Volkswagen AG recorded a loss of 500 million euros in the first quarter due to the suspension of electric vehicle production at its Tennessee factory. This marks the latest impact from a reversal in US climate policy, which is compelling the entire industry to scale back its electrification ambitions.
The German automaker ceased production of the battery-powered ID.4 model at its Chattanooga plant this month and shifted production toward a gasoline-powered sport utility vehicle.
Affected by this one-time expense and increased US tariff burdens, Volkswagen AG's operating profit fell to 2.5 billion euros in the first quarter, down from 2.9 billion euros during the same period last year.
The profit figure fell short of analysts' expectations, as they had projected operating profit to remain stable year-on-year.
Shares of Volkswagen AG declined 2.4% during early trading in Frankfurt, bringing the year-to-date drop to more than one-fifth.
Meanwhile, rival Stellantis recently recorded a 22 billion euro impairment charge after abandoning its electric vehicle strategy but returned to profitability in the first quarter by refocusing on gasoline models under its Ram and Jeep brands in the US.
For the January to March quarter, Stellantis reported a net profit of 377 million euros, compared to a loss of 387 million euros a year earlier. Revenue increased by 6% to 38.1 billion euros, driven by a recovery in US sales.
Since taking over as CEO last June, Antonio Filosa has discontinued plug-in hybrid vehicles and reintroduced the popular 5.7-liter Hemi V8 engine in the Ram 1500 pickup and other models such as the Jeep Cherokee—models that had been phased out by his predecessor Carlos Tavares.
Automakers, including Stellantis and Volkswagen AG, are navigating a complex environment: they must significantly increase electric vehicle sales in Europe to meet regulatory requirements and stay competitive. Conflicts in the Middle East and rising fuel prices have also reignited global interest in electric vehicles.
Volkswagen AG is currently implementing a restructuring plan that will eliminate tens of thousands of jobs in Germany and reduce production capacity. The company emphasized the need for further cost savings to remain competitive.
CFO Arno Antlitz stated, "In this environment, planned cost reductions are not enough. We must fundamentally transform our business model to achieve structural, sustainable improvement."
Losses in the electric vehicle sector also highlight the challenges global automakers face in the US, where they are making costly adjustments to their EV strategies and production.
Due to a complete reversal in US climate policy, automakers have recognized at least $75 billion in impairment charges as they realign their electric vehicle strategies.
Following the Trump administration's elimination of the $7,500 consumer tax credit starting in 2025, overall sales of new electric vehicles in the US declined by 28% in the first three months of the year.
Volkswagen AG felt this shift acutely, with its first-quarter electric vehicle sales in the US dropping by more than 80% compared to the same period last year.
Comments