German automaker Volkswagen has confirmed plans to sell its factory in Urumqi and a test track in Turpan, located in China’s Xinjiang region. The company cited "economic reasons" for the decision, as it faces slowing growth in China and growing competition from domestic automakers.
The sale, part of a joint decision with its Chinese partner SAIC, will transfer the plant and its workers to SMVIC, a subsidiary of Shanghai Lingang Development Group. Volkswagen has also extended its partnership with SAIC for another decade, through 2040.
This move comes as VW implements cost-cutting measures, including factory closures and layoffs in Germany, and grapples with the challenges of a potential trade war between the European Union and China over electric vehicle tariffs.
The decision to exit Xinjiang is set against a backdrop of international criticism over alleged human rights abuses in the region. Rights organizations accuse China of detaining over a million Uyghurs, a Turkic-speaking Muslim minority, and other ethnic groups in “reeducation camps.” Allegations of forced labor and systemic surveillance have intensified global scrutiny of businesses operating in the region.
Volkswagen’s presence in Xinjiang has drawn criticism from human rights advocates. Although VW has denied evidence of forced labor at its facilities, its operations in the region have remained controversial.
The withdrawal highlights the growing tension multinational corporations face in balancing ethical considerations with economic interests. Amid escalating geopolitical pressures, including EU tariffs on Chinese-made electric vehicles, VW’s exit signals a recalibration of its strategy in the world’s largest automotive market.
While the company’s Xinjiang operations represented a small part of its broader portfolio, the move is likely to resonate with other global firms operating in sensitive regions, reinforcing the need to align corporate practices with international human rights standards.
