Volkswagen’s controversial Xinjiang plant sale signals strategic shift in China

Name: SCMP
Telephone: +852-2680-8888

VW sells assets to address political risks and cut excess capacity, while extending its partnership with SAIC to regain market share in China

Reading Time:3 minutes

Why you can trust SCMP

The SAIC Volkswagen plant in Urumqi in China’s Xinjiang Uygur Autonomous Region has been sold to a state-owned company. Photo: AP

Daniel Renin Shanghai

Published: 7:30am, 29 Nov 2024Updated: 8:00am, 29 Nov 2024

Volkswagen’s (VW) sale of a controversial plant in China will come as a relief to the German carmaker, as it rationalises its flagging operation amid cutthroat competition in the world’s largest automotive market, industry observers say.

The divestment could see international carmakers reduce their capacity by as much as 10 million units on the mainland as they continue to lose market share to more nimble local electric vehicle makers amid an accelerated pace of electrification in China, according to UBS.

VW announced on Wednesday that the plant in Urumqi, the capital of the Xinjiang Uygur autonomous region in western China, and two test tracks in Turpan, Xinjiang and Anting, Shanghai, will be sold to Shanghai Motor Vehicle Inspection Certification, a subsidiary of Shanghai Lingang Development Group.

All three assets are owned by VW and its Chinese partner SAIC Motor. Details of the transaction were not disclosed.

A file photo from September 2018 shows VW cars being assembled at the SAIC Volkswagen plant in Urumqi. Photo: Reuters

“By selling the plant in Xinjiang, VW can quell fears about political risks and cut excess capacity to adapt to a changing market where its petrol vehicles are no longer easy sales,” said Qian Kang, who owns car-component businesses in eastern Zhejiang province. “After all, the factory has been idle over the past five years.”