Volkswagen Cuts U.S. Production Amid Slumping Sales; Chattanooga Plant to Lay Off Workers

Volkswagen is facing major headwinds in the U.S. market. Sales of the 2026 ID.4 electric crossover fell 19% in the first half of 2025, with the second quarter plunging 65% year-over-year. As a result, the German automaker has scaled back ID.4 output at its Chattanooga, Tennessee plant. Starting in late October, 160 workers will be let go, though they will receive 80% of their normal pay along with full benefits as part of a support package.

The ID.4 was originally positioned as a strong rival to the Tesla Model Y, but demand has fallen far short of expectations. Volkswagen stresses that the production cut doesn’t signal an exit from EVs or the ID.4 lineup, but rather an adjustment to actual market conditions.

Other models built in Chattanooga—the Atlas and Atlas Cross Sport—will continue to be produced at current volumes. Still, the numbers explain the company’s move: just 17,000 ID.4s were sold in the U.S. in 2024, compared to about 38,000 the year before. Under those conditions, maintaining previous production levels has become economically unsustainable.