The Volkswagen Group and its Chinese joint venture partner sold their assembly plant in China’s Xinjiang region to a Shanghai government-owned firm, the German automaker announced Wednesday, in a move that comes after the company faced years of criticism from rights groups and Western lawmakers over the alleged use of forced labor in the region.
Volkswagen sold its controversial plant in China's Xinjiang region after facing years of pressure ... [+]
In its announcement, Volkswagen said its local joint venture with China’s SAIC Motor Corp. sold its manufacturing site in Urumqi, Xinjiang, along with two test tracks in the region for “economic reasons,” adding that the move is part of a strategic realignment.
The company sold its assets to the Shanghai Motor Vehicle Inspection Center (SMVIC), although the financial terms of the deal were not revealed.
Both SAIC and SMVIC are owned by the Shanghai Government.
The German automaker’s statement made no mention of concerns about forced labor and human rights violations in Xinjiang, but the company said it has agreed to extend its joint venture agreement with SAIC till 2040 and plans to bring a “new generation of electrified vehicles” to the country by 2026.
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The sale comes after Volkswagen faced several years of pressure from human rights groups and Western lawmakers over the alleged human rights abuses and use of forced labor in the Xinjiang region—which Beijing has vehemently denied. In 2022, the company received a “red flag” rating by Morgan Stanley Capital International—which rates companies on environmental, social, and governance (ESG) metrics—due to forced labor allegations in Xinjiang, prompting some ESG investors to drop the company from their portfolio. Last December, the company published findings of an audit it conducted into labor practices at its Xinjiang plant and found no evidence of forced labor. However, in February U.S. customs officials blocked the import of thousands of Porsche, Bentley and Audi-made cars, as they contained an electronic component made in China that violated forced labor laws. All three luxury brands are subsidiaries of the Volkswagen Group. At the time, U.S. lawmakers issued a statement urging Volkswagen to “cease its operations in Xinjiang, where the U.S. government has determined that the Chinese Communist Party (CCP) is conducting an ongoing genocide against the Uyghurs and other ethnic minorities.” A U.S. Senate probe report published in May found Volkswagen was one of several automakers that purchased parts from a supplier sanctioned by the U.S. for using forced labor programs in Xinjiang. In September, the Financial Times reported that the automaker’s audit into the Urumqi factory failed to meet international standards.