Volkswagen shuts down factory in Germany for the first time in 88 years

German car manufacturer Volkswagen will cease production at its Dresden plant in the coming days, marking the first shutdown of assets in Germany in the company’s 88-year history, according to Daily Sabah.

The closure of the production line comes amid significant pressure on the group’s cash flow due to weak sales in China and Europe, as well as the impact of US tariffs on exports to the United States.

The Dresden plant has been operating at minimal capacity in recent years, and local media reported back in November that the plant’s prospects were extremely limited. The site, which began operations in 2002, has produced less than 200,000 cars, less than half the annual output of VW’s main plant in Wolfsburg.

The decision to discontinue production is part of a broader restructuring program in Germany, agreed with trade unions, which envisages a reduction of 35,000 employees by 2030.

Volkswagen has been under pressure from rising costs in Europe, a slower-than-expected transition to electric vehicles, and increased competition from Chinese manufacturers, especially in the EV segment. The company’s CFO, Arno Antlitz, previously noted that net cash flow in 2025 may be only slightly positive, while financial pressure will continue in 2026. Analysts point out that the concern will have to invest simultaneously in both electric vehicle production and new generations of internal combustion engines.

The Dresden plant was originally designed as a showcase for VW’s engineering capabilities and produced the premium Phaeton, but later became a symbol of the brand’s electric transformation, particularly with the ID.3 model. In the future, the facility is planned to be leased to the Technical University of Dresden to create a research campus focusing on artificial intelligence, robotics, and microchips.

It should be noted that the EC is preparing to review the de facto ban on the sale of new cars with internal combustion engines from 2035. This could be the EU’s biggest departure from its green course in the last five years.

In its latest report, EUROFER improved its forecasts for production dynamics in the EU automotive industry in 2025, expecting a 3.8% y/y decline instead of the previous 4.3% y/y. Despite the slight improvement, the overall outlook for the sector remains subdued due to persistent structural problems and external risks.