SHANGHAI (Reuters) -Volkswagen is to sell all its operations in China’s Xinjiang, it said on Wednesday, after years of mounting pressure to abandon its presence in a region where rights groups have documented abuses against the Uyghur population.
The carmaker made the announcement at the same time as saying it would extend its partnership with Chinese partner SAIC by a decade to 2040, a major move by the German carmaker in its biggest market, where sales have been flagging.
VW and SAIC will sell their plant in Xinjiang to Shanghai Motor Vehicle Inspection Certification (SMVIC), a unit of state-owned Shanghai Lingang Development Group, which will take on all its employees, they said.
Under the terms of the deal, for which financial details were not disclosed, SMVIC will also take over SAIC/VW’s test tracks in Turpan, Xinjiang, and Anting in Shanghai. Volkswagen (ETR:) will then no longer have a presence in Xinjiang. Beijing has denied any abuses there.
Stakeholders including the state of Lower Saxony, Volkswagen’s second-largest shareholder, welcomed the sale.
Top 20 shareholder Deka Investment, one of several investors who had been pressuring the carmaker to pull out of Xinjiang, said the exit would bring controversial discussions to an end with minimal financial impact.
The Xinjiang plant, which opened in 2013 and previously assembled Volkswagen’s Santana vehicle, had dwindled in significance in recent years after the carmaker cut jobs, leaving about 200 employees to conduct final quality checks and hand over vehicles to dealers in the region.
The facility had the capacity to manufacture 50,000 units annually, but had not produced any cars since 2019.
Volkswagen has denied reports that it kept the plant open as a condition from Beijing to keep producing across China. It said on Wednesday the decision to sell the plant was made for economic reasons.
The deal looks to be mutually beneficial for both joint venture partners, removing a major reputational concern for VW and alleviating a point of tension in the relationship between the German carmaker and China’s SAIC at a time when both are struggling to boost sales in China’s sluggish economy.
Europe’s car companies also have to contend with the impact of a potential trade war between Beijing and the European Union after the EU imposed import tariffs on China-made electric vehicles.
Volkswagen said on Wednesday the joint venture aims to release 18 new models by 2030, including two extended range models for Chinese consumers in 2026.
The VW brand is also working with other Chinese partners like Xpeng (NYSE:) to develop new models better suited to Chinese consumers, aiming for over 30 new electric or hybrid models by 2030.
Volkswagen shares were down 0.5% at 1100 GMT, inline with Germany’s blue-chip .
