German automotive giant Volkswagen will halt vehicle production at its Dresden manufacturing plant on Tuesday, marking the first time in its 88-year history that the company has closed a production facility on German soil. The move follows a 2024 agreement between management, the works council, and labor unions to cut 35,000 jobs and reduce domestic capacity amid mounting pressure from Chinese competitors, weakening demand in Europe, and slower-than-expected adoption of electric vehicles.
Under the agreement, production at the Dresden site, located in the eastern German state of Saxony, was scheduled to end by the close of this year. The factory, which began operations in 2002, has produced fewer than 200,000 vehicles and was once positioned as a flagship showcasing Volkswagen’s technological and manufacturing capabilities. Models assembled there included the luxury Phaeton and later the electric ID.3, neither of which delivered lasting commercial success for the group.
The closure comes as Volkswagen grapples with cash flow constraints driven by weak sales in China, declining European demand, and pressure on exports to the United States due to tariffs. At the same time, the company faces the challenge of financing around €160 billion in investments over the next five years. Analysts view the shutdown as a limited but symbolic step in Volkswagen’s broader effort to adapt to fierce global competition, high energy costs, heavy bureaucracy, and rising structural pressures within Germany’s industrial landscape.
