Audi Approved for $3.3 Billion EV Factory in China

Audi and FAW Group, the state-owned partner it is effectively required to have in order to preferential treatment from the Communist Party of China, received some good news this week. Government officials have approved the duo for a new, jointly operated production facility in Changchun.

With Volkswagen Group having shifted its focus toward China in recent years, the market has become all-important for the German company. VW is currently the top-selling brand for the entire region, with its Audi subsidiary typically being the highest volume premium automaker from Europe. Building in China is good optics for brands hoping to remain popular there and has the added benefit of placing manufacturing complexes closer to relevant suppliers, especially if you’re swapping to electric vehicles.

Decades of allowing foreign entities to make use of its cheap labor force and lower regulatory standards have allowed for component consolidation, paving the way for factories responsible for producing more complex items with higher margins. China now exports essential parts for most major automakers and has become the world’s largest battery exporter by far. Considering the number of companies that are keen to rebrand themselves as green, clean, purveyors of all-electric transportation, the timing couldn’t be more perfect.

Though it also has some downsides.

Volkswagen Group’s Chinese production ties have resulted in accusations of the company directly benefiting from slave labor. The worst of this came in 2020 after the company was chastised for having a facility in Xinjiang where the Chinese government has forcibly detained millions of Uyghurs (a primarily Muslim ethnic minority) at reeducation facilities and work camps. With VW’s foundation being steeped in the anti-Semitic policies of the National Socialist German Workers’ Party (NSDAP), one would think the company would be extra careful not to utilize political prisoners as a source of labor. But Volkswagen actually hasn’t suffered all that much from the decision, save for some bad publicity, and has no intention of changing tactics.

“We have made it clear that we must stand by our commitment in China as a whole, and we will also stand by our commitment in Xinjiang as long as we believe that it is economically feasible,” Stephan Wöllenstein, CEO of Volkswagen Group China, was quoted as saying by Der Spiegel in 2021.

According to Reuters, the companies will be investing a total of 20.93 billion yuan ($3.29 billion USD) for the facility. Local planning regulators have approved the groundbreaking for April of 2022 and completion is tentatively scheduled for 2024. Audi said it would ideally like to see production commence before the year was over. But the facility is already behind schedule after alleged bureaucratic hang-ups attributed to regulators.

From Reuters:

The plant will start production in December 2024 and have the capacity to manufacture 150,000 cars a year, according to the regulator. Its statement also showed the approval was given on Feb. 11, and that the venture plans to produce three electric models, including Audi’s e-tron SUV.

“The Audi FAW NEV project is an important cornerstone of Audi’s electrification strategy in China,” a Volkswagen spokesperson said, confirming the approval.

“We are consequently pushing forward the relevant works in this project. The construction of the plant is planned to start in the second quarter of 2022.”

Audi and FAW collaboratively manufacturer combustion vehicles in Changchun already. The duo signed in October of 2020 to jointly produce premium EVs in China, with the new facility representing the fruit of those efforts.

[Image: JL IMAGES/Shutterstock]