Volkswagen and SAIC close their joint plant in Nanjing, China. Production has already come to a standstill. In Nanjing, the partners had mainly built combustion models such as the VW Passat and Skoda Superb. Production is now moving to a nearby plant.
There had already been rumors last year about the closure of the plant in Nanjing. The German business paper Handelsblatt initially reported on the plant’s closure, but the German Group has since confirmed the information to the German specialized publication Automobilwoche.
It’s the first time Volkswagen has really closed a plant in China. Although the Group has withdrawn from the controversial Xinjiang plant in the Uyghur region, the site was sold and not closed. And although production at part of SAIC-Volkswagen’s Anting plant has been discontinued, the site is still being used as a research and development center.
Demand is too low, and the site is too complex to reach
The production facility in Nanjing, which only opened in 2008, was initially designed for an annual capacity of 360,000 vehicles. Most recently, the VW Passat and the Skoda Superb, among others, rolled off the production line there. However, this was at a significantly lower capacity than the plant would allow.
As the Handelsblatt writes, citing several people familiar with the events, the location close to the city center may have been a problem in addition to the low demand. Due to the densely populated area, logistical connections were complex, and conversions were also tricky. A transformation to e-car production would therefore have been costly and inefficient. The aim is apparently to return the site to the city.
Overcapacity everywhere
Not so long ago, Volkswagen was the most important car manufacturer in China. Even without production in Nanjing, Volkswagen still operates around 40 vehicle and component plants in China, whose capacity far exceeds current demand.
Production of the Passat and Superb will probably move to Yizheng, around 70 kilometers away. It remains to be seen how many of the 2,500 employees in Nanjing will also move to the new plant or whether the capacities and personnel in Yizheng are already sufficient.
“It is conceivable that employees will find new jobs with up-and-coming Chinese brands. The well-trained Volkswagen employees are likely to be in demand from new players on the market,” writes Automobilwoche.
China is the biggest car market in the world, and is very important for most German manufacturers. Their sales have been dwindling lately, partly due to the incredible growth of the Chinese car industry, increased competition, and pressure on prices. Additionally, the Chinese have an advantage in the fully electric car market.
‘In China, for China’
To date, about 50 million customers in China are driving cars from the VW Group brands. The Volkswagen Group is continuing to build on this strong market position. Therefore, it is “consistently powering forward its ‘Target picture 2030’, and the ‘In China, for China’ approach to achieve high technical localisation to leverage the market’s innovative dynamics, reduce development time for products and technologies by 30%optimize costs through local supply chains, and strengthen customer orientation.”
Volkswagen Group China is pursuing a clear growth plan with its ‘in China, for China’ strategy in a market that is expected to grow from around 23 million cars today to approximately 28 million cars by 2030. In this context, Volkswagen Group China aims to remain the largest international OEM in China and continue to position itself among the top 3 OEMs in the country.
