German carmaker Volkswagen will soon cease operations at its Dresden plant, marking the first closure of the company's assets in Germany after 88 years of operation, according to a report by Daily Sabah.
The factory closure comes as the Volkswagen group faces significant pressure on its cash flow due to weak sales in China and Europe, as well as the impact of US tariffs on exports to the US market.
The Dresden plant, which began operations in 2002, has been operating at very minimal capacity in recent years. Local media reported in November that the plant's prospects were very limited.
During its operation, the plant produced less than 200,000 cars, less than half the annual output of VW's main plant in Wolfsburg.
The decision to stop production is part of a larger restructuring program in Germany, which was agreed with unions. The program plans to cut 35,000 jobs by 2030.
Volkswagen is facing rising costs in Europe, a slower-than-expected transition to electric vehicles (EVs), and increasing competition from Chinese manufacturers, particularly in the EV segment.
Volkswagen Chief Financial Officer Arno Antlitz has previously said that net cash flow in 2025 could be only slightly positive, and that financial pressure is expected to continue until 2026. Analysts have stressed that the company needs to invest simultaneously in the production of electric vehicles and a new generation of internal combustion engines.
Originally built as a showcase for VW's engineering capabilities and producing the premium Phaeton model, the Dresden plant has since become a symbol of the brand's electrification transformation, particularly with the production of the ID.3 model.
In the future, the plant is planned to be leased to the Technical University of Dresden to develop a research campus focused on artificial intelligence, robotics, and microchip technology.
It is also worth noting that the European Union is preparing to review a de facto ban on the sale of new cars with internal combustion engines from 2035. This could be the biggest change in EU green policy in five years.
In the latest EUROFER report, the EU automotive industry’s production forecast for 2025 has been revised slightly, with a year-on-year decline of 3.8% compared to the previous forecast of 4.3%. Despite the slight improvement, the overall outlook for the sector remains bleak due to ongoing structural problems and external risks.
