Volkswagen cuts forecast on Audi plant closure in Belgium & additional expenses

Volkswagen AG lowered its margin outlook for the year, citing costs related to a potential Audi plant closure in Belgium after disappointing demand for some electric vehicles and other unplanned expenses.

The German carmaker reduced its guidance to as much as 7%, down from a previously predicted high of 7.5%, according to a filing Tuesday. VW also cited other expenses that weighed on its second quarter result, amounting to the total additional burden of €2.6 billion ($2.8 billion) on its operating result.

Other key forecast measures were left unchanged.

Audi’s management has been in discussions with the Belgian government about the future of its Brussels factory, which had no additional models planned beyond the Q8 e-tron. It said in March that it would make a decision by the end of the year.

Carmakers have been grappling with poor EV sales, prompting a range of manufacturers including VW and Mercedes-Benz Group AG to rethink plans. Key markets including Germany, Europe’s biggest auto market, have removed or cut incentives for EVs, leading to lower-than-expected demand.

According to Tuesday’s statement, Audi is now working on developing solutions for the site, which at the end of this process “may among other things be closed down."

Additional costs included exchange rate losses, expenses in connection with the planned closure of the gas turbine business of MAN Energy Solutions and provisions for termination agreements to cut personnel.

Separately, Porsche cut its profit outlook after tax, citing equity investment in Volkswagen. Volkswagen will publish its financial report for the first half on Aug. 1.

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