Volkswagen suffers more than rivals from auto industry challenges

Perhaps no automaker has been hit harder by shifting political winds in Washington and tumult in the global auto industry than Volkswagen.

- Jack Ewing

The German automaker’s sales in the US fell 20 per cent in the last three months of 2025 because of tariffs, trade conflict and the withdrawal of incentives to promote electric vehicles (EVs).

Volkswagen’s travails are an extreme example of the difficulties foreign automakers have had in the US car market as it diverges sharply from the rest of the world. Sales of EVs are growing in China, Europe and elsewhere but slumping in the US after Republicans in Congress and the Trump administration ended tax credits and other incentives. Policy now promotes fossil fuels.

The divergence makes it difficult for foreign automakers to offer models that cater to American consumers while also appealing to other buyers and fending off Chinese automakers, which are making inroads in Europe and Asia.

In addition to policy whiplash, Volkswagen and other importers are harder hit than domestic manufacturers by US President Donald Trump’s tariffs. The levies on imported cars and parts raise Volkswagen’s costs and force the company to choose between raising prices, which hurts sales, and sacrificing profit.

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 to the company’s long-running quest to become a major player in the US.

Globally, Volkswagen is second only to Toyota Motor in the number of cars it sells. But it is a niche brand in the US, selling 330,000 vehicles in 2025 - 13 per cent fewer than in 2024. Toyota sold more than 2.1 million cars in the US in 2025, an 8 per cent increase. And the Japanese automaker’s luxury Lexus brand sold nearly 400,000 vehicles.