VW is closing a German Plant for the first time. The Plant Will Turn to AI Research
Tuesday was a historic day for German automaker Volkswagen. The company has officially closed a factory in its country for the first time in its 88-year history.
The factory in Dresden, Germany has been in operation since 2001. By mid-2026, it is said to be reborn as an AI, chip design research hub. The facility will be operated in partnership with the German state government of Saxony and the Dresden University of Technology, and the university will occupy almost half of the factory’s floor space.
“We did not take the decision to end car production at the Transparent Factory after more than 20 years lightly. However, from an economic point of view it was absolutely necessary,” said Volkswagen CEO Thomas Schäfer in a statement. “Working with TU Dresden, we are transforming the factory into a place where travel, technology and science meet.”
Volkswagen is struggling this year, as the company has been hit hard by Trump’s spending spree. The company announced its first quarterly loss in five years in its latest earnings report in October, and warned that the US trade war will cost the business €5 billion (about $5.8 billion) a year. When they announced the research center, Volkswagen also said it would reduce production capacity across Germany by more than 730,000 vehicles a year by 2028 and cut 35,000 jobs at its German sites by 2030.
Another concern for the automaker is the intense competition in the Chinese market, which is the company’s biggest global sales market. Thanks to the tariffs from Beijing, Chinese automakers have been offering electric cars with advanced technologies such as autonomous parking systems at a much cheaper price than foreign rivals.
These changes forced Volkswagen to take drastic measures to catch up. Earlier this year, the automaker announced that it will invest up to 1 billion euros (equivalent to about 1.2 billion dollars) in AI by 2030, hoping that the technology will give impetus to the new development process of cars and technology.
“Our ambition: There is no process without AI,” said Hauke Stars, member of the board of IT management at the Volkswagen Group in a statement.
The company, which will operate a new research center for chip design and AI and robotics, also faced a chip supply shock earlier this year when trade tensions with China prompted the Netherlands to take control of Dutch but Chinese-owned chipmaker Nexperia. In turn, Beijing completely banned exports of the chips, which are widely used by carmakers, prompting Volkswagen to warn of a possible production halt before the issue is resolved and chip supplies resume in November.
Volkswagen is not alone in its AI push. Auto giant General Motors announced in October that it will be adding AI to several vehicles within the next three years, such as blinds-free driving and in-car AI conversations.
Electric car maker Rivian, which launched a $5.8 billion joint venture with Volkswagen last month, also made big announcements on AI earlier last week, with hands-free driving coming next year and eyes following eventually. Rivian’s autonomy and AI platform is not part of the Volkswagen deal, Rivian CEO RJ Scaringe said in an interview Tuesday, but he said the program was created with the idea that “they will eventually use this, not only for our products, but for other companies as well.”
