European Carmakers Now Rely on Chinese Firms for Joint Ventures in Europe
Last week, Chinese automaker Geely announced the retirement of its founder, Li Shufu, alongside plans to assemble luxury vehicles in Volvo factories across Europe. This move allows Geely to avoid protective tariffs on Chinese-made cars and marks a reversal in the traditional joint venture (JV) dynamic between Western and Chinese car industries. Historically, since the 1970s, Western automakers entered China through JVs with local manufacturers to tap into the vast but underdeveloped Chinese market, which had limited domestic car production focused mainly on trucks and buses.
The first such JV was established by AMC with Chinese partners, followed by Volkswagen’s successful Shanghai Volkswagen JV with SAIC, which dominated the Chinese market through the 1980s and 1990s. Over time, other global brands like Peugeot, Toyota, and Hyundai joined. However, about five years ago, Chinese carmakers like BYD and Xpeng began to innovate rapidly, surpassing Western firms in electric vehicle technology and design tailored to Chinese consumers. By 2024, BYD became the top-selling car brand in China, signaling a shift in market leadership.
This technological leap and regulatory push for green vehicles in China led Western automakers to dissolve many JVs, as Chinese partners outpaced them in electric vehicle development and consumer preferences. Now, the trend has reversed: European carmakers are seeking partnerships with Chinese firms to build factories in Europe, primarily to circumvent tariffs but also to leverage Chinese technological advances. For example, Ford plans to produce an SUV in Spain using Chinese platforms, and Stellantis collaborates with Lifan Motor for new models.
The Chinese auto industry’s faster innovation cycles, flexible platforms, and dominance in battery technology contrast with the slower, less adaptable European industry. Chinese platforms like Chery’s T1x support numerous models and powertrains, while European platforms often last over a decade with limited updates. China’s focus on solid-state battery development further widens the technological gap. Consequently, Europe is now courting Chinese automakers, with Chinese-branded vehicles increasingly appearing in European markets, including Israel, potentially leading to fully Chinese-made components under European badges in the future.
