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Global crisis hits German brand's operations in the Chinese market, with possible closures of factories in Nanjing and Ningbo
Volkswagen, one of the largest car manufacturers in the world, faces a challenging period with the possibility of end production in two major factories in China. The global crisis that the brand is facing, aggravated by the drop in sales in the Chinese market, raises the hypothesis that close the Nanjing and Ningbo units, fruit of its partnership with SAIC (Shanghai Automotive Industry Corporation), according to the Quatro Rodas website.
The German automaker had already signaled financial difficulties, including considering the closure of factories in Germany for the first time in almost nine decades of history. However, the current scenario in China, which was once represented about 50% of sales of the Volkswagen group, further emphasizes the need for adjustments.
Loss of market share to Chinese brands
In the last years, the Chinese market has seen the rise of local manufacturers, such as BYD, which took the lead in 2023, overtaking Volkswagen, which had held the top spot for more than 25 years. In the first half of this year, Volkswagen sold 1,34 million vehicles in China, representing a drop of more than 25% compared to the numbers from three years ago.
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Volkswagen Group CEO Oliver Blume, crecently commented on the significant loss of the brand in the Chinese market, stating that “there are no more checks coming from China.” This reflects the changing preferences of Chinese consumers, who are increasingly opting for local brands, especially with the growth in the production of electric vehicles, a segment in which BYD stood out.
Nanjing and Ningbo units at risk
Among the plants that could be closed are those in Nanjing and Ningbo, both of which are the result of partnerships between SAIC and Volkswagen. The Nanjing plant, which opened in 2008, occupies an area of 635.000 m² and has production capacity of 360.000 vehicles per year. Among the models produced at this unit are the VW Passat and Skoda brand vehicles, such as the Kamiq and Superb.
The Ningbo factory, another strong candidate for closure, is responsible for the production of popular models such as Volkswagen Lamando, Tharu, Teramont, Viloran, Skoda Octavia and Audi Q6. The closure of these units would represent a significant change in Volkswagen's strategy in the country, which until recently was its main global market.
Change of strategy to contain losses
Volkswagen has not officially confirmed the closure of these factories, limiting itself to stating that production decisions are being adapted to “market demands”. However, sources linked to the company indicate that, if the units are in fact closed, workers may be relocated to other factories, such as the Yizheng plant, also the result of the SAIC-Volkswagen partnership. Interestingly, this same unit had already received transferred workers from Volkswagen's first factory closed in Shanghai two years ago.
Global impact and reflection on the Chinese market
The crisis Volkswagen is facing in China is not isolated. The COVID-19 pandemic has caused a drop in car sales in Europe, which also contributed to the weakening of the brand's operations in other markets. In China, in addition to the growing preference for local brands, the transition to electric vehicles is also reshaping the automotive landscape. Volkswagen, despite its efforts in electric vehicle segment, still faces challenges in competing with Chinese companies such as BYD and Nio, which have dominated this niche.
The SAIC-Volkswagen partnership, which started in 1984 and was one of the first international collaborations in the Chinese automotive sector, it reached its peak between 2016 and 2019, when it produced more than two million vehicles annually. However, the decline in sales in recent years and the rapid evolution of the Chinese market are forcing Volkswagen to rethink its strategy.
