Volkswagen to close China's Xinjiang plant amid concerns for human rights abuses

Volkswagen on Wednesday (Nov. 27) said that it will close its exiting plant in China's Xinjiang region after the company and its Chinese partner agreed to sell the asset to a Shanghai government-owned buyer, two people familiar with the issue said. 

The German automaker had a joint venture assembly plant in Urumqi, the capital of Xinjiang. 

Moreover, it also had two test tracks in the region, maintaining the largest and most visible presence in Xinjiang of any multinational company. 

Volkswagen and SAID will now sell the plant to Shanghai Motor Vehicle Inspection Certification (SMVIC), a subsidiary of the state-owned Shanghai Lingang Development Group, the sources said.

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The company's presence in the country had attracted condemnation from human rights groups that alleged abuses, including mass forced labour in detention camps in the region. 

Beijing, however, denies these claims. The Chinese government has also put pressure on global companies to keep doing business in Xinjiang. 

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Earlier in September, the Ministry of Commerce began investigating whether PVH, the corporate parent of the clothing brands Calvin Klein and Tommy Hilfiger, had taken "discriminatory measures" for not buying products from Xinjiang. 

Notably, for Volkswagen, the only issue was not just the political liability but also because it was losing money as it was designed to make gasoline-powered cars. But China has now swiftly adopted electric vehicles in the last four years. 

Moreover, half of the cars sold in China are now either battery-electric or plug-in hybrid cars. 

(With inputs from agencies)