Volkswagen has sold its Xinjiang factory after 12 years of operations marked by criticism and financial struggles. The plant, which never achieved profitability, became a symbol of the challenges foreign companies face in politically sensitive regions.
The Xinjiang Dilemma
Xinjiang, designated as an “autonomous region” in China, has faced strict control by the Chinese government for decades. After 1949, the Communist Party absorbed the region, historically home to the Uighur Muslim population. Han Chinese settlers were encouraged to relocate, gradually making Uighurs a minority in their ancestral homeland.
To assimilate the Uighurs, China promoted economic development, portraying it as a path to modernization. In 2014, these efforts escalated into the establishment of “re-education camps,” where Uighurs underwent forced indoctrination. Reports of torture, forced sterilizations, and labor camps surfaced globally. The government initially denied these practices but later described the camps as “training centers,” highlighting Xinjiang’s economic growth and infrastructure advancements as successes.
Amid this push for development, foreign companies were encouraged to invest in the region. Volkswagen, along with other firms, faced pressure to participate despite growing political tensions and human rights concerns.
Volkswagen’s Struggles in Xinjiang
In 2012, Volkswagen opened a semi-knockdown factory in Xinjiang. The plant required parts to be shipped over 2,000 kilometers from eastern China and employed just 197 workers. Designed to produce up to 50,000 vehicles annually, the factory never reached its capacity and was unprofitable from the start.
Volkswagen likely sought to exit the joint venture with Chinese partner SAIC for years, amid mounting criticism over its presence in the region. A recently renegotiated agreement allowed the company to sell the Xinjiang plant. However, the deal extended Volkswagen’s partnership with SAIC until 2040, a decade beyond the original 2030 deadline. It also included plans for a major product launch in 2026.
Although Volkswagen has left Xinjiang, its continued collaboration with China’s government raises questions about its commitment to addressing ethical concerns tied to its operations in the region.
