VW Closes German Plant for First Time Ever. Plant Will Pivot to AI Research

Tuesday was a historic day for German automaker Volkswagen. The company officially closed a plant in its home country for the first time in its 88-year history.

The plant in Dresden, Germany had been operating since 2001. Come mid-2026, it is slated to be reborn as an AI, robotics and chip design research hub. The hub will be operated in conjunction with the government of the German state of Saxony and the Dresden University of Technology, with the university set to occupy nearly half of the factory’s floor space.

“We did not take the decision to end vehicle production at the Transparent Factory after more than 20 years lightly. From an economic perspective, however, it was absolutely necessary,” Volkswagen CEO Thomas Schäfer said in a press release. “Together with TU Dresden, we are transforming the factory into a place where mobility, technology, and science converge.”

Volkswagen has been struggling this year, as the company was hit hard by Trump’s tariffs. The company announced its first quarterly loss in five years in its latest earnings report in October, and warned that the U.S. trade war would cost the business €5 billion (roughly $5.8 billion) a year. While announcing the research hub, Volkswagen also said that it will reduce technical production capacity across Germany by more than 730,000 vehicles per year by 2028 and that it will cut 35,000 jobs across its German locations by 2030.

Also weighing on the carmaker is intense competition in the Chinese market, which is a major market for the automaker’s global sales. Thanks to levies from Beijing, Chinese automakers have been offering electric vehicles with the top technological advancements like autonomous parking systems at a significantly cheaper rate than foreign competitors.

The changes have pushed Volkswagen to take dramatic action in catching up. Earlier this year, the automaker announced that it will invest up to 1 billion euros (equaling almost $1.2 billion) into AI by 2030, hoping that the tech would provide a boost to the new vehicle and tech development process.

“Our ambition: No process without AI,” Hauke Stars, member of the board of management for IT at the Volkswagen Group said in a statement.

The company, which will be utilizing the new research hub for chips design as well as AI and robotics, also faced a chips supply scare earlier this year when rising China trade tensions caused the Netherlands to seize control of Netherlands-based but China-owned chipmaker Nexperia. In turn, Beijing completely blocked exports of the chips, which are used heavily by carmakers, causing Volkswagen to warn of potential production stoppages before the issue was resolved and chip supply resumed in November.

Volkswagen isn’t alone in its AI push. Fellow major automaker General Motors announced in October that it will be infusing AI into several vehicles within the next three years, like eyes-off driving and in-vehicle conversational AI chatbots.

Electric vehicle maker Rivian, which launched a $5.8 billion joint venture with Volkswagen last month, also made major announcements on the AI front last week, with hands-free driving set to come next year and eyes-off to follow eventually. Rivian’s autonomy and AI platform are not part of the Volkswagen deal, Rivian CEO RJ Scaringe said in an interview on Tuesday, but he did say that the initiative was developed with the idea that they would “eventually leverage this, not just with our own products, but with other companies as well.”