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On Sept. 19, according to media reports, a person familiar with the matter revealed that SAIC-Volkswagen may close its Nanjing plant next year to cope with the slowdown in demand for fuel-engine cars. Some employees of the Nanjing plant will be told to move to SAIC Volkswagen. A factory that makes Skoda models in Ningbo, Zhejiang province, has also been idle for months and is considering closing and adjusting Skoda's brand strategy, the source said.

With regard to the specific "transfer timetable" for the closure of the Nanjing plant, the person said that the official had not yet had a clear time. At the same time, pointed out that the factory will be completely closed or sold, the authorities also do not have a specific plan. It is understood that the annual production capacity reached 360000 vehicles. The data show that SAIC-Volkswagen Nanjing factory first belonged to Nanjing Automobile. After SAIC acquired Nanjing Automobile in 2007, the factory became SAIC-Volkswagen's first factory outside Shanghai, which was used by SAIC-Volkswagen. It is mainly responsible for the production of Volkswagen Passat, Skoda Express and other models.

In response to the news of the closure of the Nanjing plant, the official response to the media said: all SAIC-Volkswagen factories are operating normally in accordance with market requirements and our forecasts, and are gradually transforming car production and parts factories as the focus shifts to smart electric vehicles. Judging from the official response, there was no complete denial of the news. Of course, what will happen in the future has yet to be officially announced.

It is worth mentioning that the news of SAIC-Volkswagen's closure of the Nanjing plant was reported earlier. After the official announcement of the closure of the Anting No. 1 plant last year, there was news in the market that SAIC-Volkswagen would close the Nanjing plant, and employees of the Nanjing factory revealed in an interview with the media that the land of the Nanjing factory would be closed when it expires in 2025. In addition, it was revealed that the clerks in each workshop of the factory had communicated to the employees that the labor contract could be terminated by agreement, and those who agreed could receive compensation for N months' salary, but SAIC Volkswagen did not respond to the news on the market at that time.

In fact, with the rapid development of domestic new energy vehicles, the market share of traditional fuel vehicles has been seriously reduced. In this context, many traditional fuel car companies have overcapacity, and SAIC-Volkswagen is no exception. Data show that SAIC-Volkswagen planned to have a production capacity of 2.088 million vehicles last year, while the actual production capacity was only 1.202 million vehicles, with a capacity utilization rate of only 58 per cent. This figure also means that nearly 900000 vehicles are idle. That's for sure. There is a certain correlation between overcapacity and poor sales.

SAIC Volkswagen, as a joint venture car company, also had unlimited scenery in its early years, and launched Santana and other national miraculous cars, which caused a sensation for a time. From 2015 to 2018, it has been the top seller in China's auto market for four consecutive years. From 2014 to 2018, SAIC-Volkswagen sold 1.812 million vehicles, 2.0018 million vehicles, 2.0631 million vehicles and 2.0651 million vehicles respectively, according to relevant data. However, by 2019, SAIC-Volkswagen sales began to decline, with the rise of new domestic car-building forces, SAIC-Volkswagen is in an even more disadvantageous position. Sales didn't pick up much after 2024. Data show that SAIC-Volkswagen sold 593100 vehicles from January to July 2024, down 1.53% from a year earlier.

In this context, SAIC-Volkswagen has to carry out transformation and adjustment. In fact, the closure of factories by joint ventures is not uncommon in China, which can be regarded as a helpless move by joint venture car companies. Previously, the first and second factories of DPCA were closed in 2019 because of overcapacity. Beijing Hyundai also suspended its No. 1 factory in Beijing in 2019 because of overcapacity. Subsequently, the factory was resold to the ideal car of the new car-building force in China. This year, it was reported that the Beijing Hyundai plant in Chongqing had stopped production in December last year, and most workers were on holiday. In response to the news, officials have not received any internal documents about the suspension of production.

Shutting down factories due to overcapacity can reduce expenses and costs by shutting down redundant production lines, but the auto industry is concerned that it will eventually have to return to sales. Recently, SAIC-Volkswagen has also accelerated plans to revive Skoda, the second brand under SAIC-Volkswagen. It has been sought after by the market with a lower price. In July 2016, Skoda officially carried out independent brand operation in the Chinese market, changing from SAIC Volkswagen to SAIC Skoda. At that time, Skoda's sales in the Chinese market increased year by year, exceeding 300000 vehicles for three consecutive years. However, after 2019, the brand's sales were also declining, with cumulative sales falling to 44600 in 2022 and Skoda's domestic sales of only 22800 in 2023.

In order to revive Skoda's sales, SAIC-Volkswagen announced this month that Skoda will sell at SAIC-Volkswagen 4S stores in order to improve Skoda's market coverage. In the follow-up, whether Skoda can get rid of the decline in sales remains to be seen.

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