BERLIN, (Reuters) – Volkswagen is expected to take a hit to first-quarter earnings from the decision to end production of its ID.4 electric SUV at the German carmaker’s Tennessee plant, analysts said on Tuesday after a call with management.
Volkswagen will book a charge equivalent to 60% to 75% of its original $800 million investment to retool the Chattanooga plant to produce the model, Bernstein analysts said.
A Volkswagen spokesperson confirmed that Bernstein’s calculations were correct.
Excluding the writedown, the group’s operating earnings would increase year-on-year in the first three months of the year, according to Bernstein.
Volkswagen would also benefit beyond the first quarter “from no longer selling this unprofitable vehicle”, the analysts said.
Volkswagen announced on April 9 that it would end ID.4 production in Chattanooga this month, citing a challenging time for the U.S. electric vehicle market.
Automakers have scaled back or cancelled production of EVs after the federal government last fall ended the use of a $7,500 tax credit towards the purchase of an EV.
Reporting by Rachel More; Editing by Jamie Freed
