The global automotive industry is no stranger to navigating complex trade policies, supply chain challenges, and shifting market demands. For Audi, a premium brand under the Volkswagen Group, the United States represents a critical market with significant growth potential. As the company evaluates its manufacturing strategy, Audi nears a decision on its first U.S. plant, a move that could reshape its operations in North America. This decision, driven by long-term strategic goals rather than short-term political pressures, comes as the automaker faces a 25% tariff on imported vehicles proposed by President Donald Trump. Below, we explore Audi’s options, the implications of this potential investment, and how it aligns with the company’s vision for the next decade.
The Context Behind Audi’s U.S. Manufacturing Plans
Audi’s consideration of a U.S.-based factory predates the current tariff discussions. The automaker has long recognized the importance of localized production to strengthen its foothold in North America, where it sold over 230,000 vehicles in 2023. The U.S. market, with its appetite for premium SUVs and electric vehicles (EVs), is a cornerstone of Audi’s global strategy. However, the proposed 25% tariffs on imported autos have added urgency to these plans, prompting Audi to accelerate its decision-making process.
At the Shanghai Auto Show in April 2025, Audi CEO Gernot Döllner emphasised that the company is moving “full throttle” toward a final decision on its first U.S. plant. While the tariffs present a challenge, Döllner framed the potential factory as part of a broader, decade-long commitment to growth in North America. “We will stay in the U.S. market, and we will find a way to be part of that market and to grow,” he stated, underscoring Audi’s resolve to remain competitive.
The decision to establish a U.S. manufacturing presence is not about yielding to political pressure, as Döllner clarified. Instead, it reflects Audi’s proactive approach to mitigating trade barriers, optimising supply chains, and meeting customer demand more efficiently. As Audi nears a decision on its first U.S. plant, the company is weighing multiple options, each with its own set of opportunities and challenges.
Audi Nears Decision on First U.S. Plant: The Options on the Table
Audi is considering three primary strategies to establish or expand its manufacturing capabilities in the United States. Each option leverages the existing infrastructure of its parent company, Volkswagen, to streamline operations and reduce costs.
Option 1: Building a New U.S. Factory
The first and most ambitious option is to construct an entirely new manufacturing facility in the United States. This greenfield approach would allow Audi to design a state-of-the-art plant tailored to its production needs, particularly for high-demand models like the Q5 SUV and future electric vehicles. However, building a new factory is a long-term endeavor, with an estimated timeline of three and a half to four years from groundbreaking to full operation.
To maximize efficiency, Audi is likely to locate the new plant near an existing Volkswagen facility. The South, where German automakers like BMW and Mercedes-Benz have established manufacturing hubs, is a strong contender. Volkswagen’s supplier networks in the region, already supporting its Chattanooga, Tennessee, and Puebla, Mexico, plants, would provide logistical advantages. By situating the new factory close to these networks, Audi could reduce transportation costs and streamline component sourcing.
While a new plant offers long-term benefits, such as greater production capacity and flexibility, it requires significant upfront investment and patience. As Audi nears a decision on its first U.S. plant, the company must balance these factors against the immediate pressures of tariffs and market competition.
Option 2: Utilizing Volkswagen’s Chattanooga Plant
For a faster solution, Audi is exploring the possibility of producing vehicles at Volkswagen’s existing factory in Chattanooga, Tennessee. This plant, which currently assembles models like the Volkswagen Atlas and ID.4 electric SUV, could serve as a short-term stopgap while Audi finalizes its long-term plans. By leveraging Chattanooga’s infrastructure, Audi could begin U.S. production sooner, mitigating the impact of tariffs on imported models like the Q5, which is currently manufactured in Mexico.
Using an existing facility would require adjustments to accommodate Audi’s premium vehicles, which often demand higher-quality materials and specialized assembly processes. However, the shared ownership under the Volkswagen Group would facilitate collaboration, making this a viable interim solution. As Audi nears a decision on its first U.S. plant, the Chattanooga option offers a pragmatic way to maintain market presence while preparing for a more permanent manufacturing strategy.
Option 3: Repurposing the Blythewood Facility
The third option involves repurposing a new Volkswagen facility under construction in Blythewood, South Carolina, originally intended for Scout, Volkswagen’s rugged EV brand. This plant, still in its early stages, could be adapted to produce Audi vehicles, offering a middle ground between building a new factory and using an existing one. Converting the Blythewood facility would allow Audi to benefit from a modern production site without the full timeline and cost of a greenfield project.
Like the Chattanooga option, repurposing Blythewood would enable Audi to respond to tariffs more quickly than a new plant would. However, it would require careful coordination to ensure that Scout’s production goals are not compromised. As Audi nears a decision on its first U.S. plant, the Blythewood facility represents a flexible, forward-looking option that aligns with the company’s electrification ambitions.
Navigating Tariffs and Market Dynamics
The proposed 25% tariffs on imported vehicles have thrown a wrench into the plans of global automakers, including Audi. The company currently manufactures its Q5 SUV in San José Chiapa, Mexico, and exports it to the U.S. under the United States-Mexico-Canada Agreement (USMCA). While the USMCA provides some trade benefits, the new tariffs could significantly increase the cost of these imports, squeezing Audi’s profit margins and potentially raising prices for consumers.
To address this challenge, Audi is exploring a combination of strategies beyond localized production. In the short term, the company may implement price increases to offset tariff costs, though Döllner has indicated a cautious approach to avoid alienating customers. Internally, Audi is also optimizing its operations, such as adjusting supply chain logistics and production schedules, to absorb some of the financial impact.
As Audi nears a decision on its first U.S. plant, these measures are critical to maintaining competitiveness in a market where rivals like BMW and Mercedes-Benz already have established U.S. manufacturing operations. BMW’s plant in Spartanburg, South Carolina, and Mercedes-Benz’s facility in Tuscaloosa, Alabama, have allowed these brands to navigate trade policies more effectively, highlighting the strategic advantage of localized production.
A Long-Term Vision for North America
Audi’s potential U.S. factory is not just a response to tariffs; it’s a cornerstone of the company’s 10-year plan to expand its presence in North America. The U.S. is a key market for Audi’s premium vehicles, particularly its SUVS and growing lineup of electric models like the e-tron series. By producing vehicles locally, Audi can reduce lead times, lower transportation costs, and better align its offerings with American consumer preferences.
The decision to invest in U.S. manufacturing also reflects Audi’s confidence in the region’s economic and industrial potential. The South, with its business-friendly policies, skilled workforce, and robust automotive supplier base, is an ideal location for German automakers. As Audi nears a decision on its first U.S. plant, the company is poised to join its peers in leveraging these advantages to drive growth.
Moreover, localized production could enhance Audi’s sustainability efforts. By reducing the carbon footprint associated with shipping vehicles from Mexico or Europe, a U.S. plant would align with the company’s commitment to environmental responsibility. This is particularly relevant as Audi ramps up production of electric vehicles, which are central to its goal of achieving carbon neutrality by 2050.
The Road Ahead
Audi is expected to announce its final decision on its first U.S. plant later in 2025, with CEO Gernot Döllner indicating that the company is moving swiftly to finalize its plans. Whether Audi opts for a new factory, the Chattanooga plant, or the Blythewood facility, the decision will mark a significant milestone in the company’s North American journey.
As Audi nears a decision on its first U.S. plant, the stakes are high. A U.S. manufacturing presence would not only help the company navigate tariffs but also position it for long-term success in a competitive market. By investing in localized production, Audi is signaling its commitment to the U.S., its customers, and its vision for a sustainable, innovative future.
The automotive industry is at a crossroads, with trade policies, electrification, and consumer demands shaping the strategies of global players. For Audi, the path forward involves bold decisions and strategic investments. As the company nears a decision on its first U.S. plant, it is laying the foundation for a new chapter in its North American story—one that promises growth, resilience, and a stronger connection with American drivers.