German embattled automotive giant Volkswagen is expected to stop manufacturing vehicles at its site in Dresden after Tuesday, marking the first time in the carmaker’s 88-year history that it will close production in Germany, according to the Financial Times (FT) on Sunday.
The closure of the plant’s production line comes as Europe’s largest auto manufacturer is under cash flow pressure as a result of weak China sales and demand in Europe, as well as U.S. tariffs weighing on sales in America, the report said.
German media reports in November indicated that the production in Dresden was marginal, describing "the end" for the factory.
Late last year, the company announced it would cut 35,000 jobs in Germany by 2030 while also reducing production capacity.
Volkswagen has been hit hard by rising costs at home, a stuttering switch to electric cars and growing competition in the key market of China from domestic rivals, particularly in the EV segment.
The automaker’s CFO, Arno Antlitz, suggested in October that its net cash flow for 2025, which had previously been forecast to be close to zero, could be slightly positive, the FT said.
However, it cited that the carmaker would continue to see further pressure.
"There’s certainly pressure on the cash flow in 2026,” it quoted Bernstein analyst Stephen Reitman as saying. He noted that the auto group was looking for ways to reduce spending and boost operating profits.
Volkswagen was facing "widespread” challenges, with the expected longer lifetime for fossil fuel-burning engines requiring new investment, Reitman said. "You have to look at new generations of gasoline technologies,” he added.
Dresden has produced fewer than 200,000 vehicles since production started in 2002, or less than half the annual output of VW’s central factory in Wolfsburg, according to FT.
The move brings Volkswagen a small step forward in its plans to reduce capacity in Germany, it added, citing that changes are part of a deal agreed with unions last year that will lead to 35,000 job cuts at the VW brand in Germany.
VW brand chief Thomas Schäfer said this month the decision to close production had not been taken "lightly,” but that "from an economic perspective it was essential.”
The plant was intended as a showcase for Volkswagen’s engineering prowess and was first tasked with the assembly of the high-end VW Phaeton. After the Phaeton was discontinued in 2016, the Dresden site became a symbol of Volkswagen’s electrification efforts, most recently producing the battery-powered ID.3.
The site will be rented out to the Technical University of Dresden to establish a research campus for the development of artificial intelligence, robotics and chips, the FT report said.