Volkswagen AG plans to close one of its joint venture plants in China as demand for internal combustion engine (ICE) vehicles in the country continues to fall, according to local reports citing a source close to the company.
The source suggested the German automaker is making preparations to shut down its Nanjing plant, managed by its SAIC-VW Automobile Company 50% owned joint venture with SAIC Motor Corporation, in 2025 and that other plants will likely follow.
The news emerged after SAIC Motor reported a 23% plunge in SAIC-VW sales to just over 110,000 units in August, resulting in a 5% drop in year to date sales to 712,325 units. At its peak just several years ago the joint venture sold over 2m vehicles annually.
SAIC-VW’s Nanjing plant has a production capacity of 360,000 vehicles annually including the VW Passat and Skoda branded cars. Just two years ago the joint venture ceased operations at another plant, in Shanghai’s Anting district, in response to slow demand with production transferred to a facility in Yizheng in Jiangsu province.
Volkswagen was also understood to be carrying out a strategic review of its Chinese operations, including to assess whether to continue selling its Skoda entry level brand in the country following a sharp drop in sales this year. The SAIC-VW facility in Ningbo in Zhejiang province, which makes several Skoda models, has been idle for long periods this year and may also be shut down permanently next year.
Volkswagen has stepped up its transition to battery electric vehicles (BEVs) in China in the last year but it faces a daunting task of having to restructure its network of over 30 vehicle assembly and component plants which are mostly focused on ICE vehicle production.
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By GlobalData
Volkswagen has an annual production capacity currently estimated at around 4.5m units in China across three main joint ventures, including a major partnership with state owned FAW Group called FAW-Volkswagen Automotive Company, which has seen its sales fall by 17% YTD according to local reports. It also has a third, smaller joint venture with JAC Group, called JAC Volkswagen Automotive Company.
In the last year, Volkswagen established a strategic partnership with BEV startup XPeng, with plans to launch three new BEV models built on Xpeng based platforms by 2026.
In July Volkswagen launched its first smart battery energy vehicle (BEV) in China, the ID. UNYX 01, designed specifically for the local market and available under the company’s new ID. UNYX sub-brand.
