Volkswagen, Europe’s largest industrial group with a market capitalization of £44 billion, is planning a significant investment in the United States. This move comes as the company, which includes brands like Porsche, navigates potential tariffs adn engages in direct discussions with the U.S. government.

Direct Talks with Washington

Oliver blume, who heads the Volkswagen Group, characterized the discussions with the Trump administration as both constructive and fair. These talks suggest that Volkswagen is actively participating in tariff negotiations, rather than relying solely on Brussels.

Blume himself traveled to Washington and established a direct line of interaction with the U.S. Commerce Secretary, Howard Lutnick. While the details of these discussions remain confidential, Blume emphasized their importance.

Investment as a Strategic Move

Volkswagen hopes that its planned significant investment will influence the U.S. administration’s final decision regarding the 25% tariffs imposed on auto imports in April.

Our primary contact is the US secretary of commerce, but ultimately, the issues also go thru the US president’s desk.So far, we’ve experienced absolutely fair, constructive discussions. Of course, many things are complex, and we’ve agreed not to share any content. I will stick to that.
Oliver Blume, Volkswagen Group CEO

EU-U.S. Trade Talks Loom

Blume’s statements precede a new round of discussions between the European Union and the United States. Maroš Šefčovič, the EU commissioner for trade, is scheduled to meet with Howard Lutnick on the sidelines of an OECD council meeting in Paris on Tuesday.

Despite these talks, there is a widespread expectation that a baseline tariff of approximately 10% will likely persist beyond the July expiry date of the Trump administration’s 90-day pause on tariffs.

A Universal Approach

While Blume is engaging with Washington on behalf of Volkswagen, he maintains an eye on solutions that can be applied universally. This suggests a broader interest in fostering a stable and equitable trade environment.

The Volkswagen Group intends to continue investing in the US and plans to expand its partnership with the American electric vehicle manufacturer Rivian through further,massive investments. Blume emphasized that all of this should play a role in decisions regarding tariffs.

Challenges and Strategic Shifts

The past year has presented significant challenges for volkswagen, including increased competition from Chinese electric vehicles in the EU market. Volkswagen currently lacks an entry-level competitor in this segment.

The potential impact of U.S. tariffs on car imports is particularly concerning for Porsche. Unlike VW models and those of German competitors BMW and Mercedes-benz, Porsche cars sold in the U.S. are almost exclusively manufactured in Germany.

The German auto sector’s failure to anticipate the rise of Chinese competition is viewed as indicative of broader issues. Volkswagen is planning to reduce its workforce by 35,000 jobs by 2030.

In March, the company reported a 30% year-on-year drop in net profits, attributed to high production costs and declining sales in China.

When asked about the biggest mistake made by German manufacturers, Blume stated, we’ve rested on our laurels for too long and realised too late that the world is changing extremely rapidly and dynamically. He urged the German car industry to move beyond endless debates and rather decide and act.

Electric Vehicle Strategy

Sales of Chinese electric vehicles in the EU have more than tripled between 2019 and 2023. While the EU imposed 10% tariffs in 2024, slowing growth, concerns remain that China is not creating a level playing field.

The EU also fears that Chinese goods, initially intended for the U.S.market, may be diverted to Europe in the long term.

Blume defended Volkswagen’s electric vehicle strategy,noting the upcoming launch of VW,Cupra,and Skoda EVs priced around €25,000,followed by a more affordable entry-level car called the ID.EVERY1.

He acknowledged that job cuts are painful but emphasized that something has to happen if the company wants to survive long term.