Volkswagen Plans Stop to Production at Jointly-owned China Plant

A Volkswagen logo is seen at the New York International Auto Show Press Preview, in Manhattan, New York City, U.S., March 27, 2024. (REUTERS/David Dee Delgado)

SHANGHAI/BERLIN (Reuters) -Volkswagen is planning to stop production at one of its combustion engine car plants in China, a person with direct knowledge of the matter said, in a sign of carmakers' struggles to manage overcapacity in the world's biggest car market. The carmaker, along with its joint venture partner SAIC Motor, will gradually shift production of its Passat family cars from the Nanjing plant to a nearby factory in the same eastern province of Jiangsu, the person said. But the JV has no definitive timetable for the move and has not yet decided whether it would completely close the factory or put it on sale, the person added. Some workers at the Nanjing factory would be told to relocate to work in SAIC-VW's Yizheng plant, which currently makes the brand's best-selling Lavida sedans, the person said. The two are also mulling plans to revive the sales of Skoda, the two people said. The brand only makes up 1% of the total SAIC-VW sales while in 2018, it accounted for 17%. Bloomberg News first reported on Wednesday the two companies' plans to close two factories of Nanjing and Ningbo. Volkswagen said it does not comment on speculation. SAIC was not immediately available for comment.

Two sources denied that the joint venture partners plan to close the Ningbo plant, its largest after its three factories in Shanghai.

Volkswagen, long the top-selling automaker in China, is suffering from a decline in its market share in the country and is working with SAIC and other partners such as Xpeng to bring new models on the market it hopes will be more competitive.

Reuters reported earlier this year that SAIC aimed to cut 10% of jobs in 2024 at SAIC Volkswagen and other partners, facing steep drops in sales. The VW-SAIC JV sold 1.2 million cars in 2023, down 43% from its peak in 2017.

(Reporting by Zhang Yan, Victoria Waldersee, Editing by Madeline Chambers and David Evans)