German automaker Volkswagen said the company is planning to increase investments in the US to reduce the impact of tariffs and strengthen its position in the auto market.
Volkswagen CEO Oliver Blume in an interview with the German paper, Süddeutsche Zeitung, said along with plans of massive investments in the US, the company is also engaging in discussions with the US government over tariffs.
Tariff cloud and investments
Blume said he had discussions with US Commerce Secretary Howard Lutnick over tariffs.
The CEO of the largest automaker in Europe said:
“So far, we have had absolutely fair, constructive discussions. I was in Washington myself and we have been in regular dialogue ever since.”
He added that he had agreed to keep the details of the discussions private.
Volkswagen has already invested a significant $5.8 billion stake in US electric vehicle manufacturer Rivian and plans to expand its Audi brand’s production within the US.
Volkswagen’s Audi brand is planning to produce automobiles in the US, where it currently has no production.
The company also employs over 20,000 people directly and 55,000 people indirectly in the US, Blume added.
These moves are aimed at localizing production to reduce exposure to import tariffs and to align more closely with the US market.
In 2022, the company also invested in Electrify America, a subsidiary focused on expanding electric vehicle charging infrastructure across the U.S. and Canada.
In partnership with Siemens, the company invested $450 million to support Electrify America’s growth plans, aiming to double its charging infrastructure to 1,800 locations and 10,000 fast chargers by 2026.
Reuters had reported that several German carmakers, including Volkswagen, are in talks with the US government for an import tariff deal.
The report also said the companies were using US investments and exports to soften any blow.
The US in March announced a 25% tariff on automobiles manufactured outside the US.
The tariffs will heavily impact Volkswagen’s Porsche as the company manufactures all of the models in Germany.
Financial Woes
Volkswagen, in its Q1 earnings, saw its operating profit fall to €2.9 billion from €4.59 billion in the previous year.
Its revenue rose 2.8% to €77.6 billion as a result of higher vehicle sales in markets outside China.
The company said it was expecting various financial metrics such as net cash flow, operating return on sales, and net liquidity to come in at the lower end of annual forecasts due to political uncertainty, trade restrictions, and regulations regarding emissions.
The company also faced challenges in the European market with increasing sales of Chinese electric vehicles, while the company doesn’t have an entry-level model to compete in the category.
Sales of Chinese electric vehicles have increased by more than three times from 2019 to 2023 in the EU.
The figures slowed down in 2024 after the EU put a 10% tariff on Chinese cars.
The company is planning to reduce costs by letting go of 35,000 employees by 2030.
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