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The difference makes it difficult for foreign automakers to offer models aimed at American consumers while 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 being hit harder than domestic manufacturers by President Donald Trump’s tariffs. The tariffs on imported cars and parts are raising Volkswagen’s costs and forcing the company to choose between raising prices, which hurt sales, and sacrificing profits.
The auto tariffs will remain in place even if the Supreme Court strikes down many of Trump’s other tariffs, which are based on a different law, in a ruling expected soon.
Volkswagen’s troubles are the latest setback in the company’s long-running quest to become a major player in the United States. Worldwide, Volkswagen is second only to Toyota Motor in terms of the number of cars it sells. But it is a niche brand in the United States, selling 330,000 cars last year, down 13% from 2024. Toyota sold more than 2.1 million cars in the United States in 2025, up 8%. And the Japanese automaker’s luxury brand Lexus sold nearly 400,000 vehicles.
Hyundai, based in South Korea, also weathered the headwinds faced by foreign automakers. US sales rose 8% to 900,000 cars in 2025.
In the 1960s, during the heyday of the Beetle, Volkswagen was the largest car importer in the United States. But it was pushed aside by Asian brands and has been trying to recapture its glory ever since. Volkswagen is also still trying to rebuild its reputation after a diesel emissions cheating scandal that came to light in 2015.
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“It is clear that 2025 brings real challenges for the industry and 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 U.S.”
The company predicted that sales will improve in 2026 when the company starts selling a new version of the Atlas SUV, which will be made in Chattanooga, Tennessee. The company declined to comment further.
The Atlas is insulated 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 causing bigger problems. The company, based in Wolfsburg, Germany, reported a loss of 1.1 billion euros ($1.25 billion) in the third quarter of 2025, with tariffs partly to blame.
Volkswagen isn’t the only German automaker struggling in the United States. According to analyst estimates, sales of Mercedes-Benz vehicles fell by about 10% last year; the company has not yet reported sales figures for 2025. Mercedes produces SUVs in Alabama, but its luxury sedans and many parts are imported.
BMW did slightly better. U.S. sales rose 5% in 2025 from the previous year, although a 3% decline in the fourth quarter could signal trouble in 2026. In Spartanburg, South Carolina, it makes two popular SUVs, the X3 and X5.
“Clearly they are in better shape,” Stephen Reitman, an analyst at Bernstein in London, said of BMW.
Washington’s reversal of policy on electric vehicles has been a problem for most automakers.
General Motors said Thursday that its profits would be hurt by a $7.1 billion loss in the final quarter of 2025, mainly due to the reduced value of its investments in electric vehicles. Ford Motor took a $19.5 billion hit to its electric vehicle profits last month.
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But for Volkswagen, policy changes undermined plans to use electric vehicles to gain a greater share of U.S. car sales.
In 2022, Volkswagen became one of the first foreign automakers to produce an electric vehicle in the United States, depending on the Biden administration’s climate and auto policies. But sales of that car, the Chattanooga-made ID.4, fell 60% in the fourth quarter after Congress eliminated tax breaks of up to $7,500 for people who bought or leased electric vehicles.
Lately, Americans have introduced hybrids, which offer some of the benefits of electric cars but don’t require charging. Volkswagen does not offer hybrids in the United States.
“We are in a hybrid era right now,” said Ryan Rohrman, CEO of Rohrman Automotive Group, which has 22 dealerships in the Midwest selling brands including Toyota, Hyundai and Volkswagen. Rohrman said he did not understand why Volkswagen had not offered hybrid models.
By 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-speed car market. Luxury vehicle sales remain fairly strong because wealthy people still have money to spend. But middle-class buyers are in a pinch, which is hurting sales of moderately priced cars like the Jetta and Golf.
“They are in a middle market that is evaporating,” Erin Keating, executive analyst at Cox Automotive, said in an email. “Buyers are either trading on established luxury or value.”
Volkswagen owns Audi, but that luxury brand is also having a hard time. Audi’s U.S. sales fell 16% last year to 165,000 cars. Porsche, also part of Volkswagen, did not report its U.S. sales for the full year.
Rohrman said Volkswagen could be as successful in the United States as it is in the rest of the world if company leaders made more of an effort 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 it.”
This article originally appeared in The New York Times.
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