 "Amid human rights concerns, Volkswagen to exit China's Xinjiang plant")
Volkswagen is reportedly set to sell its facility in Xinjiang, China, in an agreement with its Chinese partner SAIC Motors. According to The Financial Times, the plant will be acquired by Shanghai Motor Vehicle Inspection Certification (SMVIC), a subsidiary of the state-owned Shanghai Lingang Development Group.
The deal will see Volkswagen and SAIC transfer ownership of the Xinjiang plant and associated testing tracks in Turpan and Shanghai’s Anting to SMVIC. While the transaction value remains undisclosed, this move will mark Volkswagen’s exit from the Xinjiang region.
Despite its withdrawal from Xinjiang, Volkswagen plans to deepen its partnership with SAIC by extending their joint venture for 10 more years, until 2040. The collaboration aims to release 18 new vehicle models by 2030, underscoring Volkswagen’s commitment to China, its largest market.
Controversy over Volkswagen’s Xinjiang operations
Volkswagen’s operations in Xinjiang have faced intense scrutiny amid global allegations of human rights abuses against Uyghur Muslims, including claims of forced labour and detention camps. While China denies these allegations, the controversy has presented significant reputational challenges for the German automaker.
In September, an audit commissioned by Volkswagen found “no indication” of forced labour at its Xinjiang facility. However, the audit, conducted by Berlin-based consultancy Löning, drew criticism from human rights groups.
Critics argued that the audit lacked adherence to internationally recognised SA8000 standards. Judy Gearhart, a professor at American University and contributor to SA8000 auditing standards, told FT that the findings were unsupported, particularly as worker interviews were live-streamed to a law firm in Shenzhen, raising concerns about confidentiality and potential intimidation.
Volkswagen defended the audit, stating that it complied with legal requirements and was independently conducted. The company clarified that Löning and its Chinese partner, Guangdong Liangma Law, were not accredited for SA8000 audits, according to Social Accountability International, the global body overseeing the standard.
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MSCI’s red flag and subsequent removal
Global index provider MSCI had flagged Volkswagen for human rights concerns in 2022, barring ESG-focused investors from its shares. However, following the audit’s findings, the red flag was removed in December 2023. MSCI acknowledged the challenges in gathering audit data and stated it would continue monitoring future disclosures related to the case.
Volkswagen has consistently defended its compliance with legal and ethical standards, reiterating that the audit was conducted independently by Löning. While Markus Löning declined to comment, Volkswagen stressed that all personnel involved were adequately qualified and experienced.
(With Reuters inputs)