Perhaps no automaker has been hit harder by the shifting political winds in Washington and the tumult of the global auto industry than Volkswagen. The German automaker’s U.S. sales fell 20% in the last three months of 2025 due to tariffs, trade conflicts and the withdrawal of incentives to promote electric vehicles.
Volkswagen’s difficulties are an extreme example of the difficulties foreign automakers face in the U.S. auto market, which diverges sharply from the rest of the world. Sales of electric vehicles are growing in China, Europe and elsewhere, but are slumping in the United States after congressional Republicans and the Trump administration ended tax credits and other incentives. Politics now favors fossil fuels.
That divergence makes it difficult for foreign automakers to offer models that meet the needs of U.S. consumers while attracting other buyers and fending off Chinese automakers, which are making inroads in Europe and Asia.
In addition to the political blow, Volkswagen and other importers are being hit harder than domestic manufacturers by President Trump’s tariffs. Taxes on imported cars and parts raise Volkswagen’s costs and force the company to choose between raising prices, which hurts sales, and sacrificing profits.
The auto tariffs will remain in place even if the Supreme Court strikes down many of Mr. Trump’s other tariffs, which are based on a different law, in a ruling expected soon.
Volkswagen’s problems are the latest setback in the company’s long-running quest to become a major player in the United States.
Globally, Volkswagen is second to Toyota Motor in terms of the number of cars sold. But it is a niche brand in the United States, selling 330,000 vehicles last year, down 13% from 2024. Toyota sold more than 2.1 million cars in the United States in 2025, an increase of 8%. And the Japanese automaker’s Lexus luxury brand sold nearly 400,000 vehicles.
Hyundai, headquartered in South Korea, has also weathered the headwinds facing foreign automakers. Its sales in the United States increased by 8% in 2025, to reach 900,000 cars.
In the 1960s, during the Beetle’s heyday, Volkswagen was the largest importer of cars in the United States. But it was pushed aside by Asian brands and has since been trying to regain its glory. Volkswagen is also trying to rebuild its reputation after a diesel emissions cheating scandal revealed in 2015.
“It is clear that 2025 has brought real challenges to the industry and to us,” Kjell Gruner, president of Volkswagen Group of America, said in a statement. “As we enter 2026, we do so with momentum and a renewed commitment to the United States”
The company predicted sales will improve in 2026 when it begins selling a new version of the Atlas sport utility vehicle, made in Chattanooga, Tennessee. The company declined to comment further.
The Atlas is sheltered from tariffs. But models like the Tiguan, Golf and Jetta are imported from Mexico or Europe and are vulnerable to trade tensions.
Volkswagen’s problems in the United States are fueling deeper woes. The company, based in Wolfsburg, Germany, reported a loss of 1.1 billion euros, or $1.25 billion, in the third quarter of 2025, attributable in part to tariffs.
Volkswagen isn’t the only German automaker struggling in the United States. Sales of Mercedes-Benz vehicles fell about 10 percent last year, according to analyst estimates; the company has not yet released sales figures for 2025. Mercedes makes sport utility vehicles in Alabama, but its luxury sedans, as well as many components, are imported.
BMW is doing a little better. Its U.S. sales rose 5% in 2025 from a year earlier, although a 3% decline in the fourth quarter could indicate trouble in 2026. It makes two popular sport utility vehicles, the X3 and X5, in Spartanburg, South Carolina.
“Clearly they are in better shape,” Stephen Reitman, an analyst at Bernstein in London, said of BMW.
Washington’s reversal in electric vehicle policy has been a problem for most automakers.
General Motors said Thursday its profits will be hit by a $7.1 billion loss in the final quarter of 2025, mainly due to the decline in the value of its investments in electric vehicles. Last month, Ford Motor saw its electric vehicle profits decline by $19.5 billion.
But for Volkswagen, the policy changes have jeopardized its plans to use electric vehicles to capture a larger share of U.S. car sales.
In 2022, Volkswagen became one of the first foreign automakers to manufacture an electric vehicle in the United States, banking on the Biden administration’s climate and auto policies. But sales of that car, the ID.4, made in Chattanooga, fell 60% in the fourth quarter after Congress eliminated tax credits of up to $7,500 for people who bought or leased electric vehicles.
Recently, Americans have been turning to hybrid vehicles, which offer some of the benefits of electric cars but don’t need to be charged. Volkswagen does not offer hybrids in the United States.
“We’re in a hybrid era right now,” said Ryan Rohrman, chief executive of Rohrman Automotive Group, which has 22 dealerships in the Midwest selling brands including Toyota, Hyundai and Volkswagen. Mr. Rohrman said he didn’t understand why Volkswagen hadn’t offered hybrid models.
In contrast, nearly half of all Toyota cars sold in the United States were hybrids, according to company figures.
Volkswagen has also suffered from a two-tiered auto market. Sales of luxury vehicles remain quite strong because wealthy people still have money to spend. But middle-class buyers are falling short, hurting sales of moderately priced vehicles like the Jetta and Golf.
“They are positioned in a middle market that is evaporating,” Erin Keating, executive analyst at Cox Automotive, said in an email. “Buyers are either opting for established luxury or luxury. »
Volkswagen owns Audi, but that luxury brand is also struggling. Audi’s U.S. sales fell 16 percent to 165,000 cars last year. Porsche, which is also part of Volkswagen, has not released its U.S. sales for the full year.
Mr. Rohrman, the car dealer, said Volkswagen could be as successful in the United States as in the rest of the world if company executives worked to understand the market.
“Toyota, Honda, Lexus – they want to own North America,” he said. “If Volkswagen was that hungry, I think they would have gotten it.”
