In the past, local OEMs were foreign-owned enterprises. Now, Japanese companies are setting up factories in China to produce automobiles.
Recently, Nissan and Chery signed a non-binding memorandum of understanding. The two parties are currently discussing the possibility of starting in the 2027 fiscal year to produce passenger cars for the British market at Nissan's first production line in Sunderland, UK. This factory is not an insignificant asset of Nissan; it was once the largest and most efficient automotive manufacturing base in the UK, giving birth to iconic models such as Qashqai and Leaf. Now, this core production line may be used to manufacture cars of Chinese brands.
The basis for this cooperation lies in the vastly different circumstances of both parties. The Nissan Sunderland plant is currently facing severe challenges. Due to the weak demand in the European market and the impact of its own product line, the factory's production capacity utilization rate has been continuously declining. According to the data, the plant's operating rate in 2025 was only 45.5%, far below the break-even point of 75%-80% in the automotive manufacturing industry.
In order to survive, Nissan integrated its manufacturing operations in Sunderland into the second production line in May 2026, leaving the first production line idle. How to revitalize this heavy-asset factory has become a difficult problem for Nissan's European management team. At the same time, the Nissan Group as a whole is going through tough times, suffering from huge net losses in two consecutive fiscal years and launching a global restructuring plan that includes closing some factories.
In contrast, Chery has witnessed a strong growth momentum in the European market, especially in the UK. Its models have once ranked among the best-selling vehicles in the UK market. However, the model of exporting complete vehicles from China is facing multiple pressures: such as rising logistics costs, emerging tariff risks, and a long supply chain cycle. To establish a presence in the European market and avoid trade disputes, promoting local production has become a realistic choice for Chery. Building a new factory takes a long time and incurs high costs, so making use of the existing mature production capacity has become a more efficient option.
This is not the first time that Chery has integrated Nissan's idle production capacity. Previously, Chery had entered the Spanish Barcelona factory that Nissan had closed through a joint venture and acquired its assets in South Africa. However, the nature of the Sunderland project is different this time: Nissan did not sell or close the factory, but instead opened its still-operating core production system in a "contract manufacturing" model to serve Chery. According to the memorandum, the factory's property rights, equipment and employees still belong to Nissan, while Chery pays for the manufacturing costs. This provides Chery with extremely high capital efficiency, enabling it to quickly obtain the "European manufacturing" status and access the mature local supply chain and worker system; for Nissan, it gains valuable manufacturing income to share its high fixed costs and helps maintain local employment.
From a global industrial perspective, this cooperation model is no longer isolated. The Stellantis Group has planned to produce electric vehicles for the joint venture Zolten at its factory in Spain, and is discussing cooperation with Dongfeng Motor at its factory in France; idle factories of multinational automakers such as Ford and General Motors have also been taken over or approached by Chinese brands one after another.
The root cause lies in the fact that traditional European car manufacturers have been moving relatively slowly in their transition to electric and intelligent technologies. At the same time, their market share and profits in China have shrunk, resulting in redundant global production capacity layouts. Meanwhile, Chinese car manufacturers, who possess core technologies for electric vehicles, supply chain cost advantages, and rapidly growing demand, are emerging as the key force to revitalize these idle global production capacities.
Over the past four decades, the main thread of China's automotive industry has been "using the market to exchange for technology", with local factories mainly providing assembly services for multinational car manufacturers. Now, in Sunderland, UK, the roles are reversing: Nissan, the giant that defined the global lean manufacturing standards, may take on the role of a "contract factory" for its Chinese partner. The value chain and cooperation model of the global automotive industry are undergoing a profound reshuffle and reconfiguration.
