BERLIN, April 14 - Volkswagen is set to take a hit to first-quarter results as a consequence of halting production of its ID.4 electric SUV at the automaker's Tennessee assembly site, analysts said following a call with management on Tuesday.
Bernstein analysts estimated that Volkswagen will record a charge equal to 60% to 75% of the $800 million that was invested to convert the Chattanooga plant to ID.4 production. A Volkswagen spokesperson confirmed that Bernstein's calculations were accurate.
The analysts added that, excluding this writedown, the group's operating earnings would have increased on a year-on-year basis for the first three months of the year. In addition, Bernstein noted a benefit that would extend beyond the immediate quarter, saying Volkswagen would also benefit later "from no longer selling this unprofitable vehicle."
Volkswagen disclosed on April 9 that it would end ID.4 production in Chattanooga during this month, citing a difficult environment for the U.S. electric vehicle market. The announcement comes amid wider adjustments across the industry, with automakers having scaled back or cancelled EV production after the federal government last fall ended the use of a $7,500 tax credit toward the purchase of an electric vehicle.
The move to take a substantial portion of the retooling cost as an accounting charge will directly affect the group's first-quarter bottom-line, even as analysts indicate underlying operating performance, excluding the writedown, showed year-on-year improvement. The confirmation from Volkswagen's spokesperson aligned with Bernstein's math, making the size of the charge clearer to investors.
For the automotive sector and market participants, the write-down highlights the financial and operational consequences of shifting demand conditions in the U.S. EV market. The company's decision to cease ID.4 output at Chattanooga and to recognize much of the retooling expense in the first quarter are immediate developments that will shape near-term reported results.
Clear summary
Volkswagen will register a first-quarter charge amounting to 60% to 75% of the $800 million invested to retool its Chattanooga plant for the ID.4, a figure confirmed by a company spokesperson. Excluding the charge, Bernstein said Volkswagen's operating earnings would have risen year-on-year in Q1, and the firm expects a longer-term benefit from stopping sales of the unprofitable ID.4.