Volkswagen Exits Xinjiang Plant Citing Economic Challenges
Volkswagen has sold its plant in Xinjiang, China, attributing the decision to economic factors. The plant, situated in a region at the heart of international human rights controversies, had shifted from producing combustion engine vehicles in 2019 to operating as a distribution hub.
“There is no business case for the plant,” a company spokesperson stated, highlighting reduced demand for traditional combustion vehicles amid growing global competition in the electric vehicle (EV) market. The spokesperson emphasised that Volkswagen is accelerating its transition towards EV production, as demand for electric cars continues to rise worldwide. In China, EV sales could represent 45% of total car sales this year, according to the International Energy Agency.
The Xinjiang facility, part of a joint venture with China’s SAIC Motor, has drawn criticism due to allegations of human rights abuses in the region. Human rights groups and Western governments have accused China of forced labour and mass detentions targeting the Uyghur Muslim population. China has consistently denied these allegations, describing claims of abuse as politically motivated misinformation.
Responding to the plant’s sale, a spokesperson for China’s foreign ministry reiterated these denials, asserting that “rumours about Xinjiang have generated a lot of false information.”
Volkswagen has faced scrutiny for maintaining operations in Xinjiang. While the company’s executives reported no evidence of human rights violations during a 2023 visit, and an internal audit similarly found no signs of forced labour, criticism arose over the audit’s adherence to international standards.
Beyond Xinjiang, Volkswagen is contending with intensifying competition in China, the world’s largest car market, where domestic manufacturers are gaining ground in the EV sector. Private brands have increasingly challenged Volkswagen’s market share, pressuring the automaker to adapt swiftly to the industry’s evolving landscape.
Volkswagen is also grappling with domestic challenges in Germany. Last month, the company announced plans to close at least three factories and lay off tens of thousands of workers, marking the first closures in its 87-year history.
The sale of the Xinjiang facility underscores Volkswagen’s broader efforts to navigate shifting market dynamics while addressing longstanding criticisms about its presence in a contentious region.
