Due to Weak Demand, Volkswagen United States Chattanooga Plant Cuts ID.4 Production

According to foreign media reports, Volkswagen Group of America has recently announced an adjustment to the production plan of the ID.4 electric vehicle at its Chattanooga plant in Tennessee due to weak demand for the model. Starting from September 2, the plant has gradually reduced the production of the ID.4 compact electric crossover, resulting in 160 employees being placed on temporary furlough beginning at the end of October.

Volkswagen stated that it will supplement the unemployment benefits provided by the state of Tennessee, which means that affected employees will receive 80% of their base salary and continue to enjoy full benefits.

Image source: Volkswagen

A Volkswagen spokesperson stated in a statement, "This production adjustment will not change our commitment to the ID.4, to the Group's expanding electric vehicle portfolio, or to the team at the Chattanooga plant. This decision is entirely market-driven and aims to align our production with market demand."

The spokesperson stated that Volkswagen will reduce the number of ID.4 units assembled per production shift, while the production plans for the other two models manufactured at the Chattanooga plant—the large crossover Atlas and the Atlas Cross Sport—will remain unchanged.

Volkswagen's launch of this initiative comes at two critical junctures: first, the federal government’s tax credit policy for electric vehicle leasing and purchasing will end on September 30; second, contract negotiations between Volkswagen and the United Auto Workers (UAW) in Chattanooga have been ongoing for about a year.

According to the research and data center of "Automotive News," the sales of the ID.4 in the United States dropped significantly by 65% in the second quarter of this year, with sales of fewer than 2,000 units, which dragged down Volkswagen's overall sales in the U.S. market. However, in the second quarter of 2024, the sales of this model approached 5,700 units.

Although the ID.4 was the third best-selling electric vehicle in the United States this January, it soon lost eligibility for the $7,500 federal EV tax credit, and its sales have remained sluggish ever since. To counter this disadvantage, Volkswagen has been offering significant incentives, reducing the ID.4’s monthly lease payment to $129, making it the lowest-cost electric vehicle to lease in the U.S. However, this has clearly failed to reverse the model’s declining sales trend.

This production cut is yet another obstacle faced by the ID.4 model. In September 2024, due to a defect in the door handles, Volkswagen issued a months-long sales suspension and halted the production of the ID.4. It is reported that in 2022, Volkswagen shifted the production of the ID.4 for the U.S. market from Zwickau, Germany, to the Chattanooga plant.