Volkswagen to Book Q1 Charge After Tennessee EV Halt
Volkswagen will record a charge of up to $600 million after ending ID.4 output in Tennessee. The decision follows a decline in U.S. electric vehicle demand.
The German automaker Volkswagen is projected to take a significant hit to its first-quarter earnings following the decision to end production of its ID.4 electric SUV at its Tennessee plant. Analysts from Bernstein reported on Tuesday that the company will book a charge representing 60% to 75% of its original $800 million investment used to prepare the Chattanooga facility for the model. A spokesperson for the company, which is based in Germany, confirmed that the financial estimates provided by Bernstein are accurate. Despite this writedown, the group's underlying operating earnings are expected to show year-on-year growth for the first three months of the year when the one-time charge is excluded. The decision to halt production in the United States was announced on April 9, with the company citing a challenging market environment for electric vehicles. The industry has seen several manufacturers scale back or cancel EV production plans after the federal government ended a $7,500 tax credit for electric vehicle purchases last autumn. Beyond the immediate impact on the first-quarter results, analysts believe the move will be beneficial in the long term. By no longer selling the unprofitable ID.4 model from the Chattanooga plant, the company is expected to see improved financial performance in subsequent quarters.
