the motivation to move production into Europe is driven by more than just logistics—it’s about survival in a protectionist market. The European Union has introduced punitive tariffs on electric vehicles (EVs) built in China, forcing brands to rethink their supply chains.

While some brands prioritize markets outside the EU, such as Norway and the UK, or pivot toward plug-in hybrids to avoid these duties, the long-term solution is local production. We are seeing two distinct strategies emerge:

• The Green-Field Approach: Some giants are building from the ground up. BYD, for instance, has established a brand-new factory in Hungary.
• The Asset-Light Approach: Others are seeking “subtenant” agreements. Subleasing existing plants allows companies like Chery to enter the market faster, avoid massive upfront investment costs, and maintain flexibility in an unpredictable regulatory environment.

Volvo provides a clear case study of this agility. The Volvo EX30 was initially produced in China, but to avoid tariffs, the company quickly shifted production of vehicles destined for certain regions to its factory in Belgium.

Survival Alliances: ‘Sleeping with the Enemy’

The prospect of European factories hosting Chinese brands is often viewed as “sleeping with the enemy.” However, the economic pressure of global restructuring is leaving legacy brands with few alternatives.

Nissan is currently navigating a massive global restructuring program that involves cutting up to 20,000 jobs worldwide and permanently closing several manufacturing plants. When sales dip and capacity remains high, the priority shifts from total independence to financial viability.

Nissan isn’t alone in this trend. Reports indicate that other major players are exploring similar collaborations:

• Stellantis: Reportedly exploring plant collaborations with Dongfeng, with additional talks involving Xpeng and Xiaomi.
• Other Majors: Ford and Volkswagen have also reportedly held similar discussions over the past year as they grapple with overcapacity and falling sales.

The Strategic Trade-off

By allowing Chinese competitors into their plants, legacy makers gain a steady revenue stream and protect existing jobs. In exchange, Chinese OEMs gain a foothold in the European market and a way to bypass trade barriers. We see a marriage of convenience born out of necessity.

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