Volkswagen has finally had to give in to the pressure so is it in financial trouble?
Volkswagen announced on Wednesday that it would sell its operations in Xinjiang, China, following years of pressure from human rights groups regarding the region’s treatment of Uyghurs.
This move comes alongside a 10-year extension of Volkswagen’s partnership with Chinese company SAIC, a significant step in strengthening its position in China, its largest market. The partnership aims to reverse a recent decline in sales. Volkswagen and SAIC will sell their Xinjiang plant to Shanghai Motor Vehicle Inspection Certification (SMVIC), a subsidiary of state-owned Shanghai Lingang Development Group.
Moreover, the deal, whose financial terms were not disclosed, will also transfer test tracks in Turpan (Xinjiang) and Anting (Shanghai) to SMVIC, which will take over the employees. As a result, Volkswagen will exit Xinjiang completely, although Beijing has denied allegations of abuses in the region.
The sale was welcomed by several stakeholders, including the state of Lower Saxony, Volkswagen’s second-largest shareholder, and Deka Investment, a major investor who had been urging the company to leave Xinjiang. The Xinjiang plant, which had been operational since 2013 and assembled the Santana vehicle, had become less significant in recent years.
After Volkswagen cut jobs, only about 200 employees remained, handling quality checks and deliveries. The plant also had a capacity of 50,000 units annually but hadn’t produced any cars since 2019. Volkswagen emphasized that the decision to sell was based on economic reasons, not pressure from Beijing.
On top of that, shares of Volkswagen dropped 0.5 percent on the news, reflecting the broader challenges the company faces, including a 26 percent decline in its stock this year due to a major cost-cutting strategy that includes job reductions and factory closures. The sale comes amid increasing trade tensions between China and the West, including new punitive tariffs on Chinese-made electric vehicles imposed by the EU.
The extended partnership with SAIC will help Volkswagen maintain its foothold in the world’s largest auto market and avoid reputational risks associated with its Xinjiang operations. As part of the renewed joint venture, the companies plan to release 18 new models by 2030, including two extended-range electric vehicles (EVs) by 2026.
Despite China’s recent relaxation of rules requiring foreign carmakers to partner with local companies, Volkswagen’s commitment to SAIC suggests it will continue to operate under the joint-venture model in China. The company also aims to launch over 30 new electric or hybrid models by 2030, including collaborations with other Chinese partners like Xpeng.
We got all this from Reuters and their full article is linked here. Thank you Reuters for the information and images?
