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The two Volkswagen Group brands have never built cars in the U.S., but a combination of lower taxes and higher tariffs might change their mind, according to German business daily Handelsblatt. Audi confirmed the plans.
President Donald Trump’s threat to impose across-the-board tariffs on any imports appears to be working.
Volkswagen Group’s premium brands Audi and Porsche are considering shifting some production to the United States for the first time in their history, according to a report by German daily Handelsblatt, citing several sources familiar with the matter.
The move comes after last week’s warning from the freshly sworn-in 47th president that he will place duties on imports that can just as easily be manufactured in the U.S. Those companies that do create American blue-collar jobs will, however, be rewarded with a 15% corporate tax rate he’s hoping to pass.
“My message to every business in the world is very simple: Come make your product in America and we will give you among the lowest taxes of any nation on earth,” he told participants at last week’s World Economic Forum in Davos. “But if you don’t make your product in America, which is your prerogative, then very simply you will have to pay a tariff.”
Tariffs are likely the reason why Volkswagen has now confirmed it is pulling the plug definitively on exporting its ID.7 to the U.S. market. The company hoped the range-busting electric sedan might prompt Tesla customers disgruntled by Elon Musk’s politics to trade in their Model 3s.
While Porsche did not respond immediately to Fortune for comment, Audi confirmed the thrust of the report.
For the moment, most carmakers are keeping their cards close to their chest until the administration provides final clarity on what goods will qualify for which exact tariffs.
Plans focus on Tennessee or South Carolina
“We’re examining various scenarios, but a decision hasn’t been reached yet,” a spokesman for Audi said, declining to comment further.
Audi does operate a production site in Mexico, a popular manufacturing hub for the auto industry thanks to free trade agreements it has signed with dozens of countries. But until now the brand stopped short of following Volkswagen into the U.S. VW maintains a factory in Chattanooga, where it builds the slow-selling ID.4 electric crossover and the Atlas full-size SUV.
Porsche by comparison builds almost all of its models in Germany’s Stuttgart and Leipzig, except for the Cayenne SUV, which has always been made at Volkswagen’s Slovakia plant. The other exception is Malaysia, where it assembles a small number of vehicles for the local market to avoid tariffs. Other than that, not even China can boast of its own Porsche production.