In the production line, semi-assembled cars suspended by large cranes continue to move. Volkswagen AG's Dresden plant, known as the "Transparent Factory," will be repurposed into a technology research center in the future.
Due to weak market demand and high U.S. tariffs, the automotive giant has decided to halt vehicle production at its Dresden plant, which began operations in 2001.
This Tuesday, the last car will roll off the assembly line at Volkswagen AG's Dresden facility in Germany. This marks the first time in the 88-year history of the automaker that it has shut down a vehicle production plant in its home country.
As early as last year, Volkswagen AG had issued warnings about production cuts. At that time, the company faced sluggish demand in Europe and its largest market, China, while high U.S. tariffs further dragged down its sales in America.
After 24 years of vehicle production, the Dresden plant will transition into a research center focusing on artificial intelligence, robotics, and chip design. The facility, nicknamed the "Transparent Factory" for its glass exterior, will be jointly operated by Volkswagen AG, the state of Saxony, and the Dresden University of Technology.
Thomas Schäfer, CEO of the Volkswagen brand, stated in a release: "Shutting down the Transparent Factory's vehicle production line, which has operated for over two decades, was not an easy decision. But from an economic standpoint, this move is absolutely necessary."
Volkswagen AG has reached an agreement with the German workers' union: the plant's 230 employees can choose between severance packages, early retirement, or transfers to other company facilities.
The Dresden plant, opened in 2001, initially produced the luxury sedan Phaeton before shifting to the electric Golf hatchback. In recent years, it primarily manufactured the ID.3 electric vehicle. The last car to roll off the line this Tuesday is a red ID.3 GTX, which will be signed by factory employees and permanently displayed in the facility, which remains open to visitors.
U.S. tariffs imposed during the Trump administration dealt a heavy blow to Volkswagen AG. The company reported that $1.5 billion in losses last quarter were partly due to these tariffs, with full-year tariff-related costs expected to exceed $5 billion in 2025. Meanwhile, declining sales in China's premium car market have also pressured Porsche, a brand under Volkswagen AG's control.
Compounding the challenges, Volkswagen AG recently became entangled in geopolitical tensions surrounding Dutch semiconductor firm NXP. Although headquartered in the Netherlands, NXP is effectively controlled by China's Wingtech Technology. The Dutch government briefly took over the company, sparking global automakers' concerns about chip shortages until control was returned to Wingtech.
Volkswagen AG's struggles reflect Germany's broader economic situation. The German economy contracted in 2023 and 2024 before stagnating in 2025. However, ING economist Carsten Brzeski noted in a report that German industrial production has recently shown "initial signs of bottoming out and stabilization."
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