Today, anyone who walks through the streets of Ürümqi or Turpan will discover only a few signs of the cultural genocide of Muslim minorities by the Chinese government. Many checkpoints are abandoned and some of the notorious re-education camps are empty. The inmates have often been relocated to regular prisons, and many Uyghurs have also been sent to other provinces in China for suspected forced labor. After years of open repression, the Chinese government wants to restore a semblance of normality and transform the economically backward region into a tourism paradise. Villages and towns everywhere are being converted into Disneyland-like attractions.
Volkswagen would also like to cut its ties to the Uighur region. The group has now declared that it will sell its factory in Ürümqi and the test track in Turpan “for economic reasons” to the Shanghai Motor Vehicle Inspection Certification (SMVIC), a subsidiary of the state-owned Shanghai Lingang Development Group. Volkswagen is under pressure in China because of falling sales figures, but also because its involvement in Xinjiang had caused dissatisfaction among shareholders.
The German car manufacturer had operated the controversial plant in Ürümqi with its Chinese partner SAIC from Shanghai for around ten years. For a long time, foreign manufacturers in China had to produce their vehicles exclusively through joint ventures with local partners. These requirements were first relaxed and then completely lifted in 2022. VW still stuck with its Chinese partners.
However, the original hopes of economic success as part of the government’s campaign to develop the western provinces failed to materialize. Instead of assembling up to 50,000 cars a year as planned, the plant in Xinjiang ended up only being responsible for commissioning vehicles built in other provinces for the local market. Of the approximately 650 employees at peak times, only 175 were left, a quarter of them from minorities. It is questionable whether there were ever forced laborers among them.
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A controversial audit allayed concerns
Last year, Volkswagen tried to refute the allegations with an independent on-site report, which, according to experts, did not meet international standards. “We were unable to find any evidence or evidence of forced labor among employees,” the report said. And further: The around 200 employees are “paid above average and have little to do”. However, human rights activists quickly criticized the methodology and the question of whether independent audits were even possible given the strict surveillance in Xinjiang. The test track in Turpan was not checked at that time anyway.
However, the investigation was enough for the US rating agency MSCI to remove its “red flag” warning level for VW. The image as a sustainable, socially responsible company was thus restored, at least on the capital market. Regardless, the mere fact that Volkswagen’s presence in the region gave the Chinese government a fig leaf to dismiss allegations of human rights violations caused criticism.
China’s leader Xi Jinping ordered the brutal crackdown against the Uyghurs and other minorities after there were several terrorist attacks in the region between 2008 and 2014, which Beijing attributed to separatists. Accordingly, the Chinese government has always described the officially ended campaign as a fight against terror and denied any allegations of genocide.
However, the political pressure on Volkswagen never let up. In order not to offend the Chinese government, the group is now presenting the withdrawal, which has been negotiated since at least February, as part of a larger restructuring. The contract with SAIC actually ran until 2030 and was just extended early until 2040. However, Volkswagen said there is no connection between the withdrawal from Xinjiang, which was sealed a few days ago, and the contract extension.
VW wants to start a new product offensive in China from 2026 and bring 18 new models from the core Volkswagen and Audi brands onto the market with SAIC by the end of the decade. Of these, 15 are intended exclusively for the Chinese market. By 2030, the VW Group wants to sell four million cars a year in China and thus achieve a market share of 15 percent. Last year, according to VW, the share was 14.5 percent. But the German manufacturer has fallen seriously behind, particularly when it comes to electric and hybrid cars. More than every second car sold in China now has an electric or hybrid drive.
In total, the VW Group operates a total of 38 factories in the People’s Republic, excluding Ürümqi. However, it is questionable whether these will all be retained in the future. In its communication on the contract extension with SAIC, VW said that “economic alternative solutions would be examined in individual cases” if, for example, plants cannot be converted to build electric cars.
Instead of SAIC, which is also present in Germany with brands such as MG, the state-owned company SMVIC is now to take over the properties in Xinjiang. Like SAIC, the company is based in Shanghai and has test centers across China, including a high-temperature test site in Turpan and a sub-zero temperature test site in Heihe in northeast China, near the border with Russia. In the future, used vehicles of various brands will be prepared for resale at the plant in Ürümqi. VW says the new owner will take over the remaining employees of the joint venture.
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