Volkswagen Eyes Exit from China as Sales Plummet and Labor Strikes Escalate

German automaker Volkswagen, grappling with financial struggles and union strikes, is reportedly exploring the sale of additional factories in China.

On Monday, the German business magazine WirtschaftsWoche (WiWo) reported that Volkswagen has decided to pull out of its Nanjing plant in Jiangsu Province. The company is also considering selling more of its 26 underperforming production facilities in China. The Nanjing plant, a joint venture between Volkswagen and Shanghai Automotive (SAIC) established in 2008, produces internal combustion vehicles, including the Volkswagen Passat, Skoda, and Kamiq models. Despite an annual production capacity of 360,000 units, demand in China has nosedived, leading to decreased operational efficiency. Skoda vehicles sold over 300,000 units annually in the Chinese market before the COVID-19 pandemic, and sales plummeted to just 11,000 units this year. Last month, Volkswagen decided to divest its factory in the Xinjiang Uyghur Autonomous Region, which had been embroiled in allegations of forced Uyghur labor, to a Chinese state-owned enterprise.

Back in Germany, Volkswagen was facing strong opposition from unions regarding its extensive restructuring plans. Negotiations are ongoing, but the Volkswagen union is pushing the company to abandon its plans to close factories. In response, workers staged a four-hour strike at nine of the company’s ten German plants. Earlier this month, around 100,000 of Volkswagen’s 120,000 employees took part in a two-hour work stoppage. Volkswagen claims it needs to slash costs by €17 billion (approximately $18 billion) and has proposed closing at least three German plants, downsizing its workforce, and implementing a 10% wage cut. However, the union and the government are staunchly opposed to factory closures that would result in job losses. Before the fourth round of labor negotiations, Chancellor Olaf Scholz criticized the company, stating that poor management decisions had created this problematic situation and that closing factories was not the right solution. Saskia Esken, co-chair of the ruling Social Democratic Party, echoed concerns regarding management’s actions, declaring that such drastic measures are unacceptable and emphasizing the need to safeguard valuable jobs.