10:46 am, June 30, 2026
Former Volkswagen UK boss Paul Willis has warned car dealers to be ‘very, very cautious’ before signing up with Chinese manufacturers, saying franchise agreements need to be scrutinised carefully as the brands rapidly expand across Europe.
Willis spent more than 40 years in the motor industry, including as managing director of Volkswagen Group UK and more recently with Middle East retailer Al-Futtaim Automotive. He said dealers should pay close attention to distribution contracts and the long-term profitability of Chinese franchises.
Speaking on the Car Dealer Podcast, Willis said he believed BYD would be his preferred Chinese brand if he were building a dealer group today, but said retailers should still proceed carefully.
You can listen to the interview in full by clicking play below or watch the interview on our YouTube channel above.
He explained: ‘Well, I did. I invested in BYD. I’ve spoken to all of them. I’ve been interviewed by all of them and I’ve interviewed all of them. So I think BYD is probably the one.
‘However, again, if you look at the distribution strategy and the behaviour of BYD, I would question some of the things that they have been doing.’
Willis said his wider message to dealer groups was one of caution, and gave an example he had witnessed in Spain from a dealer group working with the Chinese car maker.
‘My overarching point would be to a dealer group, you need to be very, very cautious because I can give you an example of Madrid,’ he said.
‘One of the biggest dealer groups in Madrid opened a number of BYD outlets. Unfortunately, after two years, BYD’s view of the volume potential and their view of the volume potential was quite far apart.
‘BYD just opened a number of dealerships and re-sliced the market areas completely.
‘Within the distribution contract, or the retailer contract, that was in there, and they won’t take that out because it gives them more flexibility.
‘That makes it very, very difficult for a retailer if the ground underneath them continues to shift all the time.’
While stressing that not every Chinese manufacturer would behave in the same way, Willis said dealers needed to understand exactly what they were signing.
He added: ‘Maybe not all of them do that. I’m sure they don’t. But the distribution agreement and the provisions in there need to be carefully analysed by the retailers because I think, for a number of years, the profitability in some of them – I can’t comment on all of them – will be under pressure.’
Chinese manufacturers continue to grow their presence rapidly in the UK market, with brands including BYD, Omoda, Jaecoo, Leapmotor, Geely, Aion and XPeng all expanding their dealer networks.
Despite his warning, Willis said he was not among those predicting Chinese manufacturers would overwhelm the established brands.
Having previously worked in China as chief executive of Skoda, he said the manufacturers possessed significant strengths in manufacturing, pricing and technology but also faced major challenges.
‘Their strengths are that they can manufacture cars at more competitive prices than the incumbents,’ he said.
‘Where they have stolen ahead of the Europeans and the Americans, is in the technology.
‘However, they’ve got some serious weaknesses. Used cars aren’t a phenomenon in China. Residual values they have no clue about. Fleet, they don’t really understand.
‘So all the distribution elements that actually can make a difference to long-term development, they are 20 years behind.’
Willis also warned that dealers and finance providers taking residual value risk on Chinese vehicles should be careful as volumes increase.
‘I think anyone who takes the residual value risk on a Chinese car needs to have very deep pockets,’ he said.
‘You cannot get away from the equation that we all know well in the auto industry, which is volume price analysis. The more you pump vehicles in, in the end it will bite you with regard to the used car.
‘Maybe the transaction price is 20% below an equivalent European car and the quality looks okay.
‘The problem is that when you go to sell that car in three years, I’m pretty sure the residual value is going to be more than 20% below the equivalent European vehicle.’
However, he said established manufacturers still had significant advantages and were already adapting to the competitive threat.
‘I do believe that other companies will react and they are reacting,’ he said. ‘They’re doing joint ventures with software companies, bringing different types of models in with lower cost bases and different sourcing.
‘The sophistication of the distribution model of a number of these big European OEMs is way far ahead of any of the Chinese.’
Willis believes Chinese brands could eventually secure as much as 30% of the European market, but questioned whether competing primarily on price would prove sustainable.
He said: ‘Do I think Chinese can get to 30%? Probably. Do I think it’ll be mainly based on price? Probably. I’m not sure growing based on the core premise of price is sustainable over the long term.’
The full interview is available on Spotify, Apple Podcasts, Amazon Podcasts and more, where Willis talks about Chinese cars and the wider industry.
