Volkswagen Forced by International Pressure to Sell Its Xinjiang Plant

Illustration: Chinese-made electric vehicles flooding the European market.(video screenshot)

[People News] Under pressure from investors and activists, German automaker Volkswagen announced on Wednesday (November 27) that it has reached an agreement to sell its car manufacturing plant in Xinjiang and exit its business operations in the region.

According to Voice of America, the Chinese authorities have been accused of long-term persecution of Uyghurs in Xinjiang, including forcing them into "forced labor," which has drawn strong international condemnation and sanctions, particularly from Western countries. Volkswagen’s establishment of a car manufacturing plant in Xinjiang had faced widespread criticism.

In a statement, Volkswagen said it had reached an agreement with its local partner, SAIC Motor, to sell the controversial car assembly plant located in Urumqi, the capital of Xinjiang.

In recent years, the United Nations, human rights organizations, and international experts on Xinjiang have documented various forms of abuse and human rights violations in the region, including mass forced labor in detention camps. Beijing has consistently denied any such violations.

Reuters reported that the value of the transaction was not disclosed.

The factory, originally an assembly plant for Volkswagen’s Santana sedans, has seen its significance diminish in recent years. Volkswagen previously cut jobs at the plant, leaving around 200 employees to conduct final quality checks and deliver vehicles to regional dealerships.

Volkswagen had denied reports that maintaining operations at this plant was a condition set by Beijing for allowing the company to continue manufacturing in China.

The withdrawal of Volkswagen from its Xinjiang operations comes at a particularly challenging time for foreign carmakers in China. With the rise of electric vehicles, an economic slowdown in China, and declining consumer purchasing power, sales of traditional automobiles have plummeted. Nearly all foreign automakers have experienced an unprecedented decline in sales. Meanwhile, there is intense competition between China and Europe over tariffs on electric vehicles.

According to MarketWatch, a News Corp subsidiary, Volkswagen—owner of brands such as Audi, Škoda, Bentley, and Porsche—has seen profits decline in recent years due to rising energy costs caused by the war in Ukraine and a significant drop in sales in its largest market, China.

Volkswagen’s exit from Xinjiang coincides with plans by the United States, Canada, and the European Union to impose substantial import tariffs on electric vehicles manufactured in China.

The Associated Press noted that Volkswagen was one of the first foreign investors in China’s automotive sector. Its joint venture in Shanghai, SAIC Volkswagen, produced the Santana sedan in the 1980s, which for many years formed the backbone of taxi fleets in Shanghai and other cities.

In response to criticism about its operations in Xinjiang, Volkswagen had previously stated that an audit it commissioned found no evidence of forced labor at the plant but that the company was considering its options for the future.

Volkswagen’s Xinjiang factory, which began operations in 2013 with a maximum production capacity of 50,000 vehicles, later ceased vehicle production and shifted its focus to inspections.

Earlier this year, Volkswagen announced plans to launch 40 new models in China over the next three years, including 30 electric vehicles by 2030. On Wednesday, SAIC Volkswagen stated it aims to introduce 18 new models by 2030, 8 of which will be electric vehicles.

Like many other foreign automakers, Volkswagen has been grappling with China's electric vehicle boom over the past three years, which has swept through the world’s largest car market.

International accusations of forced labor in Xinjiang have persisted, prompting sanctions led by Western countries, particularly the United States.

On November 22, the Biden administration announced in the Federal Register the addition of 29 Chinese companies to the "forced labor" entity list, effectively banning products made by these companies from entering the U.S. market. The import ban on the newly added firms took effect on November 25.

This marks the largest single expansion of the blacklist since the Uyghur Forced Labor Prevention Act was enacted on December 23, 2021. The total number of Chinese companies on the list now exceeds 100.

The Uyghur Forced Labor Prevention Act prohibits imports of products from Xinjiang unless manufacturers provide clear and convincing evidence that their supply chains are free from forced labor.

U.S. Senator Marco Rubio, nominated by President-elect Donald Trump to serve as Secretary of State, co-sponsored the legislation in the Senate and has repeatedly called for its strict enforcement.

The Wall Street Journal highlighted that stringent implementation of the Uyghur Forced Labor Prevention Act is a key component of the Biden administration’s response to allegations of unfair trade practices by China. Xinjiang is home to the Uyghur and other Muslim minority groups and serves as a major production hub for cotton, tomatoes, and solar panels in China.

According to a recent report by Voice of America, as Trump prepares for a potential second presidential term, Uyghur Americans are urging the U.S. to adopt even tougher measures against China’s policies in Xinjiang. They advocate for stronger attention to the severe human rights violations against Uyghurs and other minorities in the region, while also calling for a more assertive approach to U.S.-China relations.

These Uyghurs are urging Trump to continue the measures taken by his administration during his first term against the Chinese Communist Party (CCP).

During Trump's first term, the U.S. government officially labeled the CCP's actions in Xinjiang as genocide and imposed sanctions on Chinese officials and entities implicated in human rights abuses, including mass detentions, forced labor, and forced sterilizations. The CCP has consistently denied allegations of mistreating minorities, claiming its policies are aimed at combating extremism and terrorism.

Nury Turkel, a senior fellow at the Hudson Institute and former chair of the U.S. Commission on International Religious Freedom, noted that the issue of Uyghur human rights has garnered bipartisan support in both the legislative and executive branches of the U.S. government. He emphasized that this issue is not just about human rights but also deeply connected to America's long-term economic and strategic security.

"Concerns over Uyghur human rights go beyond typical human rights issues; they have profound implications for U.S. national security and long-term economic strategic security," Turkel told Voice of America.

Turkel expressed cautious optimism that the Trump administration would build upon previous efforts, referencing the Uyghur Human Rights Policy Act and the genocide designation.

"I am optimistic that the incoming administration will, as before, take concrete actions to address these urgent issues affecting Uyghurs," he said.

Human rights organizations report that since 2017, at least over 1 million people have been detained in so-called "re-education camps," with more than 500,000 others sentenced to prison after unfair trials.