Volkswagen Just Sold Off a Plant in China

Volkswagen is making some tough decisions as it attempts to realign its business operations. The automaker is facing strong financial headwinds and looking to cut costs, which could include closing factories in Germany for the first time. “Economic reasons” are already affecting plants outside VW’s home country, with the automaker announcing today that it will sell a facility, as well as two test tracks, in China.

VW is selling the factory that it operates as a joint venture with SAIC in China’s Xinjiang region. However, Volkswagen also announced that it was expanding its partnership with the Chinese company, promising to introduce 18 new models by 2030 and extending their agreement until 2040. The first two new cars, both electric vehicles, arrive as early as 2026.

The sale of the Xinjiang region plant comes after years of external pressure to leave the area where human rights organizations have revealed abuses against the local Uyghur population, which have said to include forced labor, according to Nikkei Asia. Both Beijing and Volkswagen officials have denied any abuses occurring there.

Earlier this week, VW Brand CEO Thomas Schafer revealed that he didn’t see how the company could reach its goals without at least one factory closure in Germany. Layoffs will also likely happen even though the company’s works council believes the automaker could avoid this through wage cuts.

Either way, Volkswagen has a rocky road ahead as it navigates rising costs, increasing competition, and dwindling sales in some critical markets. It’s not a formula for success, but one it can fix if it takes the right steps, which will likely include additional plant closures in the future.