Volkswagen to Exit China’s Xinjiang Region After 12 Years

Volkswagen said on Wednesday that it was disposing of its ownership stakes in facilities in northwestern China’s Xinjiang region, exiting an area now known for the country’s crackdown on predominantly Muslim ethnic groups there.

Volkswagen had a joint venture assembly plant in Urumqi, the capital of Xinjiang, as well as two test tracks in the region, maintaining the largest and most visible presence in Xinjiang of any multinational company. That drew condemnation from human rights groups. The United States and a growing number of European countries bar imports from Xinjiang because of evidence of forced labor there.

The Chinese government, which denies the accusations of forced labor, has put heavy pressure on global companies to keep doing business in Xinjiang. In September, the Ministry of Commerce began investigating whether PVH, the corporate parent of the Calvin Klein and Tommy Hilfiger clothing brands, had taken “discriminatory measures” by not buying products from Xinjiang.

BASF, the German chemicals giant, has tried for a year to obtain Chinese government permission to dispose of its stakes in two manufacturing joint ventures in Xinjiang. BASF said on Wednesday that it was in negotiations to sell both stakes, but did not identify possible buyers.

For Volkswagen, the assembly plant in Urumqi did not just become a political liability — it was also a money loser, because it was designed to make gasoline-powered cars. China has swiftly adopted electric vehicles in the last four years, and half the cars sold in China are now either battery-electric or plug-in hybrid cars.

That has left manufacturers like Volkswagen Group, which also includes Audi and Porsche, with considerable unneeded production capacity. Volkswagen was China’s market leader from 1983 through last year, but BYD, a Chinese maker of electric cars, has passed it in sales this year.