Volkswagen AG is facing a potential watershed moment as it contemplates closing its Audi electric vehicle (EV) assembly plant in Brussels, Belgium. This could mark the company’s first European plant closure in its history in response to declining EV sales and broader economic challenges.

The Brussels plant, which employs around 3,000 workers, is currently dedicated to producing the Audi Q8 e-tron and Q8 Sportback e-tron models. However, these EVs have seen a drop in demand, with sales falling from 19,500 units in the first half of 2023 to 17,900 units in the same period of 2024.

Volker Germann, CEO of Audi Brussels, expressed clarity on the potential closure stating, “The announcement of the intention does not mean that a decision has been made. Nevertheless, this news has been felt very profoundly by the employees in Brussels and by me too. A transparent and constructive dialog is important in the process that will follow. We will take all perspectives into account.”

The potential closure is part of a larger trend of struggles for Volkswagen in the EV market. The company reported a decline in overall EV deliveries, down to 317,200 units in the first half of 2024 from 321,600 units in the previous year. Particularly concerning is the nearly 20% year-over-year sales decline in the Chinese market, where domestic automakers such as BYD are gaining market share with competitively priced, long-range EVs.

As a result, the company’s financial outlook has lowered its forecast for operating return on sales to 6.5 to 7%, down from the previous 7 to 7.5%. Furthermore, the potential costs associated with restructuring or closing the Brussels plant could result in a hit of up to 2.6 billion euros ($2.81 billion) to the company’s operating profit in the 2024 fiscal year according to Reuters.

The situation in Brussels is symptomatic of broader challenges facing European automakers including waning EV demand and increased competition from Chinese automakers. The European Union (EU) responded with recently implemented provisional tariffs on EVs imported from China in response to these pressures.

Read More: EU Goes Ahead With Tariffs Up To 37.6% on Chinese EVs

As Volkswagen grapples with these challenges, it’s pinning hopes on upcoming models such as the VW ID.7 Tourer, Audi Q6 e-tron, and Porsche Macan Electric to revitalize sales. The company reported an increase in its order bank in Western Europe to around 170,000 units, suggesting potential for recovery.

With this potential plant closure in consideration, Volkswagen’s restructuring efforts will be depended on its next move to aim ahead in the EV market.

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