The decline in China's light vehicle demand is driving multinational automakers to adjust their global production capacity allocation. On September 11, FAW-Volkswagen launched sales in Madagascar, becoming the first multinational automaker to export China-made vehicles to Africa. In August, BEV registrations in 16 core European markets reached 202,833 units, up 54.2% year on year, with their share rising to 30.5%. BYD plans to build three vehicle plants and one battery plant in Europe, while Leapmotor uses Stellantis's Spanish plant for localized production to avoid tariffs. The UK faces pressure from EU tariffs and rules of origin, and Nissan, McLaren, and Yokohama are simultaneously adjusting capacity and supply chains.
China's light vehicle market demand continues to decline, changing the global capacity allocation logic of multinational automakers. In September 2026, Volkswagen Group chose a path few multinational automakers had taken before—exporting vehicles made in China to Africa.
Volkswagen Makes Its Move in Madagascar, General Motors May Follow
FAW-Volkswagen (which produces Audi and Volkswagen-brand models) announced on September 11 that it had officially started vehicle sales in Madagascar. With this move, Volkswagen Group became the first multinational automaker to export cars made in China to Africa.
The backdrop to this choice is the ongoing contraction of the Chinese market. It is precisely under the pressure of weakening demand that Volkswagen Group and General Motors began to look globally and include Africa among the export target markets for China-made vehicles. For General Motors, continuously declining sales in China have likewise pushed it to export vehicles to Africa and other overseas markets through its core joint venture, SAIC-GM.
From the perspective of industrial division of labor, the key to this model lies in capacity reuse: the manufacturing capabilities, supply chain system and cost structure of the joint venture plants remain unchanged; what changes is the orientation of the end market. For multinational automakers under pressure on capacity utilization in China, Africa offers an incremental export direction, not a replacement market.
Europe: BEV Penetration Accelerates, Chinese Brands Speed Up Localization
Unlike Africa's “entry” logic, what Europe is undergoing is a dual restructuring of rules and capacity.
Data from the European Electric Mobility Association, New Automotive and Fier Automotive show that in August, BEV registrations in 16 core European markets reached 202,833 units, up 54.2% year on year, and BEV market share rose to 30.5%. In the first eight months of this year, cumulative BEV registrations in Europe exceeded 1.67 million units, up 33.1% from the same period in 2025. BEVs accounted for nearly one third of new-car sales, and the performance of Europe's EV market in 2026 has significantly exceeded previous expectations.
At this growth rate, Chinese automakers' European strategy is shifting from “vehicle exports” to “local manufacturing.” On September 16, Alfredo Altavilla, special adviser to BYD Europe, said that in the long term, to achieve growth targets and meet EU regulatory requirements, BYD needs to build three vehicle assembly plants and one battery plant in Europe. He also revealed that BYD is starting production at its first European plant in Hungary and plans to finalize the site for its second production base by the end of the year, preferring to acquire and retrofit existing plants rather than build from scratch, with Spain and France as preferred candidate locations.
Leapmotor, by contrast, chose to leverage its partner's capacity. Leapmotor has started pre-production of the B10 compact electric SUV at Stellantis's Zaragoza plant in Spain. The model meets sufficient local content standards to be considered made in Europe, thereby avoiding EU tariffs on Leapmotor EVs imported from China. The Zaragoza plant currently produces three Stellantis small cars: the Lancia Ypsilon, the Opel/Vauxhall Corsa and the Peugeot 208.
On the product side, Leapmotor is entering Europe's small electric SUV market with the B03X, priced several thousand euros lower than established competitors such as the Ford Puma, and in the same price range as European-made minicars such as the Renault Twingo. Leapmotor is offering Italian consumers a €5,000 discount, bringing the B03X price down to €19,900, close to the €19,500 starting price of the Renault Twingo in Italy.
Tariffs and Rules of Origin: External Pressure Facing the UK
The other side of localized production is the ongoing tug-of-war over tariffs and rules of origin.
Massimiliano Messina, a Nissan executive responsible for business in Europe and other regions, said that if the UK hopes to obtain equal treatment under the EU's rules-of-origin framework, it may need to impose trade tariffs on Chinese cars. He said the EU side may pressure the UK to follow the EU in implementing tariffs, to prevent large numbers of Chinese cars from entering the EU market via the UK. Chinese-brand cars now account for one-fifth of total sales in the UK market.
Demands from the supply chain side are also rising. On September 16, Bosch labor representatives called for policy action at the EU level, curbing job losses in the industry by enacting regulations that support local production. Frank Sell, chairman of the General Works Council of Bosch's Mobility Solutions business sector, speaking on behalf of about 70,000 German employees, said that only by keeping value creation and jobs in Europe can the industry's transformation succeed.
Capacity and Supporting Supply Chains Adjust in Tandem
Beyond tariffs and localization requirements, local production capacity in Europe is also being brought back into play. On September 16, Nissan announced an investment of £170 million (US$228 million) to produce the all-new Kicks hybrid SUV at its Sunderland plant in the UK; the assembled vehicles will be exported to supply other European markets. This is the first time the Kicks model will be produced and sold locally in Europe; previously its production bases were in Japan, Mexico, and Brazil.
Supercar manufacturer McLaren Automotive plans to build a new complete vehicle plant in the UK in preparation for launching the brand's first SUV. McLaren said it plans to add 1,000 jobs by 2032 and will invest £500 million (US$674 million) in a new assembly plant, upgrading its headquarters in Woking, Surrey, and its carbon fiber production base in Sheffield.
The moves in the tire segment point more directly to the supply chains of Chinese automakers. Yokohama Rubber has completed a new passenger tire plant in Hangzhou, Zhejiang. The project has a total investment of RMB 1.96 billion (US$292 million); it is a relocation and upgrade project for its existing nearby plant, with construction starting in December 2024 and the first tire rolling off the line in November 2025. It took only 11 months from construction start to production, whereas similar projects previously usually took more than two years. The plant's annual capacity has increased by about 50%, reaching 9 million tires. Chairman and CEO Masataka Yamaishi said, "We will accelerate investment returns at Chinese-style speed," and said the company is ready to adapt to the Chinese market with a fast, low-cost production model.
Observations
Putting these developments together, the overseas expansion paths of multinational automakers are becoming stratified: at one end is the "China production—emerging markets" export channel represented by Volkswagen and GM, using existing joint-venture capacity to cover growth markets such as Africa; at the other end is the "Chinese technology—local manufacturing in Europe" path represented by BYD and Leapmotor, meeting rules of origin and regulatory requirements by building or borrowing capacity.
The common premise of both paths is that the cost and efficiency advantages of China's manufacturing links remain attractive; the difference is that the former avoids the direct constraints of tariffs and local content rules, while the latter must directly confront the EU's compliance thresholds and the uncertainty over whether the UK will follow with tariffs. The remarks by the Nissan executive and the appeal by the Bosch union show that this rule contest will remain in dynamic adjustment in 2026.
