VW Starts Building Electric Vehicles In U.S. Plant: Just-In-Time Production

The timing couldn’t be much better for Volkswagen to start building electric vehicles in its U.S. plant in Chattanooga, Tenn., just as the United States has passed new requirements for EVs to be built in North America, in order to receive the proper share of a federal tax credit of up to $7,500 for buying an electric vehicle.

“We’re excited that model-year 2023 ID.4s are rolling off the production line,” in Chattanooga, said Hein Schafer, senior vice president, Product Marketing and Strategy at Volkswagen of America Inc., Herndon, Va.

In a webinar hosted by the New York-based International Motor Press Association, Schafer said the new Volkswagen ID.4 electric crossover vehicle is now the brand’s “fastest-selling” model in the U.S. lineup, with 30,000 advance reservations.

Earlier versions of the Volkswagen ID.4 were imported into the U.S. market from Europe. Moving EV production to Chattanooga was part of an $800 million additional investment in the U.S. market, VW said.

More EV models will follow, Schafer said.

Presumably, the decisions that led to producing electric Volkswagens in the United States were set in motion years ago, but it’s great optics for Volkswagen to roll out the new, U.S.-built model so soon after the U.S. Inflation Reduction Act took effect Aug. 16.

VW’s announcement of the start of U.S. production will be one among many, as other import brands do what they can to speed up existing plans to shift EV production to North America.

The stakes are high. In August, the Alliance for Automotive Innovation, a trade group for auto manufacturers, said the Inflation Reduction Act would disqualify 70% of the 72 electrified models which were then eligible for tax credits, including battery, plug-in hybrid and fuel cell electric vehicles.

Congress also passed new, phased-in requirements for where auto manufacturers source content for EV batteries, such as lithium, with an eye towards reducing reliance on China.

According to the Alliance for Automotive Innovation, there are no electric vehicles currently on the market that would qualify to pass the new content restrictions.

Volkswagen’s Schafer said there’s still “legal going back-and-forth” over VW meeting future battery-content rules. Nevertheless, he said kicking off North American assembly is a “step in the right direction.”