Volkswagen Cuts ID.4 Production Amid EV Demand Decline

Volkswagen is taking measures to reduce production of its ID.4 electric SUV at the Chattanooga plant in Tennessee, a move that indicates a downturn in anticipated demand for electric vehicles.

Although the ID.4 was the third best-selling EV in the U.S. earlier this year, trailing only Tesla’s Model Y and Model 3, its sales plummeted by more than 50% in 2024 after the company paused production and deliveries.

However, the SUV showed signs of recovery, with nearly 5,000 units sold in January 2025, putting it on track for approximately 60,000 sales this year.

Volkswagen expected lower EV demand in 2025

The decision to cut back on ID.4 production aligns with Volkswagen’s plans to adopt a two-shift schedule in response to expected lower EV demand.

While the company has not directly attributed the slowdown to external factors, it is likely that the tariffs imposed by the Trump administration on imports from Mexico and Canada are impacting operations severely.

Volkswagen maintains that its North American vehicles comply with the USMCA; nevertheless, the looming tariffs set to take effect in April 2025 are expected to significantly affect its cost structure, particularly for models from Audi and Porsche, predominantly produced in Europe.

In light of these challenges, Volkswagen has offered a voluntary attrition program for its employees in Chattanooga, which includes severance packages and retirement options. This comes on the heels of a historic decision last year, where workers at the plant became the first in the Southern U.S. outside the Big Three auto manufacturers to unionize since 1940.

The United Auto Workers (UAW) has since filed unfair practice charges against Volkswagen, highlighting the growing tension surrounding labor rights as the industry adapts to these economic pressures.

Furthermore, other automakers are sounding alarms about how these tariffs could hinder the U.S. auto industry’s competitiveness compared to China and other emerging tech leaders. With the global market shifting towards more affordable EV technology, companies are increasingly exploring partnerships and sourcing opportunities in countries like China.