Volkswagen’s possible plan to end the SEAT brand by 2029 has rattled Spain’s auto sector. The German company, which took over SEAT in 1986, is considering deep cuts that could cost up to 100,000 jobs and shrink European production. Volkswagen says it has not made a final decision, citing market demand, new rules and the wider economy as basic factors. For now, the company insists its Spanish operations and jobs are not at risk.
SEAT is not alone. Stellantis and Renault are also under pressure as Chinese rivals and the difficult shift to electric cars eat into profits. A recent push in the Catalan parliament identified the biggest threat to SEAT as a lack of new models for its factories, rather than a sudden shutdown. The Martorell plant currently builds the Ibiza, Arona and León. These models account for about 199,000 of the 500,000 cars the plant hopes to produce in 2026. The Catalan parliament wants a long-term rescue plan, with proposals including government investment and guarantees for local research and management. So far, those ideas have been rejected.
ANFAC reports that direct employment in Spain’s automotive manufacturing sector fell to 53,943 in 2025, down 36.1% from 2019. The sector lost 3,246 jobs in 2025 alone.
As Europe’s carmakers pull back, China is moving in. SAIC Motor, which owns MG, selected Ferrol in Galicia for its first European plant. The plan is to build the new MG2, a fully electric car, in Spain. This would allow SAIC to avoid EU tariffs and sell directly into Europe. But the deal is not final: Xunta de Galicia says talks with SAIC are ongoing, and the exact model planned for Ferrol has not been confirmed. Initially, the plant will use a CKD setup, with cars arriving in parts from China for assembly in Spain. Full manufacturing is not planned yet. Chinese firms have already launched five assembly projects in Spain, most of them joint ventures with European partners using old or underused plants. For Spain’s struggling car sector, these deals are a lifeline.
SAIC has begun looking for local suppliers in Galicia and northern Portugal. It has met with Portuguese industry association AFIA and expressed plans to expand its local manufacturing base, Farodevigo.es reports. Much of the Chinese investment in Spain remains at the negotiation or planning stage, but, and the full integration of local supply chains is still uncertain.
Spain’s car industry has long been shaped by outsiders. The SEAT 600, once the car for everyone, was built in Barcelona but designed by Fiat in Turin. Spain offered cheap labor and a closed market, while the know-how stayed abroad. The pattern continued: FASA built Renaults in Valladolid, Citroën set up in Vigo, and Ford came to Valencia in the 1970s after Spain relaxed its rules to attract foreign investment. The Pegaso Z-102, a Spanish sports car that broke speed records in 1953, was a rare exception. Most of the time, foreign designs ruled.
By 2000, Spain was producing more than three million cars a year. That did not last. Since then, almost 22,000 jobs have disappeared, and output is down by a quarter, ANFAC reports. Spanish factories have long depended on decisions made in Paris, Wolfsburg and Detroit, and now Beijing. One difference is that Chinese companies do not share their technology with Spanish suppliers. Their basic goal is to avoid tariffs: they ship car kits from China and assemble them in Spain, leaving the country as a “white label” factory for others.
Spain leads Europe in productivity, with each worker building fifteen cars a year. But the gains come at a price. Wages in the sector average 22 euros an hour, compared with 51 in Germany and 36 in France. After the 2008 crisis, Spain doubled down on cheap labor: wages froze, new hires earned less, and flexible hours became standard. This kept plants open but locked Spain into a model built on low pay and short-term deals.
Spain now competes with Morocco, Slovakia and Turkey, while China has become the real game-changer. Its cheap electric cars have flooded the world market. In 2025, Spain’s car trade balance reached its worst point since 2009 as production and exports slowed, Chinese imports soared and European brands lost ground. ANFAC says Spanish car production fell 9.2% in the first four months of 2025, while exports dropped 11.7% from a year earlier.
The EU responded in 2024 by raising tariffs on Chinese electric cars to as much as 45%, citing extensive state subsidies in China. Now it is considering tougher rules. The proposed Industrial Acceleration Law would tie subsidies and public contracts to cars built in Europe: at least 70% of each car would have to be made locally, and foreign ownership could not exceed 49%. The measure would not ban Chinese cars, but it would cut them off from subsidies that make electric cars affordable.
China plans to keep its best technology at home and export car kits for final assembly abroad. Bloomberg reports that Beijing has told its carmakers to produce basic parts in China, leaving only the final steps to be carried out in Europe. Promises to work more with local suppliers remain vague, with no clear deadlines.
China is also prepared to use its grip on clean technology. In October 2025, its Ministry of Commerce proposed limits on battery technology and materials, including machines needed for Spain’s new gigafactories. A trade truce with the US put the plan on hold, but Beijing has not abandoned the idea.
Brussels wants to turn the tables. In the 1980s, Volkswagen entered China through joint ventures and shared technology to gain access to the Chinese market. China learned quickly. It now makes a third of the world’s cars and three-quarters of its electric vehicles. Beijing’s strategy differs: it wants control of green technology, from mining to solar panels and batteries, while the most valuable know-how stays in China.
Spain risks becoming a maquila, a low-cost assembly line for Chinese parts shipped from Shanghai. Finished cars would be sold across Europe tariff-free, giving Spain the same role Mexico plays for the US. China is offering Spain that deal.
The Spanish car market is changing too. As reported earlier, Madrid has seen a boom in used-car sales, while the rest of Spain has not kept pace. The trend reflects uncertainty around new-car production and the influence of foreign competition on what people buy.
Cars still account for 10% of Spain’s GDP, and the country is Europe’s second-largest car producer. Yet the basic decisions are made far from Madrid and Barcelona. Spanish factories are more productive than ever, but the value and technology remain under foreign control. Unless Spain and Europe secure real investment in local supply and technology, the country could become an assembly outpost. From the SEAT 600 to the MG ZS, Spain’s industrial fate has often been decided elsewhere. Now, those decisions are coming from Beijing.
