Audi Electric Car Factory In Belgium Mined By Closure, Employer Severance Pay Of Up To Hundreds Of Millions Of Euros

Audi Factory in Brussels, Belgium. (Doc. Audi)

JAKARTA - Volkswagen AG news plans to close the Audi electric car factory in Belgium as a cost-saving measure is getting stronger. This will be an important decision for Europe's biggest automaker.

According to Bloomberg, July 15, Volkswagen has never previously closed a car factory in the European region. However, factories in Brussels that have high operational costs have the potential to be the first due to low demand for electric SUVs produced there. Volkswagen mentions additional cost charges, including from restructuring, as a reason to lower its financial targets this year.

The sluggish sales of electric cars have forced automakers, including the Mercedes-Benz Group AG, to rethink their plans. Major areas such as Germany, Europe's largest car market, have removed or reduced incentives for electric vehicles. This increases pressure on old companies with the presence of new players like BYD from China starting to enter their market.

The existence of a strong union in Volkswagen has so far made it difficult for the company's restructuring efforts.

"The closure of the plant will be a big step in the right direction," said Deutsche Bank analyst led by the Rokossa Team in a note. "Most investors may not see it as a possibility."

The German automaker has corrected its operating profit forecast to a maximum of 7 percent, down from the previous highest estimate of 7.5 percent.

Audi's management has discussed with the Belgian government about the future of its plant in Brussels, which only produces a luxury Q8 E-Tron model and its variations. Factory closure is just one of several restructuring options, Volkswagen said.

The move "is part of an ongoing cost efficiency and size change program at VW," Jefferies analyst Philippe Houchois said in a note. "This is a possible indicator of restructuring actions across Europe's automotive industry in the coming years."

The Audi factory near Brussels employs about 3,000 people and has been producing Q8 e-trons since 2022. Deutsche Bank analysts estimate that severance pay alone will amount to hundreds of millions of euros.