Volkswagen and its Chinese partner SAIC Group are set to close their joint factory in Nanjing as part of a restructuring of their business operations in China.
据路透社和《华尔街日报》报道，Volkswagen spokesperson confirmed on Friday (July 11th) that “We can confirm that production at the SAIC Volkswagen Nanjing plant has been halted.” The spokesperson added, “Many of SAIC Volkswagen’s factories are currently undergoing or have undergone transformation to produce electric vehicles.”
Earlier on Friday, the German media outlet “Handelsblatt” reported that due to Volkswagen’s declining market share in China, Volkswagen and SAIC are shutting down the joint factory in Nanjing. The report mentioned that due to the factory’s proximity to densely populated areas, limited logistics, and insufficient space for renovation to transform it into an electric vehicle production base, the factory faced high costs and low efficiency issues, leading to its closure.
SAIC Volkswagen responded to mainland media outlets stating that the production and sales at the Nanjing plant are running normally and that the reports by the German media outlets are inaccurate.
The Nanjing factory, operational for 17 years with an annual production capacity of 360,000 vehicles, employed over 2500 workers producing models like Volkswagen Passat and Skoda Superb.
This isn’t the first time Volkswagen has closed a factory. In 2022, Volkswagen partially closed its first plant in Anting, Shanghai, relocating the production of gasoline-powered cars to Yizheng City, Jiangsu, and repurposing the site into a research and development center.
Meanwhile, Volkswagen is facing challenges as its market share in China is declining. The demand for internal combustion engine models in China has significantly decreased, with local electric vehicle giants like BYD gradually capturing market share.
China, being the world’s largest electric vehicle market, has rapidly expanded its electric vehicle industry in recent years through policy subsidies and technological innovations. However, intense market competition and excess production capacity have led to oversupply. The German media outlet “FOCUS Online” warned that the Chinese electric vehicle market is entering a phase of “survival of the fittest,” with many small and medium-sized car manufacturers facing bankruptcy due to an inability to withstand price wars. Many newly produced electric vehicles are left unsold, piling up at ports or landfills, with instances of “brand-new cars being scrapped directly.”
Analysts estimate that Volkswagen needs to achieve sales of 1.2 million electric vehicles by 2028 to attain a balanced return on investment in electric vehicles. Local competitors like BYD are not just rivals but also price-cutters, with BYD offering electric vehicles at a 40% lower price than Volkswagen.
HSBC and J.P. Morgan believe that if Volkswagen reaches its breakeven goal by 2029, the profit margin for electric vehicles will reach 6.5%, presenting a buying opportunity. However, Credit Suisse remains skeptical, warning that the Chinese electric vehicle market is engaging in price wars that may erode profit margins.