Volkswagen’s China JV Weighs Shuttering Car Plant as It Accelerates Shift to EVs

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SAIC Volkswagen’s factory in Nanjing, Jiangsu province. Photo: SAIC Volkswagen

Volkswagen AG’s China joint venture (JV) with state-owned SAIC Motor Corp. Ltd. (600104.SH) is considering shutting down a combustion engine car plant in Nanjing as it accelerates its pivot toward electrification in the world’s largest auto market where demand for fossil fuel powered vehicles is weakening.

The move would be part of efforts by SAIC Volkswagen Automotive Co. Ltd. to “upgrade and optimize” its carmaking capacity as it joins other automakers in increasingly focusing on producing electric smart vehicles in China, the JV told Caixin on Saturday.

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Volkswagen AG's JV with SAIC Motor Corp. may shut down a combustion engine plant in Nanjing to focus on electric vehicles.
Sales of fossil fuel cars in China dropped to 952,000 in August 2023, while NEV sales rose 30.9% year-on-year to 990,000 units.
SAIC Volkswagen's annual sales dropped from over 2 million (2016-2019) to 1.2 million in 2023.

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Who’s Who

Volkswagen AG: Volkswagen AG, in partnership with SAIC Motor Corp. Ltd., is contemplating closing a combustion engine car plant in Nanjing to focus on electric vehicles due to declining demand for fossil-fuel cars in China. This shift aligns with broader industry trends toward electrification. Facing falling sales in China, Volkswagen is also considering cost-cutting measures, including potential plant closures and job cuts in Germany.

SAIC Motor Corp. Ltd.: SAIC Motor Corp. Ltd. (600104.SH) is a state-owned Chinese automaker that operates a joint venture with Volkswagen AG. The JV, named SAIC Volkswagen Automotive Co. Ltd., focuses on producing both conventionally powered and electric vehicles in China. SAIC Motor is involved in efforts to pivot towards electrification and optimize carmaking capacity in the world's largest auto market.

SAIC Volkswagen Automotive Co. Ltd.: SAIC Volkswagen Automotive Co. Ltd., a joint venture between Volkswagen AG and SAIC Motor Corp. Ltd., is considering closing a combustion engine car plant in Nanjing as it focuses on electrification in China. The JV plans to transfer Passat production to another facility if the plant closure is finalized. Already stopped production at its No. 1 Auto Plant in Shanghai, it is converting Anting’s No. 2 Auto Plant for NEV production. The company currently sells 21 models, including five NEVs.

Nissan Motor Co. Ltd.: Nissan Motor Co. Ltd.’s joint venture with Dongfeng Motor Group Co. Ltd. in China closed a small-sized plant in Changzhou, Jiangsu province in June. This decision reflects the broader trend of declining sales of traditionally powered cars in China, impacting various foreign automakers.

Dongfeng Motor Group Co. Ltd.: Dongfeng Motor Group Co. Ltd. is a partner in joint ventures with both Nissan Motor Co. Ltd. and Honda Motor Co. Ltd. in China. Its JV with Nissan closed a small-sized plant in Changzhou, Jiangsu province, in June, and its JV with Honda announced plans to shutter a facility with an annual production capacity of 240,000 cars in November.

Honda Motor Co. Ltd.: Honda Motor Co. Ltd.’s China joint venture with Dongfeng announced plans to close a facility with an annual production capacity of 240,000 cars in November. This move is part of a broader trend affecting foreign automakers in China as the market shifts towards new-energy vehicles (NEVs).

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What Happened When

January 2024：: SAIC Volkswagen signed a deal with the local government to build an eco-industrial park for NEVs and intelligent connected cars on the site where the No. 1 Auto Plant was located.

May 2024：: The No. 2 Auto Plant in Anting began to be revamped to host NEV production as per a deal that allowed SAIC Motor and Volkswagen's Audi AG to develop models on a China-specific platform for premium electric smart cars.

June 2024：: Nissan's JV with Dongfeng closed a small-sized plant in Changzhou, Jiangsu province.

August 2024：: Sales of conventionally powered cars in China dropped to about 952,000 units from 1.4 million a year earlier, while sales of NEVs grew 30.9% year-on-year to 990,000 units.

Early September 2024：: SAIC Volkswagen launched the Passat Pro sedan.

Sept. 2, 2024：: Volkswagen announced it was weighing the closure of factories in Germany.

After Sept. 2, 2024：: Volkswagen canceled several deals related to a three-decades-old pact protecting employment in Germany until 2029.

September 21, 2024：: SAIC Volkswagen told Caixin that it is considering shutting down a combustion engine car plant in Nanjing to accelerate its pivot toward electrification.

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