Volkswagen, BMW and Mercedes hit by Xinjiang forced labour complaint

Germany’s top carmakers have been accused of using forced labour in their Chinese supply chains, in one of the first official complaints against domestic companies to be brought under the country’s new supply chain law.

On Tuesday, the European Center for Constitutional and Human Rights, a non-profit organisation based in Berlin, said it had filed a complaint with German regulators against Volkswagen, BMW and Mercedes-Benz alleging their links with forced labour in China’s region of Xinjiang.

The complaint was filed under a new German law that came into effect at the start of 2023, which requires large companies to ensure human rights and environmental issues in their supply chains are monitored and addressed. Penalties range from a fine of up to 2 per cent of total annual global sales and exclusion from government contracts for up to three years.

European companies operating in Xinjiang now face political and regulatory pressures at home and abroad, as a wave of advocacy groups start to bring legal cases in European courts over products made in Xinjiang. The US has already banned imports from the territory.

Looming regulatory scrutiny adds to the growing controversy over Volkswagen’s factory in Xinjiang. Human rights protesters were among those disrupting the carmaker’s annual general meeting last month, while investors demanded an independent audit of its Xinjiang plant.

“The presence of the factory in Urumqi alone is sufficient to establish a high likelihood that the company may be receiving labour transfers of Uyghur workers,” the complaint against VW alleged, referring to the state-sponsored forced labour programmes that Beijing is accused of administrating.

The complaints against Mercedes-Benz and BMW centred around a few indirect and direct suppliers based in or near Xinjiang, which the ECCHR said were likely to have been at risk of using forced labour.

The carmakers’ relationship with CATL, which produces nearly a third of all electric vehicle batteries, was also singled out, as the Chinese battery maker last year began to expand its footprint in Xinjiang.

All three complaints claimed that raw materials coming out of Xinjiang, such as copper, lithium and aluminium, carried an especially “high risk” of being linked to forced labour.

VW, BMW and Mercedes-Benz all declined to comment on the complaints, stating that they had yet been contacted by German regulators.

Mercedes-Benz added that “whenever concerns are raised, we push suppliers for clarification” and said that it regularly carried out spot checks with suppliers in China.

BMW said that it was “continuously” monitoring suppliers’ compliance with its standards and “consistently” investigating potential breaches.

CATL and SAIC Motor did not respond to requests for comment.

The cases will now be reviewed by the German Federal Office for Economic Affairs and Export Control, which said it would take “the necessary time”. The authority said it has received 10 complaints or tips relating to supply chain problems in the past six months.

European companies operating in China face conflicting regulations. While European Union member states are rolling out laws to compel firms to conduct corporate supply chain due diligence, China has made doing so highly dangerous with its recent Anti-Espionage Law and crackdown on consultancy and auditing firms. In March, US due diligence firm Mintz was raided — partly as a result of its work in Xinjiang.

“As long as there are no credible and effective due diligence mechanisms in place, companies should cease their business activities in the Uyghur Region,” said Miriam Saage-Maaß, Legal Director at ECCHR.

Unfettered access to Xinjiang has been impossible since the government enacted a high-security crackdown on Uyghur and other Turkic Muslims, surveilling and tailing journalists who enter the region.

Last year the United Nations concluded that there had been “large-scale arbitrary detention” in the region, and that atrocities there might even amount to crimes against humanity.

Earlier this year, Volkswagen’s China head Ralf Brandstätter announced that its Xinjiang plant was no longer producing cars, and that there were no plans to resume production; instead, it quality checks cars for sale in the region.

Volkswagen has a minority stake in the joint-venture that operates the plant, which is controlled by the Chinese state-owned SAIC Motor. Brandstätter visited the company’s Xinjiang plant in February and said the company did “not see any evidence of human rights abuses at the plant”.