On Thursday, the company announced that its assembly plant in Chattanooga, Tennessee will stop production of the company’s all-electric SUV ID.4 in mid-April. Instead, the focus will be on production of the new generation of the best-selling gasoline-powered SUV, the Atlas model. Production of the second generation Atlas will begin in the summer and will be available at dealerships in the autumn.
Volkswagen will continue to sell whatever is left in ID.4 inventory until it runs out, which they expect will be sometime in 2027.
“The EV market is challenging the industry, dealing with this unpredictability that has required measured decisions over the past few years,” Volkswagen said in a press release announcing the decision.
This is especially bad news for environmentalists: Atlas models rank far worse than the ID.4 on fuel economy efficiency standards, with the Atlas using nearly 5 times as much energy as the EV model it replaces.
Even though ID.4 production is effectively ending in the US, manufacturing continues in China and the EU. The company also said it is currently planning a “future version of the ID.4” specifically for the North American market, but did not specify what it would look like.
Volkswagen’s decision is the latest in a downward trend for the EV industry, which began when President Trump slashed the $7,500 electric vehicle tax credit last year. But while the US EV industry is shrinking, Chinese and European sales continue to grow. China has outperformed almost every other industry in the quality and affordability of its EVs, and Chinese exports now dominate most EV markets around the world, except the US, where Chinese EV imports face 100% tariffs.
Trump and some US automakers may essentially agree to give the global EV race to China, but some experts warn that this would be ill-advised, especially in light of recent events.
In retaliation for the US and Israeli military attacks that have been hitting Iran since February 28, the Iranian regime closed most traffic through the Strait of Hormuz, a key chokepoint for oil trade. In response, oil prices have skyrocketed around the world, including in the United States, highlighting the volatility of gas in an unpredictable geopolitical environment.
Morgan Stanley analysts estimate that with current gas prices, it is 60% cheaper to drive an EV than a gas-powered vehicle.
Car sales in the United States declined sharply in March, with auto industry insiders largely blaming 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 a surge in shipments despite the war in the Middle East, the China Passenger Car Association said on Thursday. Earlier this week, Wang Chuanfu, CEO of Chinese EV giant BYD, reportedly said the company expects overseas EV sales to grow to “another level” this year due to higher gas prices.
Rising gas prices have also sparked some interest in EVs in the United States. According to car buying platform CarEdge, online searches for EV models increased 20% in the first three weeks of the war.
One American automaker that may have benefited was Tesla. The company said last week that despite the loss of the tax credit, it sold more EVs in the first three months of 2026 than in the same period in 2025. The company is reportedly developing a smaller, cheaper (and actually new) EV offering that would solve the affordability problem plaguing the US market in the absence of government subsidies and help the company become more competitive in China, where low prices reign supreme.
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