Nissan to do contract manufacturing for Chery—Chinese carmakers' roles in the global market reversed.

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Over the past forty years, the main theme of China’s auto industry has been exchanging market access for technology, with local factories providing contract manufacturing and capacity for multinational car companies.

WallStreet.cn has learned that Nissan signed a non-binding Memorandum of Understanding with Chery Automobile on June 3 local time, with both parties exploring the possibility of Nissan producing passenger cars for Chery at its Sunderland factory in the UK. The goal is to launch the first Chery models on the factory’s first production line in fiscal year 2027.

This is the first time in recent years that a foreign company has opened its core factory production line for contract manufacturing by a Chinese car company.

The Sunderland factory is not a marginal asset for Nissan; it was once the largest and most efficient automobile manufacturing base in Britain, responsible for iconic models like Qashqai and Leaf.

With sluggish demand in the European market and Chinese new energy vehicle companies accelerating their overseas expansion, the Sunderland factory’s capacity utilization rate has continued to decline. In May this year, Nissan consolidated its manufacturing business at Sunderland onto the second production line, attempting to improve utilization.

The vacated first production line thus became Chery’s springboard into Europe.

On the other hand, after enjoying the early bonus of pure roll-on-roll-off exports, Chinese brands going overseas now face increasingly complex European geo-politics, high logistics costs, and tariff barriers, urgently needing to expand localized overseas production.

The roles have reversed: from Chinese car companies acting as contract manufacturers for foreign brands in the past, to multinational giants outsourcing core production lines for Chinese brands now.

This also marks that Chinese car companies have substantively moved beyond simple product export, entering a new phase of reshaping the overseas industry chain.

01 Chinese Car Companies "Pick Up Bargains"

To understand this Memorandum of Understanding, we must see the contrast in business status: Nissan’s desperate search for survival and Chery’s hunger for capacity.

Located in northeastern England, the Sunderland plant was once Nissan’s pride in Europe’s heavy asset investment, providing livelihoods for about 6,000 local employees. At its peak, it was among the fastest growing, most cost-controlled single-vehicle factories in Europe.

However, as overall European auto consumption has been shrinking since 2019, coupled with Nissan’s delayed product updates and internal turmoil, the plant’s output has continued to decline.

According to independent auto industry research institution MarkLines, Nissan’s Sunderland factory’s capacity utilization will only hit 45.5% in 2025, a sharp drop of 8.7 percentage points from 2023.

In heavy-asset auto manufacturing, a full-vehicle production line typically needs to stay at a 75-80% utilization rate to break even. 45.5% means huge depreciation, plant amortization, and labor costs are mercilessly eating up per-car gross profit.

Financial bleeding forced Nissan into defensive contraction. In May 2026, Nissan announced it would consolidate all manufacturing at Sunderland onto the second production line. This move avoided massive layoffs but left the first production line idle.

With 900 jobs cut in Europe and some plants shut in Japan, revitalizing the dormant Sunderland line became the most pressing challenge for Massimiliano Messina, Nissan Europe’s business head.

Chery faces the opposite problem in the UK and Europe, struggling with capacity and logistics bottlenecks. Chery’s Omoda and Jaecoo brands have performed well in the UK, and imports of Jaecoo 7 from China even became the UK’s best-selling single model across all categories in March 2026.

However, this prosperity, built on a long sea-borne supply chain, is extremely fragile.

Roll-on-roll-off shipping costs directly erode pricing power, and tariff barriers always loom.

Chery Omoda and Jaecoo’s UK business leader Gary Lan has openly stated the brand aims to enter the UK’s top three in sales and put localized production on the agenda within a few months.

To support this, Chery even set up a commercial vehicle R&D center in Liverpool. But for passenger cars, traditional greenfield factory investments in the UK would take at least 3-5 years, and bear high upfront costs plus unpredictable union and environmental compliance risks.

In a fast-changing market window, Chery can’t afford to wait.

In fact, Nissan and Chery’s intersection on capacity assets is not new. Reviewing both companies’ asset transfer history in recent years, one sees a clear progression of Chinese car companies integrating multinational companies’ idle assets.

In April 2024, Chery signed a joint venture agreement with Spanish Ebro-EV Motors to enter the Nissan Barcelona plant that closed at the end of 2021. Under the JV—60% Ebro, 40% Chery—they plan to reach annual production of 50,000 by 2027, 150,000 by 2029.

In early 2026, the asset transfer model repeated in Africa, as Nissan further sold its low-utilization edge asset in Pretoria, South Africa, to Chery.

In the first two deals, Chery was more like a buyer, acquiring lines Nissan essentially abandoned.

But the Sunderland contract manufacturing memorandum is different. Chery is no longer picking up marginal cast-offs, but entering Nissan’s operating core manufacturing system.

Under Sunderland's cooperative framework, Nissan keeps physical ownership and continues employing existing workers.

This model gives Chery very high capital efficiency, avoiding hundreds of millions of pounds in plant building, and directly connecting to Britain’s mature workforce and supply chain network.

For Nissan, opening the first line for contract manufacturing for Chery, in exchange for B2B manufacturing service income, effectively spreads out massive fixed asset depreciation.

This is the most realistic asset self-rescue solution—to retain core assets, preserve 6,000 local jobs, and ease political and union pressure.

02 Global Industrial Chain Reshaping

Nissan manufacturing for Chery at Sunderland is not an isolated incident in the global auto industry.

Sunderland is not alone. Chinese auto expansion overseas is shifting from whole-vehicle exports to capacity integration, and the relationship between traditional multinational and Chinese car companies is also changing.

Looking at European auto manufacturing, the challenge of revitalizing idle capacity has become a pressing problem for European car companies, while Chinese car companies hold the “key.”

Ford earlier entered substantive talks with Geely and other Chinese firms about European factory transfers. Stellantis in May 2026 released its FaSTLAne 2030 strategy, planning to share capacity at its Madrid and Zaragoza factories with its controlled Leapmotor International JV, and discuss cooperation with Dongfeng at its Rennes factory in France.

An engineer with decades of experience at a joint venture car company told WallStreet.cn the root cause is that Europe’s traditional carmakers have missed out on both electrification and intelligentization transitions. On one hand, their late push into electrification and intelligence left their new energy models uncompetitive in the market; on the other, fierce competition in China means these international brands’ market shares have sharply declined, breaking the financial loop whereby Chinese profits subsidized European factory operations.

Chinese companies quickly targeted these idle factories.

Unlike early Japanese and Korean overseas expansion, which favored heavy-asset self-built factories, the new generation of Chinese brands prefer “brownfield integration” and light-asset cooperation. Even with Stellantis, the remedy for excess capacity is to share production with its 51%-owned Leapmotor International JV, allocating leapmotor models through its Spanish and French factories.

This model avoids Europe’s complicated union disputes and land/environment review, creating a buffer on the political level.

British union national official Steve Bush commented on the news: “This is great news for Sunderland workers... Since Chinese cars are increasingly common on UK roads, having British workers make them makes sense.”

By activating idle capacity, Chinese brands tie their own interests to local employment, making it the most effective business weapon for going overseas and localizing.

The deepest industry change brought by this “reverse contract manufacturing” is the total inversion of the auto manufacturing value chain. In the past era of China-foreign joint ventures, multinationals controlled brand premium, core engine technology, and vehicle electronics architecture, while the Chinese side mainly handled stamping, welding, painting, and assembly, earning meager processing fees.

But today, the script on Sunderland is completely different.

In this contract manufacturing model, Chery controls product definition, core plug-in/EV platform technology, intelligent cockpit software ecosystem, and the most critical user data asset.

Nissan, once defining global lean manufacturing standards, in this partnership has essentially degraded into an assembly service supplier.

This role reversal marks that the industry’s core value-added has shifted from “chassis and internal combustion manufacturing” to “three-electrical systems and intelligent domain control.”

Traditional car companies with vast manufacturing bases but lacking core intelligent EV tech must rent capacity for cash flow; Chinese car companies with core tech and cost control can, much like Apple, export standards and technology, turning idle global factories into their own “Foxconns.”

This contract manufacturing and shared factory model may expand to more regions, but implementation is not easy.

Technical system compatibility and supply chain localization are unavoidable issues. Chinese car companies must bring battery and intelligent driving hardware suppliers overseas to build local support.

Nissan’s manufacturing for Chery is just one facet of this global auto industry reshuffling.

The old order of defining auto camps by country of origin is loosening. The future global auto industry landscape will be reshuffled based on technical command and asset operation efficiency. In this reshuffling, Chinese car companies hold more initiative.

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