Volkswagen Eyes China: Seat's Possible End Signals a Shift in the Auto Industry

The Volkswagen Group is reportedly weighing the possible closure of its Seat brand and increasingly leaning on Chinese technology — to the point that cars and platforms developed in China could eventually be shipped back to Europe. That's according to Tomáš Kozelský, an analyst at Česká spořitelna.

According to him, the situation marks a reversal of a trend that used to run entirely the other way: for decades, European carmakers exported their platforms, engines and production know-how to China. "Today Volkswagen is considering whether to bring technology and vehicles developed in China back to Europe," Kozelský noted, adding that the key question now is what terms such cooperation would take and how the resulting value would be split between the two sides.

Europe vs. China: a widening gap in pace

Still, the analyst stresses it's too early to talk about European carmakers losing their competitive edge altogether. Last year the EU produced 13.5 million cars, while China increased output by 10% to 34.5 million vehicles. The issue isn't the volume itself, but the trend: EU production has essentially stalled, while China's auto industry keeps growing.

Petr Knap, a strategic consultant for the automotive sector, sees a potential Seat closure as more of a symbolic move than a disaster. "Seat has been losing relevance for years, and today, with output of around a quarter of a million cars annually, it's a secondary brand. The plant itself won't close — it will keep producing the increasingly successful Cupra," he explained.

By his estimate, the brand's final closure wouldn't happen before the end of 2029, leaving plenty of time to prepare. What's more, current Seat models still run on internal combustion engines, which will lose their relevance by 2030 anyway. Knap also finds it telling that the Group is willing to let go of a traditional national brand once it stops making economic sense.

Why German carmakers are looking to China

The main driver behind these sweeping changes, Knap believes, is growing competition from China — both the success of Chinese brands at home and their rapid expansion into Europe. German manufacturing today is 30–50% more expensive than Chinese production — a fact, he says, that the entire industry can no longer ignore.

Using Chinese platforms could bring Volkswagen short-term benefits, helping it withstand price pressure and close the technological gap with Chinese manufacturers. But in the long run, Knap warns, this only deepens dependence on Chinese engineering and weakens Europe's own R&D centers. "It's a forced move. A genuinely winning strategy has to be built on in-house development," the consultant emphasized.

He sees the same pattern playing out at other carmakers: Mercedes is deepening its partnership with BAIC, Stellantis is teaming up with Leapmotor, while BMW is betting on its own in-house Neue Klasse platform. "German brands all share the same logic: they can no longer win back China, but they need to survive in that market and carry the hard-won lessons and expertise over to other markets," Knap concluded.

What this means for Czechia

Analyst Kozelský also pointed to Czechia's position as the EU's third-largest car producer, behind Germany and Spain. Last year the country produced around 1.45 million vehicles — more than 12% of all passenger cars manufactured in the EU. Czechia's strength lies in its highly efficient production base, developed infrastructure and extensive supplier network, none of which can be quickly replaced.

The main long-term risk, according to Kozelský, lies elsewhere — in how much of the value added will actually be created in Czechia. If key platforms, software, batteries and electronic systems end up being developed and supplied mainly from abroad, the Czech auto industry could remain impressive in terms of volume while losing out on the most technologically advanced and profitable part of production.

Around Prague, based on reporting by novinky.cz