(Bloomberg) -- Volkswagen AG will end its activities in Xinjiang, bowing to pressure from investors concerned about possible human-rights abuses in the western Chinese region.
The German carmaker’s local venture with SAIC Motor Corp. will sell a small plant in Urumqi to a unit of state-owned Shanghai Lingang Economic Development, VW said Wednesday. The manufacturer will also extend its partnership with SAIC by a decade to 2040.
VW has fielded uncomfortable questions about its presence in Xinjiang due to allegations by the US and others that China has engaged in forced labor of Uyghurs and other Muslim minorities in the vast region. Beijing has vehemently denied the allegations, saying that its program that aims to improve living standards for ethnic minorities has been misconstrued.
VW shares were little changed in early trading, falling 0.4% at 9:34 a.m. in Frankfurt. The stock has declined 28% this year as the carmaker contemplates widespread job cuts and possible factory closures amid a drop in demand for electric vehicles.
VW has struggled in China in particular, where domestic brands like BYD now dominate. By 2030, SAIC Volkswagen will introduce a total of 18 new models to the market, including eight new EVs.
Automakers have repeatedly been caught in the crosshairs as their complex supply chain, which typically includes a sprawling web of suppliers and sub-suppliers, makes it easy to obscure a product’s origins. In February, US authorities blocked the import of thousands of Porsche, Bentley and Audi models because they contained a Chinese component that violated US anti-forced labor laws.
The Urumqi facility, which employs 175 workers, doesn’t manufacture any cars but makes final quality checks of already assembled vehicles that are then sent on to dealerships in the region. VW’s venture will also sell test tracks in Turpan and Anting to the same buyer.
Late last year, Volkswagen said independent auditors found no signs of forced labor at the joint-venture plant, prompting US rating agency MSCI to drop its “red flag” on the stock. VW, however, said in February that it was once again reviewing its activities there after reports emerged citing new evidence, such as photos of Uyghur workers wearing Chinese military uniforms.
--With assistance from Danny Lee.
(Updates with shares in fourth paragraph.)
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