Volkswagen will stop producing electric vehicles at its Chattanooga, Tennessee plant this month, pivoting to a larger gasoline-powered sport utility vehicle as demand for EVs weakens.

The German automaker said it would halt production of the ID.4 and instead focus on a new version of the Atlas SUV. Workers assigned to the EV line will be offered reassignment within the plant, with some eligible for early retirement.

The move comes as several major carmakers scale back electric vehicle plans following the removal of US tax credits, which triggered a sharp drop in sales.

Volkswagen sold around 250 ID.4 units in the United States in the final quarter of 2025, down more than 60 percent from a year earlier.

Industry-wide, companies including General Motors, Ford, Stellantis and Honda have delayed EV rollouts amid weaker-than-expected demand.

Still, signs of a potential rebound are emerging. Online searches for electric vehicles rose 25 percent from late February to March, driven partly by rising gasoline prices linked to tensions in Iran.