Volkswagen to close German plant due to Chinese competition
The decision follows a 2024 agreement between Volkswagen, its works council, and labor unions to cut 35,000 jobs and scale back production capacity in Germany. The move comes amid growing competition from Chinese automakers, declining demand in Europe, and slower-than-expected adoption of electric vehicles.
Under the plan, vehicle production at Volkswagen’s Dresden plant—the capital of Saxony in eastern Germany—was scheduled to end by the close of this year. Tuesday’s shutdown marks the first permanent closure of a Volkswagen production site in Germany since the company’s founding.
The Dresden plant’s closure reflects broader financial challenges faced by Volkswagen, including weak sales in China, falling demand in Europe, and US tariff pressures. The company plans to invest roughly €160 billion ($187.9 billion) over the next five years, necessitating cost reductions in its home market.
Since opening in 2002, the Dresden facility has produced fewer than 200,000 vehicles. It was originally envisioned as a flagship plant, showcasing Volkswagen’s technological capabilities with models such as the Phaeton and, later, the ID.3. However, neither vehicle became a commercial success.
Volkswagen views the Dresden closure as a necessary step to remain competitive, amid growing pressure from Chinese rivals, US tariffs, high domestic energy costs, extensive labor protections, and complex internal bureaucracy.
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