Why Did Volkswagen Decide to Close Its Nanjing Factory in China?
Volkswagen’s decision to shutter its Nanjing plant didn’t come out of nowhere. For years, the site—run in partnership with SAIC—was a powerhouse, rolling out VW Passats and Skoda models with a hefty annual capacity of 360,000 vehicles. But the writing was on the wall: demand for traditional internal combustion engine (ICE) cars in China has been steadily declining, and the factory’s utilization rate plummeted. According to industry data, many of VW’s joint-venture plants with SAIC were operating at just 58% of their combined 2.1 million unit capacity in 2023. That’s a lot of idle machinery.
The broader context? China’s auto market is in the midst of a seismic shift. Electric vehicles (EVs) are surging, and legacy automakers like VW are scrambling to keep up with nimble domestic brands. The Nanjing plant, which had been in operation for 17 years, simply couldn’t justify its footprint in a market where combustion engines are losing ground fast.
How Does This Closure Reflect the Changing Chinese Auto Market?
China is no longer just the world’s largest car market—it’s also the epicenter of the EV revolution. In 2023, over 8 million new energy vehicles (NEVs, including EVs and plug-in hybrids) were sold in China, making up more than 30% of all new car sales, according to the China Association of Automobile Manufacturers. That’s a staggering leap from just a few years ago.
Volkswagen, once the king of the Chinese sedan, now finds itself squeezed by local competitors like BYD and Nio, who are churning out affordable, tech-packed EVs at breakneck speed. The Nanjing plant’s closure is a clear signal: the old playbook—relying on ICE sedans and badge power—doesn’t cut it anymore. VW’s own statement confirmed the trend, noting that many of its SAIC joint-venture sites are being converted for EV production, though the fate of the Nanjing facility remains uncertain.
What Happens to the Workers and the Local Economy?
Whenever a major factory closes, the ripple effects are real. Volkswagen employs over 90,000 people across China, and while the company hasn’t released specific numbers for Nanjing, it’s safe to say hundreds—if not thousands—of jobs are affected. Local suppliers and service providers will also feel the pinch.
That said, VW and its partners have a track record of retraining and redeploying workers when plants are retooled for new models or technologies. In Germany, for example, deals with labor unions have helped soften the blow of similar transitions. In China, the government often steps in to support job placement and retraining, especially in strategic industries like automotive. Still, for many families in Nanjing, this transition will be far from painless.
Is Volkswagen Falling Behind in the EV Race?
Volkswagen isn’t giving up on China—far from it. The company still operates 39 factories in the country and is investing billions in electrification. In 2023, VW announced plans to launch more than 10 new EV models in China by 2027, and it’s already converting several plants to focus on electric vehicles.
But the competition is fierce. Chinese brands have a home-field advantage, with faster development cycles and a better understanding of local tastes. VW’s challenge is to speed up its own transformation without alienating its traditional customer base. The closure of the Nanjing plant is a tough but necessary step in that direction.
What Does This Mean for the Future of Car Manufacturing in China?
The Nanjing closure is part of a broader trend: global automakers are consolidating operations, shutting down underused plants, and doubling down on EVs. It’s not just VW—other international brands are making similar moves as they adapt to a market that’s evolving at warp speed.
For China, this means more investment in high-tech manufacturing, battery production, and smart mobility solutions. For workers and cities that have long relied on traditional auto plants, it’s a wake-up call to diversify and upskill for the next chapter.
The big takeaway? Reinventing a legacy like Volkswagen’s isn’t about perfection—it’s about smarter adjustments. Start with one change this week, and you’ll likely spot the difference by month’s end.