Volkswagen Names Zwickau as Group Hub for Circular Economy, Commits Up to €90 Million

Volkswagen has designated its Zwickau vehicle plant as the group’s central competence center for circular economy activities, committing up to €90 million in investment as it seeks to reduce raw material dependence and develop new recycling-driven business models, according to company reporting.

The move positions the eastern German site as the testing ground where dismantling standards, recycling processes, and digital systems will be developed and later rolled out across Volkswagen’s global manufacturing network. Saxony’s state government is supporting the initiative with funding of up to €10.7 million, reflecting growing political backing in Germany for industrial recycling and domestic materials security.

European automakers have stepped up circular economy efforts as tighter climate rules, volatile commodity prices, and geopolitical risks reshape supply chains. Analysts say end-of-life vehicle recycling and component reuse are becoming more critical as electric vehicles increase demand for metals such as copper, aluminum, and battery materials. Previous industry initiatives largely focused on compliance-driven recycling, but manufacturers are now aiming to turn circularity into a profit-generating activity.

At Zwickau, Volkswagen will begin with the systematic dismantling of vehicles to recover components and high-purity recyclates, while evaluating which processes can be scaled economically. The plant plans to process about 500 pre-series vehicles this year, with volumes rising from 2027 and capacity gradually expanding to around 15,000 vehicles annually by 2030. Observers note that this scale would place the operation among the larger manufacturer-led dismantling programs in Europe.

The project will also serve as a laboratory for digital tools. Volkswagen said data platforms and artificial intelligence will be used to track material flows, validate recycling outcomes, and manage second-life applications, allowing standards to be set centrally before adoption at other sites. Clean separation of materials is a priority, as regulators and customers increasingly demand traceable, high-quality recycled content.

Group circular economy head Andreas Walingen said the strategy is designed to cut emissions, strengthen resilience, and open new revenue streams, while reducing exposure to global raw materials markets. He added that Volkswagen ultimately aims to build a Europe-wide network of circular economy sites and partners to reach commercial scale.

Local management highlighted the plant’s industrial experience as an advantage. Volkswagen Saxony executives said Zwickau’s background in high-volume production, combined with Saxony’s research institutions, would help turn pilot concepts into viable business models for the wider group. Regional officials echoed that view, arguing the project diversifies the site beyond vehicle assembly and supports long-term employment.

Training is another pillar of the initiative. Volkswagen plans to integrate circular economy content into apprenticeships and university programs in cooperation with its education institute and the West Saxon University of Applied Sciences, with Zwickau acting as a training center for future locations.

Industry groups argue that manufacturer-led dismantling could accelerate the availability of certified recycled materials, but caution that profitability will depend on stable policy frameworks and consistent end-of-life vehicle supply. Market participants say the Zwickau model will be closely watched as other automakers weigh similar investments.

Source: Volkswagen Newsroom

SUNSHINE Spotlight: By turning Zwickau into its circular economy hub, Volkswagen is betting that recycling and reuse can become a core industrial business rather than a regulatory obligation.