Volkswagen Confirms New Electric Models Will Be Built at Autoeuropa as Half of Portuguese Sales Go Electric

Volkswagen is preparing to manufacture a new generation of electric vehicles at its Autoeuropa plant in Palmela, south of Lisbon, as the German automaker accelerates its electrification strategy and positions Portugal as a key production hub within its European network.

Ricardo Vieira, managing director of Volkswagen in Portugal, confirmed the plans in an interview with ECO, describing Autoeuropa as a “strategically relevant industrial asset” for the group's future and stating that Portugal “has the conditions to be the European hub of the automotive industry.”

T-Roc and Beyond

The Autoeuropa factory in Setúbal district has been the exclusive global production site for the Volkswagen T-Roc since the compact SUV's launch in 2017. The plant produced its two-millionth vehicle in 2023 and remains one of the largest private employers in Portugal, with around 5,000 workers.

Vieira said the next generation of the T-Roc — which he described as “inseparable from Portugal” — will continue to be built at Autoeuropa, alongside new electric urban models that Volkswagen plans to bring to market as part of its push to democratise access to electric mobility.

The shift comes at a critical moment for the European auto industry, which is under pressure from Chinese competitors offering cheaper electric vehicles while simultaneously facing tighter EU emissions regulations that took effect in January 2025.

Portugal Already Ahead on EV Adoption

According to Vieira, Portugal is already outperforming the European average on electric vehicle adoption. Half of all Volkswagen sales in Portugal are now electrified vehicles — a share that reflects the country's generous tax incentives for zero-emission cars, which include exemptions from vehicle registration tax (ISV) and road tax (IUC), as well as reduced benefit-in-kind taxation for company fleets.

“We are in a relatively advanced phase of electric adoption,” Vieira said, adding that the main barrier to faster uptake is no longer consumer willingness but infrastructure. “We need to accelerate the development of the charging network,” he acknowledged.

Software Is Changing the Car

Vieira also highlighted a broader transformation underway in the industry. “The car is no longer just hardware. Software has changed everything,” he said, pointing to over-the-air updates that allow manufacturers to add features and fix issues remotely after purchase — a model borrowed from the smartphone industry.

He noted a generational shift in how consumers relate to cars. “Usage is replacing the logic of ownership,” he said, citing the growing popularity of leasing, renting, and subscription models, particularly among younger drivers.

Competition From China

Asked about the growing presence of Chinese electric vehicle brands in Europe, Vieira said competition was healthy but called for “fair competitive conditions.” The European Union imposed provisional anti-subsidy tariffs on Chinese-made EVs in July 2024, with rates ranging from 17.4% to 37.6%, and those duties were confirmed in October 2024.

For Portugal, the Autoeuropa commitment represents a significant vote of confidence in the country's industrial base at a time when several European plants face uncertainty. Volkswagen announced in late 2024 that it would close three factories in Germany and cut tens of thousands of jobs globally as part of a cost-cutting drive — but Autoeuropa was not on the closure list.

The Palmela plant's relatively competitive labour costs, its proximity to the port of Setúbal for vehicle exports, and Portugal's growing renewable energy capacity — which allows manufacturers to claim lower carbon footprints in production — are all factors working in its favour.