Impact of Poor Sales in China
Escaping Human Rights Controversy
Europe's largest automaker, Volkswagen Group, has decided to withdraw from its factory in the Xinjiang Uygur Autonomous Region of China. The factory, which faced significant shareholder pressure to sell due to widespread human rights abuse controversies such as forced labor in detention camps, will be acquired by a Chinese state-owned enterprise.
According to major foreign media on the 27th (local time), Volkswagen Group has instructed the sale of the Xinjiang Uygur Autonomous Region factory, which opened in 2013, to Shanghai Automotive Industry Corporation (SAIC), a local Chinese joint venture, and SMVIC, a subsidiary of Shanghai Lingang Group, a Chinese state-owned enterprise.
SMVIC plans to take over the employment of the Xinjiang factory staff and also acquire vehicle test tracks located in Xinjiang and Shanghai. Details such as the sale price have not yet been disclosed.
The factory, which mainly produced the popular sedan "Santana" in China, had been shrinking in scale over the past few years. Recently, it only retained about 200 employees and was handling final quality inspections and vehicle deliveries.
The decision to sell appears to have been primarily driven by poor sales performance within China. The popularity of eco-friendly vehicles such as electric cars and the economic downturn have dampened the domestic market's vitality. AFP reported that the most popular car in China has shifted from Volkswagen to BYD.
Volkswagen also gained something from this factory sale: relief from ongoing human rights abuse controversies. The U.S. and international human rights organizations have criticized that approximately one million Uygurs and other Muslim minorities in the Xinjiang region are subjected to severe human rights violations in forced labor camps. The Chinese government has consistently denied these allegations. Chinese local media focused on the collaboration between SAIC Group and Volkswagen Group and news of new vehicles rather than the human rights controversies in reporting the sale decision.
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