Declining sales are pushing Volkswagen to implement harsh cost-cutting measures. Bloomberg reports a possible closure of the plant in Nanjing, with other locations in China also potentially affected.
Nanjing – Car manufacturer Volkswagen AG announced drastic cost-cutting measures in Germany as early as September. Job cuts and plant closures are on the table. The decreasing demand for electric vehicles, along with economic uncertainties in the German market, heavily impact many car manufacturers. Now, Volkswagen faces challenges in the Chinese market as well, this time due to dwindling sales of combustion engine vehicles.
The news agency Bloomberg has reported speculations about a possible plant closure in Nanjing, located in eastern China. In the long term, other Volkswagen plants in China could also be affected. The VW brand Skoda is particularly suffering from declining demand.
Volkswagen considers plant closure in Nanjing, China
Volkswagen has collaborated with the Chinese partner SAIC Motor Corp for nearly four decades. By the end of 2023, VW had over 90,000 employees in its Chinese operations. Now, sources from Bloomberg indicate a potential plant closure could occur next year at the Nanjing facility. This comes as a reaction to the reduced demand for combustion engine vehicles in China. The Nanjing site has an annual capacity of 360,000 vehicles and produces the VW Passat and Skoda brand cars. Additionally, sources suggest that the closure of other plants in China is possible.
Production was already halted in a VW plant in Shanghai two years ago, and shifted to a new facility in Anting. This factory was specifically expanded for electric vehicles, boasting a capacity of 300,000 vehicles. According to Bloomberg sources, production is now also being reduced at the second Shanghai plant, with closure being a possibility, although no decision has been made yet.
VW questions Skoda mass-market brand in China
Volkswagen’s mass-market brand Skoda is particularly at risk in China, as its sales have significantly plummeted, prompting a reassessment of its strategy. Adjustments to marketing and the dealer network are planned, as well as expanding the used car market. Last year, Skoda’s production dropped by more than half, recording less than 20,000 units.
According to the sources, the Skoda plant in Ningbo has been idle for months, and closure is likely under consideration. In response to Bloomberg inquiries, VW China stated, “All SAIC Volkswagen factories are operating normally in accordance with market demands and our forecasts.” As the focus shifts to electric vehicles, production adjustments are also reportedly being made.
VW production in China has declined in recent years – positive outlook for electric vehicle market
In China, the production of the 39 VW factories last year fell to 3.1 million vehicles produced. This figure is more than a quarter below the pre-pandemic production levels, according to data from Volkswagen Group China. Profits generated from the partnership between SAIC and Volkswagen have also declined over the past five years—from a peak of 28 billion yuan, approximately 3.9 billion US dollars, to 3.13 billion yuan, about 438.2 million US dollars, in 2023, as reported by Bloomberg.
However, the delivery figures for electric vehicles from Volkswagen AG in China paint a more favorable picture than in Germany. They rose by 23 percent last year to around 190,000 units. Nevertheless, the German automaker faces stiff competition from Chinese companies. The timeline for an announcement regarding the plants in China remains unclear; however, anonymous sources indicate that cutbacks may have already commenced. The trend observed in Germany continues to prevail in China as well.
