*Volkswagen Group, the second largest automaker in the world in 2024, is preparing to join the growing list of automakers looking to rejig its US factories in response to the tariffs. *
The German automaler’s luxury brand, Audi — which assembles most of its lineup in its home country, Hungary, Mexico, Slovakia, Spain, and China — is planning to make some of its crossover and SUV models in America.
On a recent earnings call, Audi CFO Jürgen Rittersberger added that Audi plans to launch 10 new models in the US, with production locations to be announced in 2026.
While no final decision has been made, sources speaking to German trade publication Automobilwoche say Audi is scouting three potential locations in the US.
VAG’s one existing US plant is in Chattanooga. It presently builds the Atlas and id4. Given VAG management’s inclinations of late, I would expect their first move would be to give the Atlas a quick reskin, paste an Audi badge on it, and raise the price, because it has an Audi badge pasted on it.
Audi first announced its intention to build in the US in their 2008 investment plan. They got hammered that year by the financial meltdown, and restated their intentions in the 20-teens. Then came Covid, and it was shelved again. Now come tariffs, and they’re going to do it - although they were already going to do it, as announced in their strategic plan almost two decades ago.
I have no doubt the administration will be taking credit for this, even though it’s been in the works for some time. It’s the nature of politics to take credit for things you have nothing to do with (*see: Republicans touting local investments they voted against in Biden’s infrastructure bill). Even FDR refused to call it “Hoover Dam” even though work began in 1931, and he insisted it be known as “Boulder Dam”. The name was changed back to Hoover Dam in 1947, by which time FDR had been dead for two years, and did not raise any further objection.
Part of the problem is volume. At what point is the volume in North America sufficient to make it cost effective to build any Audi here, vs importing from the EU? If the tariffs tilt that calculation in favor of building in the US, then TIG can, correctly, claim credit. The Audi plant in Mexico builds Q5s for both North America, and the EU, because Mexico has a free trade treaty with the EU. The economics of building in the US, for export to the EU, are probably pretty sketchy, so NA, by itself, needs to generate the volume to make production economic.
Getting anything set up in the US will take a year, if they move in to Chattanooga. Longer, if they want to take over the Scout plant that is building.
I notice two things: the current Q7 is very long in the tooth, ten years old, and, the Q7 is almost exactly the same size as the Atlas. Putting on my MBA hat (scrunch) do a quick reskin, using the designs for the Atlas’ Chinese variants, paste an Audi badge on it, raise the price, a lot, and call it “the new Q7”, That tides the Audi stores over while the supply chain is put together to build the Q8, and it’s Porsche siblings, in Chattanooga too. Higher ATP. Higher GP. Everything today’s auto executive wants. (remove MBA hat…splunk)
