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VW Halts Plans for Audi Factory in US as Tariffs Hit Profit
Audi Makes Models in Mexico That Don’t Qualify for Duty-Free Imports
Volkswagen AG’s plans for a possible Audi factory in the U.S. aren’t progressing as President Donald Trump’s tariffs weigh and talks for local incentives haven’t yielded results, CEO Oliver Blume told Handelsblatt.
Europe’s biggest carmaker has considered adding a second American manufacturing site on and off for some time, including dating to 2018 during Trump’s first presidency.
Talks for an Audi plant have been ongoing, initially encouraged by subsidies making an investment economically viable.
That calculus has shifted as the Trump administration placed tariffs on European carmakers, Blume said in an interview with the German newspaper, citing duty costs of 2.1 billion euros ($2.5 billion) in the first nine months of 2025.
“Given an unchanged tariff burden, large additional investment cannot be funded,” Blume said in comments released Jan. 25. “Reduction of costs in the short term and reliable business conditions in the long term are what we need.”
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Blume
VW has been trying to gain a bigger slice of the U.S. market, where it has struggled to compete with the likes of Toyota Motor Corp. as well as falling behind the competition on luxury full-size SUVs popular among well-heeled buyers. Blume walked back an earlier target of reaching a 10% market share in the world’s second biggest auto market, with the group now planning to advance in incremental steps. VW Group’s market share in the U.S. was at around 4% last year.
Trump’s tariffs have exposed carmakers relying on global production networks. While BMW AG and Mercedes-Benz Group AG both build SUVs in the U.S., Audi makes models like the Q5 SUV at its Mexico plant that don’t qualify for duty-free imports.
The company also builds VW brand vehicles in Chattanooga, Tenn., and is constructing a $2 billion plant in South Carolina that will make rugged offroaders under the resurrected Scout Motors nameplate. Blume said the company had several options for an Audi plant, also pointing to ownership of “a large plot of land” in South Carolina. Other states were also interested, he said.
“This is about economic logic: investors creating jobs and value need advantages in terms of costs,” Blume said. “Talks that I personally conducted were always fair and constructive — but we’ve not come to a solution so far.”
The carmaker’s management is in the midst of poring over details of its five-year planning round, which has been reduced to 160 billion euros from 180 billion euros two years ago. VW draws up an annual budget for spending on factories, vehicle models and new technologies such as software.
The plan is expected to be unveiled in March, when the company also publishes its annual financial results.
