Volkswagen to close Audi Brussels branch due to sharp drop in EV demand

07/15/2024 / By Belle Carter

There is a chance that the Volkswagen Auto Group will shut down its luxury brand Audi in Brussels, Belgium because of the sharp drop in demand for high-end electric cars. The low demand has also forced Europe’s top carmaker to cut its margin target for 2024.

According to labor sources, Volkswagen has not shut down a plant since it closed the Westmoreland site in Pennsylvania in 1988. The last brand chief to threaten closures in Europe stepped down months after.

But now it is also considering the restructuring or potential shutdown of the Brussels plant, where it employs 3,000 people, on the back of weak demand for the fully electric Audi Q8 e-tron, which was launched in 2019. The automaker was also considering ending its production soon. The site, which produced around 50,000 cars in the past year, has also faced “long-standing structural challenges” including difficulty in changing its layout due to proximity to the city and high logistics costs.

A consultation process is about to start to find alternative solutions for the plant and “This may include ceasing operations if no alternative is found,” Audi’s statement included. Volkswagen said the costs of finding an alternative use for the Brussels plant or closing it, as well as other unplanned expenses, would have an impact totaling up to $2.8 billion in the current financial year.

Meanwhile, Deutsche Bank analysts think that the potential Brussels factory shutdown is a “major step in the right direction,” anticipating related costs will not be cash-relevant in the short term. Analysts at brokerage Stifel meanwhile labeled Audi as “Volkswagen’s biggest problem” and “the biggest concern for investors” on a divisional basis. “The bigger issue is the severe delay in new models in recent years; Audi has been falling behind Mercedes and BMW. We calculate that the average age of Audi’s portfolio is now six years [BMW: three years, Mercedes 3.6 years],” they said.

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The company has also now lowered the forecast for its operating return on sales to a 6.5 to seven percent range, from seven to 7.5 percent previously. This prompted its parent company Porsche SE, which owns just under a third of Volkswagen but holds most of the voting rights, to lower its earnings forecast to 3.5 billion to 5.5 billion euros. Frankfurt-listed shares in Volkswagen and Porsche SE were down 1.7 percent and 2.1 percent, respectively, after the news was released.

Automakers have been hit hard by lower-than-expected electric vehicle demand after investing heavily in capacity and technology development, with Audi warning earlier this year that its sales would dip in 2024 as it worked on introducing new models while also cutting costs. “The employee representatives of Audi AG are calling for a future-proof perspective for the plant and our colleagues in Brussels. The Audi management must take responsibility for the site,” Rita Beck, spokeswoman for the Audi Committee in the European VW Group Works Council, said.

Other unplanned expenses weighing on the Volkswagen Group included exchange rate losses because of the deconsolidation of Volkswagen Bank Rus in its financial services division, and the planned closure of the gas turbine business of subsidiary MAN Energy Solutions.

Biden grants $1.7 billion to boost EV manufacturing in 8 states

Meanwhile in the United States, with just a few months remaining before the elections in 2024, President Joe Biden is still funding his green tyranny as he awards nearly $2 billion in grants to carmakers to boost EV manufacturing in eight states. (Related: Study finds electric vehicles pollute the environment 1,850 times more than gas-powered cars.)

The Energy Department will issue grants to General Motors, Stellantis and other carmakers to help restart or expand EV manufacturing and assembly sites in eight states, including Michigan, Pennsylvania and Georgia, the president’s battlegrounds, as well as to EV facilities in Ohio, Illinois, Indiana, Maryland and Virginia.

Grants totaling $1.7 billion will be used to create or retain thousands of union jobs and support auto-based communities that have long driven the U.S. economy, the White House said on July 11. It will also cover a broad range of the automotive supply chain, including parts for electric motorcycles and school buses, hybrid powertrains, heavy-duty commercial truck batteries and electric SUVs.

“Building a clean energy economy can and should be a win-win for union autoworkers and automakers,” Biden said in a statement. “This investment will create thousands of good-paying, union manufacturing jobs and retain even more by helping auto companies retool, reboot and rehire in the same factories and communities.”

The investment and the federal grant “underscore our commitment to U.S. leadership in manufacturing and innovation,” said Camilo Ballesty, GM vice president of North America Manufacturing and Labor Relations.

GM said that its $500 million federal grant will help the company convert an assembly plant in Lansing, Michigan to produce EVs. The car company has already announced over $12 billion in investments in its North American EV manufacturing and supply chain since 2020.

The grants, paid for by the landmark 2022 climate law, will help deliver on his commitment to ensure the future of the auto industry is made in America by American union workers, Biden said.

Head over to RoboCars.news for updates on the current demand and sales of electric vehicles worldwide.