Volkswagen Group said it will not proceed with plans for an Audi manufacturing plant in the U.S. unless automotive tariffs are lowered, according to CEO Oliver Blume.

Audi began exploring U.S. production options in 2023, initially driven by government subsidies, but higher trade barriers have since undermined the project’s financial viability.

Blume said tariffs have already cost VW €2.1 billion in the first nine months of 2025.

Although Audi could potentially produce electric vehicles at existing VW Group facilities in the U.S., including sites in Tennessee and South Carolina, the company is unwilling to commit to major new investment under the current tariff environment.

VW continues to see opportunities for gradual growth in the U.S. market, but has scaled back earlier expansion targets and reduced its five-year investment plan, with further details expected to be announced in March.