Volkswagen just delivered another blow to the struggling U.S. electric vehicle market.
On Thursday, the company announced that its assembly plant in Chattanooga, Tennessee, will stop producing the company’s fully electric SUV ID.4 starting mid-April. Instead, the focus will shift to producing the new generation of Atlas models, a best-selling gasoline-powered SUV. The second-generation Atlas will begin production in the summer and will be available in dealerships in the fall.
Volkswagen will continue selling whatever is left in the ID.4 inventory until it runs out, which they expect will be sometime in 2027.
“The EV market continues to challenge the industry, requiring measured decisions throughout the last few years to navigate this unpredictability,” Volkswagen said in a press release announcing the decision.
It’s particularly bad news for environmentalists: The Atlas models rank far worse than the ID.4 on fuel economy efficiency standards, with the Atlas using roughly 5 times more energy than the EV model it’s replacing.
Even though ID.4 production is effectively ending in the U.S., manufacturing seems to continue in China and the EU. The company also said that it is currently planning “a future version of ID.4” for the North American market specifically, but did not specify what that will look like.
Volkswagen’s decision is only the latest in a rough downward trend for the EV industry that began when President Trump slashed the $7,500 electric vehicle tax credit last year. But while the American EV industry shrinks, Chinese and European sales continue to thrive. China has surpassed pretty much every other industry in the quality and affordability of its EVs, and Chinese exports now dominate most EV markets around the world, with a clear exception of the U.S., where Chinese EV imports face 100% tariffs.
Trump and some American automakers may have been fine with essentially conceding the global EV race to China, but some experts warn it may have been ill-advised, especially in light of recent events.
In retaliation for U.S. and Israeli military strikes that have been pounding Iran since February 28, the Iranian regime closed most traffic through the Strait of Hormuz, a critical chokepoint for the oil trade. In response, oil prices around the world, including in the United States, have skyrocketed, highlighting the volatility of gas in an unpredictable geopolitical environment.
Morgan Stanley analysts estimate that with the current gas prices, it is 60% cheaper to power an EV than a gas-powered vehicle.
Car sales in the United States slid sharply in March in a trend that auto industry insiders have largely attributed to rising gas prices.
China has been able to weather the storm for the most part, thanks to its EV industry. Chinese car exports accelerated in March, despite the war in the Middle East upending shipments, the China Passenger Car Association said on Thursday. Earlier this week, Chinese EV giant BYD’s CEO Wang Chuanfu reportedly said that the company expects overseas EV sales to soar to “another level” this year, thanks to high gas prices.
The rising gas prices have also driven some interest in EVs in the United States. According to car-buying platform CarEdge, online searches for EV models were up 20% in just the first three weeks of the war.
One American automaker that may have benefited was Tesla. The company said last week that it sold more EVs in the first three months of 2026 than it did in the same period of 2025, despite the loss of the tax credit. The company is also reportedly developing a smaller, cheaper (and actually new) EV offering to address the affordability problem that plagues the American market in the absence of government subsidies and to help the company be more competitive in China, where low prices reign supreme.
