Volkswagen faces a sales plunge, tax credit loss, and market pressures
The Volkswagen ID.4 was full of promise when it came to the US market back in 2021. Since then, the compact electric SUV has enjoyed a series of ups and downs, vacillating between nigh-unsellable and serious contender. VW brought the nameplate substantial updates back in 2024, and it even managed to be the third best-selling EV overall as recently as January 2025. Of course, that was well before sales of the model dropped a precipitous 65% in Q2 of 2025 — perhaps a direct result of losing eligibility for the $7,500 federal tax credit. Now, the brand is ramping down production while laying off 160 employees from its Chattanooga production site.
Volkswagen
The news came early on September 2, 2025, and it likely isn’t a surprise to anyone paying attention. For one, a sales slump of 65% is hard to ignore, and it contributed to a 19% drop in sales year-over-year. Second, there wasn’t likely to be an uptick in demand coming any time soon, with an EV rebate gone and the possibility of tariffs still swirling. To make matters worse, a recall targeting the VW ID.4 was issued nearly exactly a year ago for door handles that could leak in wet conditions.
There is some silver lining to those affected by the layoffs, though. While 160 employees will be furloughed beginning in late October, VW publicly remarked that it will supplement unemployment from the state of Tennessee. Effectively, that means laid-off workers will receive 80% of their base compensation and retain full health benefits. Although officially a “slowing down” of production, ID.4 assembly will coast to a full halt by late October. This is the second time VW has elected to slow down production; the first announcement came in late March, when the automaker cut a shift from the ID.4 line.
2025 Volkswagen ID.4 Volkswagen
Other models at the factory — and VW’s plans going forward — largely remain intact
Michael Lowder tells the Chattanooga Times Free Press in an email that VW’s decision to press pause is purely a “market-driven” one. “This adjustment in no way changes our commitment to the ID.4, our growing EV portfolio, or our commitment to our Chattanooga team,” Lowder states. While the slowdown isn’t said to affect the other vehicles built at the plant — the Atlas and Atlas Cross Sport — we do wonder what effect, if any, the development will have on union talks. Just last month, Automotive News reported that talks between the UAW and VW were nearing conclusion, with final offers on the table. The last round of negotiations looked promising, with a 20% raise, cost-of-living adjustment, and reduced health care costs. Of course, that offer arrived after very nearly a year of negotiations.
Final thoughts
The VW ID.4 is a solid enough EV, and now might be a great time to pick one up at a hefty discount. As far as the future goes, that’s tougher to guarantee. There’s the vague possibility that if the EV rebate entirely disappears later this month, the ID.4 could become more competitive, as it would no longer be at a $7,500 disadvantage relative to its rivals. But we’ll have to wait and see. Hopefully, it’s “see you soon,” not “goodbye” for the Volkswagen ID.4.
