Volkswagen exiting China's Xinjiang region, sells sites amid rights abuse concerns

German carmaker Volkswagen AG has finally bowed to pressure from investors and is now set to exit China’s Xinjiang region, which has been in news for wrong reasons over the years.

Volkswagen will now end its activities in Xinjiang as investors are worried about the future of the sites that the company had acquired earlier amid sustained campaigns by human rights groups flagging human-rights abuses in the western Chinese region.

The German carmaker’s Chinese venture with SAIC Motor Corp will now sell a small plant in Urumqi, Xinjiang, to a unit of state-owned Shanghai Lingang Economic Development, Bloomberg quoted the company as saying on Wednesday.

Meanwhile, Volkswagen also decided to extend its partnership with SAIC by a decade to 2040, Bloomberg reported.

VW has been under pressure over its presence in Xinjiang, with the US-led West alleging that China has engaged Uyghurs and other Muslim minorities in the region in forced labour across the vast region.

China strongly denies such allegations. Beijing defends programmes, often cited by international agencies as violative of human rights, as its efforts to improve living standards for ethnic minorities. It says that a good programme has been misconstrued.

Volkswagen shares fell 0.4 per cent this morning in Frankfurt. Overall, its stock has declined 28 per cent through 2024 as the German auto giant is battling serious issues back home. It is under pressure over its much-anticipated job cuts and factory closures following a drop in demand for electric vehicles.

The company has also struggled in China, where the local brand such BYD has emerged as a major player with the support of the government’s policy interventions. The SAIC Volkswagen plans to introduce a total of 18 new models to the market, including eight new EVs, by 2030.

Carmakers operating from China have faced challenges in the West over labour rights issues. For example, the US blocked the import of thousands of Porsche, Bentley and Audi models in February saying that the vehicles had components that were made in China in violation of the American anti-forced labour laws.

VW’s Urumqi facility employs 175 workers but doesn’t manufacture any cars. However, it is designed to do the final quality checks of assembled vehicles. The cars are then sent to deals to be purchased by prospective buyers. Now, VW will also sell test tracks in Turpan and Anting to the same buyer.