Volkswagen AG won’t go ahead with a planned Audi factory in the U.S. unless automotive tariffs are reduced, Chief Executive Officer Oliver Blume told Germany’s Handelsblatt newspaper.

Audi has been weighing an American manufacturing site since 2023, initially encouraged by subsidies that would have made such an investment economically viable. That calculus has shifted as the Trump administration placed tariffs on European carmakers, which Blume said cost VW €2.1 billion ($2.5 billion) in the first nine months of 2025.

“Given an unchanged tariff burden, large additional investment cannot be funded,” Blume said in comments released on January 25. “Reduction of costs in the short term and reliable business conditions in the long term are what we need.”

Despite the headwinds, Blume outlined a “forward strategy” for VW’s U.S. business and said growth opportunities remain. However, he said an earlier target of reaching a 10% market share is no longer realistic, with the group now planning to advance in incremental steps.

The carmaker’s management is in the midst of poring over details of its five-year planning round, which has been reduced to €160 billion from €180 billion two years ago. VW draws up an annual budget for spending on factories, vehicle models and new technologies such as software. 

The plan is expected to be unveiled in March, when the company also publishes its annual financial results.