VW offloads Chinese factory, extends partnership with SAIC

Volkswagen Group is to sell a controversial factory in China for "economic reasons", it confirmed on Wednesday.

The German car manufacturer and its Chinese partner SAIC have agreed to sell the plant in Urumqi in the Xinjiang region to the Shanghai Motor Vehicle Inspection Certificate.

SMVIC is part of the state-owned Shanghai Lingang Development Group.

Financial terms of the deal - which will also see SMVIC take over test tracks in Turpan and Anting - were not disclosed.

However, VW said the sale was for "economic reasons".

VW and SAIC built the factory in 2013. But VW has come under mounting pressure to exit the region in recent years over alleged human rights abuses, including the forced labour and detention of the Uyghur ethnic population.

Beijing denies human rights abuses occur in the region.

The brief reference to the sale came as VW and SAIC announced plans to strengthen their partnership, including signing a ten-year extension of the joint venture until 2040.

Ralf Brandstatter, VW’s member of the board of management for China, said: "With the long-term contract extension, we underline the importance of this collaboration and the significance of the Chinese market for VW.

"China is a driver of innovation for autonomous driving and electric mobility. With the new agreement, we are intensifying our integration into the Chinese ecosystem."

Wang Xiaoqiu, SAIC chair, said the focus would be the development of "new, intelligent electric vehicles in order to maintain an industry leading position in the field of smart technologies".

Neither Wang nor Brandstetter referenced the factory sale.

China is VW’s biggest market, but weak demand, soaring global costs and stiff competition has hurt sales in recent years.