Volkswagen is reportedly considering the potential closure of another manufacturing plant, this instance occurring in China, its largest market by far. As Volkswagen’s largest market, China proves a significant challenge as local electric vehicle (EV) manufacturers, such as BYD, increasingly encroach on the German automaker’s market share.
As demand continues to slow, Volkswagen and its joint venture partner, SAIC Motor, are considering the potential closure or reduced production at one of their manufacturing facilities in China.
According to a recent report, SAIC Volkswagen is poised to cease operations at its factory in Nanjing, marking a significant shift in the company’s production strategy. According to insiders familiar with the issue, there is a possibility that this event could transpire as soon as next year.
The facility manufactures Volkswagen Passats and Skodas with an annual capacity of up to 360,000 units. As production woes deepen, SAIC Volkswagen temporarily halts operations at one facility, while another factory begins to scale back output, with the specter of permanent shutdown looming large.
Last year, manufacturing across all of VW’s plants in China remained a quarter below its pre-pandemic peak.
As the electric vehicle market heats up, low-cost EVs from established players are driving demand away from gas-powered cars, especially those from overseas manufacturers that struggled to adapt to changing consumer preferences.
Volkswagen’s Skoda brand is among those experiencing a decline in gross sales in the Chinese market. Manufacturing operations have been intermittently suspended at the Ningbo plant, which produces Skoda-branded vehicles, and are now expected to cease altogether.
One other Volkswagen plant closure?
SAIC Volkswagen dismissed concerns about potential production cuts, stating that all its Chinese factories were operating normally, aligned with market demand and its own forecasts.
The email further stated that the company is also rewiring the entire automotive manufacturing process and supply chain to support the production of high-quality electric vehicles seamlessly.
According to the sources, a thorough review of the plant’s operations is long overdue. Volkswagen aims to revive its flagging sales fortunes in China through strategic partnerships with domestic players such as XPeng and SAIC, introducing more competitive models tailored to local consumers’ preferences.
Homegrown electric vehicle manufacturers, partnering with BYD, are dominating the market with bold price slashes and innovative budget-friendly designs.
China’s electric and hybrid vehicle sales skyrocketed by 43 per cent in September compared to the same period last year, exceeding the one-million milestone at 1.03 million units.
China’s rapid pivot towards electric vehicles is being driven by the proliferation of affordable fashion options. In China, BYD’s most affordable electric vehicle, the Seagull, has a starting price of under $10,000, or approximately 69,800 yuan.
Volkswagen’s woes won’t be confined to China alone. The corporation may also be facing challenges in its home market. For the first time in its 87-year history, Volkswagen is considering closing a plant in Germany. Volkswagen’s Chief Financial Officer, Arno Antlitiz, attributed the problem to overcapacity, citing a decline in European demand for vehicles as consumers opt for fewer car purchases.
