BYD Yuan Plus (Atto 3) at 2026 Beijing Auto Show in My Little Pony trim option. Credit: CarNewsChina Understand China EV’s Market Real-time notifications when critical EV data is released All important data in one place 2,000,000+ data points Become a member BYD is in talks with Volkswagen to take over part of the German automaker’s Transparent Factory in Dresden, according to two sources familiar with the matter. The Chinese automaker would invest in the site and could use the second half of the factory to manufacture EVs, the source said. The other part of the Dresden plant is reportedly planned to become an innovation hub in cooperation with the state of Saxony and TU Dresden. A German production site could also help BYD with brand awareness, adding a “made in Germany” label as the company already invests heavily in building its image in Europe, the source said. BYD sold 3,438 cars in Germany in March, up 327% year over year. BYD had previously considered Spain as its preferred location for a second European plant. Spain was seen as attractive because of its relatively low manufacturing costs, industrial infrastructure, cheap electricity, and a clean energy network. BYD is already building factories in Hungary and Turkey. Germany also voted against the EU’s additional tariffs on China-made EVs, a stance viewed favourably in Beijing. China has been seen putting pressure on countries that supported the tariffs, while favouring those that opposed or abstained. Reuters reported in 2024 that Beijing had told Chinese automakers to pause major investments in EU countries that backed the tariffs. Poland, which voted in favour, later lost Leapmotor production at Stellantis’ Tychy plant, while Spain, which abstained, emerged as the site for Leapmotor B10 production at Stellantis’ Zaragoza plant. The EU has so far offered little visible counterweight to this strategy, leaving member states on their own. In January, it was reported that the EU is in talks with China to remove EV tariffs and replace them with a “minimum price”. BYD declined to comment when contacted by CarNewsChina. Volkswagen didn’t immediately respond to CarNewsChina’s request for comment. Xpeng and SAIC’s MG are also exploring opportunities to use Volkswagen plants in Europe, according to sources familiar with the matter who remain anonymous as they are not authorised to speak to the media. No decision has been made. MG was previously reported to be considering an EV factory in Spain, after Hungary had been seen as a possible location earlier. Xpeng already manufactures vehicles in Europe through Magna Steyr in Austria and is a Volkswagen partner in China, providing E/E architecture for VW’s new VW-branded EVs and assisted-driving software. VW holds around 5% stake in the Chinese EV maker. Volkswagen ended vehicle production at the Dresden plant at the end of 2025. The facility, officially known as the Gläserne Manufaktur, opened in 2002 as a prestige factory for the VW Phaeton. It later produced Bentley vehicles, the e-Golf, and, most recently, the ID.3. In recent years, the plant produced about 6,000 ID.3 units annually, with around 205 employees. German media reported in December that Volkswagen Sachsen, Saxony, and TU Dresden had signed a letter of intent to use part of the site as an innovation hub from 2026. TU Dresden is expected to rent nearly half of the space, while conversion costs of around 50 million euros were still under discussion. Volkswagen CEO Oliver Blume said on April 30 that sharing unused European factory capacity with Chinese automakers could be a “clever solution” to reduce capacity and lower costs. VW has already reduced capacity by 1 million vehicles and wants to cut global production capacity from 12 million to 9 million cars. BYD currently imports all passenger cars it sells in Europe from China, where they are subject to a 10% standard import duty and a 17% EU anti-subsidy tariff. Reuters reported last year that BYD would slow the ramp-up of its Hungary plant and accelerate production in Turkey. BYD denied the report, saying its Hungary project remained on track. Turkey is not subject to additional EU countervailing tariffs on vehicle imports. BYD has also faced labour scrutiny overseas. CNBC reported that alleged abuses at its Hungary plant were raised in the European Parliament, while Brazilian authorities previously accused a contractor at BYD’s Brazil factory site of conditions “analogous to slavery.” If completed, a deal in Dresden would give BYD a symbolic foothold in Germany, the home market of Volkswagen and Europe’s largest auto industry.
