Volkswagen said on Wednesday that it was disposing of its stakes in its facilities in northwestern China’s Xinjiang region, exiting an area now known for China’s crackdown on predominantly Muslim ethnic groups there.
Volkswagen had a joint venture assembly plant in Urumqi, the capital of Xinjiang, as well as two test tracks in the region, maintaining the largest and most visible presence in Xinjiang of any multinational company. That drew condemnation from human rights groups. The United States and a growing number of European countries bar imports from Xinjiang because of evidence of forced labor there.
The assembly plant did not just become a political liability for VW — it was also a money loser, because it was designed to make gasoline-powered cars. China has swiftly adopted electric vehicles in the last four years, and half the cars sold in China are now either battery-electric or plug-in hybrid cars.
That has left manufacturers like VW, the market leader in China until recently, with considerable unneeded production capacity.
The assembly plant has not built cars since 2019. VW and its state-owned joint venture partner, SAIC Motor, now employ fewer than 200 workers in Xinjiang who do the final preparation of cars for delivery to VW dealerships in western China. The Shanghai municipal government owns SAIC Motor, which also makes the MG brand of cars and has been rapidly expanding exports.
VW said that ownership of the assembly plant and test tracks was being transferred by the joint venture to the Shanghai Motor Vehicle Inspection Center, which is owned by a different arm of the Shanghai government. No price was disclosed for the transaction.
Demand for gasoline-powered cars has collapsed in China, and VW’s sprawling factory in Xinjiang has been little used of late. VW had been deploying the facility to do the final preparation of cars for delivery to dealerships.
Exporting from Urumqi is impractical: Nearby Central Asian countries buy few cars, and the plant is 1,800 miles from the coast, too far for seaborne shipments.
VW and SAIC built the assembly plant in Urumqi in 2012 and 2013 to make inexpensive, gasoline-powered cars to sell in western China. Volkswagen had made a point of hiring numerous Uyghurs, a predominantly Muslim ethnic group in Xinjiang. Uyghurs have long faced discrimination from Chinese employers, and difficulties facing Uyghurs deepened after deadly attacks by Uyghur militants from 2008 to 2014.
Beginning in 2014, China cracked down on Uyghurs and other predominantly Muslim ethnic groups in Xinjiang. As many as a million ethnic Uyghurs, Kazakhs and other minorities were sent to indoctrination camps, detention centers and prisons. Associated forced-labor programs that sent rural Uyghurs to factories and to do other urban jobs also drew heavy criticism from human rights groups, and they have prompted the United States and some European countries to restrict imports from Xinjiang since 2021.
VW has faced accusations by overseas activists that it has used forced labor by Uyghurs to build its test track near Urumqi. VW denies having done so. But when it hired an auditing firm late last year to review its compliance in Xinjiang with international labor standards, the audit was criticized overseas for not sufficiently protecting the anonymity of the workers who participated.
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