Volkswagen’s luxury brand Audi faces potential closure of its Brussels site due to a significant decline in demand for high-end electric cars, prompting Europe’s largest carmaker to revise down its margin targets for the current year.
The decision marks Volkswagen’s first potential plant closure since shuttering its Westmoreland facility in Pennsylvania in 1988. Sources within the labor sector noted historical repercussions for Volkswagen brand chiefs who previously threatened closures in Europe.
The automotive industry, grappling with lower-than-expected electric vehicle (EV) demand despite substantial investments in capacity and technology, has forced Audi to adjust its sales expectations for 2024. This adjustment aligns with efforts to introduce new models while implementing cost-cutting measures.
Volkswagen anticipates substantial costs associated with repurposing or closing the Brussels plant, estimating up to 2.6 billion euros in impacts for the 2024 financial year. This forecast revision includes a reduction in operating returns to 6.5-7%, down from the earlier 7-7.5% range, prompting Porsche SE, Volkswagen’s majority shareholder, to adjust its earnings forecast to 3.5 billion to 5.5 billion euros.
Following the announcement, Frankfurt-listed shares of Volkswagen and Porsche SE saw declines of 1.7% and 2.1%, respectively.
The decline in demand for Audi’s Q8 e-tron, launched in 2018, has been particularly steep, prompting considerations about halting its production by 2025, according to sources familiar with Audi’s plans.
In addition to demand challenges, Audi’s Brussels site has long faced structural hurdles, including logistical complexities and city proximity constraints. The company plans to initiate a consultation process to explore alternative solutions for the approximately 3,000 employees at the plant, potentially including cessation of operations if no viable alternatives are identified.
Volkswagen reported a 20% decline in first-quarter operating profits, partly attributed to Audi’s delivery delays exacerbated by component shortages, which led to a two-week closure of the Brussels plant in February.
Addressing these challenges, Rita Beck, spokesperson for the Audi Committee in the European VW Group Works Council, emphasized the need for Audi management to secure a sustainable future for the Brussels site and its workforce.
The Volkswagen Group also faces unexpected financial burdens from exchange rate losses and the planned closure of subsidiary MAN Energy Solutions’ gas turbine business.
This development underscores Volkswagen’s strategic adjustments in response to evolving market dynamics, particularly in the electric vehicle segment, highlighting ongoing challenges in the automotive industry’s transition towards sustainable mobility solutions.
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