Volkswagen Pumps The Brakes On Major US Factory Plans

"Made in the U.S.A." carries a lot of weight with many American consumers, as it's all about keeping the economy strong and hopefully creating new jobs at home. But a major automaker that once had big plans to open factories in the United States is now hitting the pause button. Volkswagen is taking a step back, and it's due to the company's financial uncertainty regarding the U.S. government's recent trade policies.

During an interview with German newspaper Handelsblatt, Volkswagen CEO Oliver Blume made it clear why VW is hesitant to move forward. "With unchanged tariff burdens," Blume said, "a large additional investment is not financially feasible." The automaker's original plans included building a U.S. manufacturing plant for Audi, a car brand owned by Volkswagen. This new factory had been debated by the company back-and-forth internally since 2018. Possible sites for the facility were South Carolina and Chattanooga, Tennessee, alongside an existing VW plant.

In addition to the Chattanooga facility, VW is currently building a $2 billion plant in Columbia, South Carolina. This location will manufacture off-road vehicles in a partnership with historic automaker Scout Motors. VW also has two production plants in Mexico, including Audi's Q5 plant, and both of those locations are impacted by American tariffs as well. VW cites these costs as one of the reasons why moving ahead with U.S. expansion has become increasingly challenging.

The impact of U.S. tariffs on Volkswagen has complicated matters for the struggling automaker, which saw a 15% operating profit drop in 2024 versus 2023. VW scrambled to rethink its strategy in 2025, as cost-cutting measures were taken and new technology investments were made. Talks of employee layoffs began the same year, and by the close of 2025, VW made the decision to eliminate 35,000 future jobs in Germany alone. These job cuts are expected to happen over time, and not all at once.

VW is also looking to capitalize on lower production costs on its Chinese-made vehicles by exporting them to other places. This would include areas like Southeast Asia, the Middle East, and South America, but not Europe. VW's foothold in China has slipped, especially in the EV market, thus forcing the company to continue cutting costs. Though VW is struggling to keep up in China, the goal is to remain a top vehicle brand in the country.

Despite the automaker's problems, VW has reported a net cash flow of $7 billion for 2025, which is around $1 billion higher than 2024. This improvement is likely tied to VW not investing money in new facilities, while also reducing its overall inventory. Plus, Porsche, a brand owned by the Volkswagen Group, cut down on its EV production in the same year. This move helped decrease profit expectations for the company, thus saving money and limiting financial strain in the process.