Opinion | Volkswagen didn't 'quit China' it was forced out because it lost the market
By Tom Fowdy
Yesterday it was announced that Germany's Volkswagen will sell its plant in China's Xinjiang autonomous region to a local owner, as well as its testing track, and withdraw from production there.
Oh how the Uyghur human rights lobby and its high priest, Adrian Zenz, celebrate on Twitter. In their respective, years of lobbying, or more accurately, smear campaigns have paid off. Long have these people contested that this German car manufacturer is an accomplice to so-called "forced labor" programs in the region targeting the Uyghur minority and therefore, it must be closed down.
Such forced labor of course has never been proven and is at best, speculative, best on speculative and highly ideological research that insinuates state labor support and work programs as "forced labor." This propaganda was originally weaponized by the United States in order to directly attack China's supply chains in the region related to key commodities in the field of agriculture and renewable energy products, leading to a sweeping and opportunistic US government ban on all goods produced in the region save they be verified, in late 2021.
While the US government has largely shelved the Uyghur propaganda campaign since 2022, the lobby it created has nonetheless continued to be a nuisance. When the policy agenda suited it, Adrian Zenz was given blanket coverage by the western mainstream media, but he is largely in the shadows now biting at the heels of policymakers. Thus, rather than being a US focused initiative, this "lobby" has largely focused on its own directive of trying to pressure both the German government, and Volkswagen, shaming them into withdrawing. So one might inevitably ask, have they succeeded in this act?
While ultimately being continually accused of employing forced labor, despite the obvious evidence to the contrary, is a reputational disaster, important context is required. Volkswagen as a business is being brought to its knees. The firm's sales in China are being wiped out by the supersonic ascension of the national automobile industry, transforming China into the largest car exporter in the world and knocking heavyweights like Japan right off the shelf. BYD is now king, and around the world car companies are struggling which has led to a protectionist backlash in both America and Europe. Only yesterday did the Financial Times report that Nissan executives told it the company was suddenly on its death kneel.
Going back to Volkswagen, we should not ignore the fact it is also being forced to close its own factories in Germany for perhaps the first time ever. Not only is the transition to electric vehicles killing car companies outside of China by burdening them with excessive costs, coupled with low subsidies, but in addition to that the total destruction of Germany's energy base as a consequence of Russia's war with Ukraine has led to skyrocketing and production costs. German industry is facing a rout and the country is experiencing "deindustrialization" which of course has hammered the economy as a whole.
China was once a safe market for German exporters which it dominated, a lucrative bonanza, but the decision of Berlin to recalibrate its foreign policy at the behest of Baerbock, as well as these industrial changes within China, has saw the advantages Volkswagen once enjoyed disappear overnight. Thus, while the closure of the plant in Xinjiang may be motivated on reputational concerns stemming from the forced labor smear campaign targeting it, there is nonetheless a genuine business case to do so, Volkswagen isn't really "quitting" the Chinese market, it is being forced out whether it likes it or not. Japan's car industry, as mentioned above, also faces the music.
It has been a running theme of China's development that a legacy company from a developed nation enjoys a huge advantage in sales as its consumer market grows, but when China eventually develops their own competitive capabilities and brands, that given brand is no longer needed and subsequently is forced to withdraw from the country altogether. This has essentially been the story of South Korea's Samsung over the past decade, who has since now turned its focus to Vietnam. After all, why are expensive Samsung devices needed when you have Huawei, Xiaomi, Oppo, etc? Even Apple is finding itself being slowly pushed back now!
Hence, the Volkswagen factory is not being abandoned or left vacant, the jobs involved are not being lost, but rather a local provider is taking over it, which is ironic given those celebrating the sale claim it is a victory for their so-called forced labor concerns, so what exactly changes you might ask? What changes is that Volkswagen is increasingly on its knees and German industry is facing a death kneel. Exporting to China might have been an option once upon a time, but for many reasons it isn't anymore.
The author is a well-seasoned writer and analyst with a large portfolio related to China topics, especially in the field of politics, international relations and more. He graduated with an Msc. in Chinese Studies from Oxford University in 2018.
The views do not necessarily reflect those of DotDotNews.
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