Volkswagen bet big on EVs. Now it's making room for gas-powered SUVs.

Volkswagen spent years preparing for an electric future. Now it's clearing space on the assembly line for more gas-powered SUVs.

In April, the German automaker announced it would stop building its ID.4 electric crossover at its Chattanooga, Tennessee, plant. The factory would instead concentrate on higher-volume models, particularly the Atlas and Atlas Cross Sport.

The Atlas has always had one big advantage over many of its three-row competitors: space. And I mean usable space, especially in that third row.

That's quite a change of direction for a company that once regarded the ID.4 as central to its American ambitions. The electric crossover was supposed to bring Volkswagen into a new era of affordable, mass-market electric transportation. Instead, the company is making room for the kind of vehicle American families have been buying all along.

And having recently driven the redesigned 2027 Atlas, I can understand why.

Whatever happened to the people's EV?

Volkswagen's electric ambitions weren't exactly modest. After its diesel emissions scandal, the company committed billions to electrification, developing an entire family of battery-powered vehicles under its ID branding.

The ID.4, which arrived in the United States in 2021, was a particularly important part of that strategy. It offered the familiar dimensions and practicality of a compact SUV, along with the promise of lower operating costs and freedom from the gas pump.

Volkswagen even invested in producing it domestically, making Chattanooga a major part of its North American EV operation.

For a while, the numbers looked encouraging. ID.4 sales rose in 2025, helped by the federal EV tax credit, which made the vehicle substantially more attractive to buyers. But after the credit expired on September 30, 2025, sales collapsed.

According to Volkswagen's sales figures, the company sold just 338 ID.4s in the first three months of 2026, compared with 7,663 during the same period a year earlier. That's a decline of nearly 96%.

By April, Volkswagen had made its decision. ID.4 production in Tennessee was finished, although remaining inventory would be available into 2027. The company hasn't ruled out bringing back a revised version.

And the ID.4 isn't the only electric Volkswagen that's had a rough time.

I happen to love the ID. Buzz, Volkswagen's battery-powered revival of the old Microbus. The styling is terrific, there's plenty of room inside, and it's a vehicle that makes you smile just looking at it.

But every time I've driven one, I've thought the same thing: Where's the range extender? The driving range just isn't enough for a vehicle designed to take people and their families on trips. Add the high price, and you've got a tough sell.

Volkswagen skipped the 2026 model year for the ID. Buzz and has since delayed its American return until the 2028 model year.

Look, there's nothing wrong with building electric vehicles. But they have to make sense for the people buying them. Price matters. Range matters. And so does being able to get where you're going without worrying about your next charging stop.

The Atlas gets a second chance

Which brings us to the 2027 Atlas.

My co-host Karl Brauer and I recently drove the redesigned SUV at a Volkswagen event in Huntsville, Alabama, not far from the Chattanooga factory where it's built.

First of all, if you've never been to Huntsville, it's a beautiful place to drive. The roads were excellent, the scenery was gorgeous, and the weather was just about perfect.

The Atlas has always had one big advantage over many of its three-row competitors: space. And I mean usable space, especially in that third row.

I know people who have kept their Atlases for years because they love them. One family I know has driven theirs from one end of the country to the other with adults sitting in the third row and all their luggage packed inside. No complaints. That's pretty impressive.

Fortunately, Volkswagen hasn't messed that up with the redesign.

The new Atlas still has that generous passenger room, but the interior is considerably more upscale. The materials are nicer, the seats are comfortable, and there's a lot more technology.

Depending on the trim, you get upgraded seating surfaces, a large central touchscreen, digital instruments, and the kind of detailing you'd expect in a more expensive vehicle. The available Harman Kardon audio system is especially impressive. Volkswagen even offers built-in games, including classics like Tetris and Uno, that you can play while the vehicle is parked.

Now, I don't know that anyone needs to play video games in their SUV, but if you're waiting to pick up the kids or sitting around at a campsite, I can see the appeal.

Under the hood is a revised 2.0-liter turbocharged four-cylinder engine producing 282 horsepower, paired with an eight-speed automatic transmission. Front-wheel drive is standard on lower trims, with all-wheel drive available.

Prices start at $43,135 and climb to $58,135 for the fully equipped SEL Premium R-Line.

One of the nice things about the Atlas is that you don't have to buy the most expensive version to get a well-equipped family vehicle. Even the base model comes with a lot of features people actually use.

Overall, I was impressed. Volkswagen has done a very nice job.

But there's one thing I don't understand.

Where's the hybrid?

The new Atlas comes with just one powertrain: that turbocharged gasoline four-cylinder.

And while it's reasonably efficient for a large SUV, an EPA-estimated 25 mpg combined with front-wheel drive and 23 mpg with all-wheel drive isn't particularly exciting when you look at what the competition is doing.

Take the 2027 Kia Telluride Hybrid.

Its 2.5-liter turbocharged hybrid system makes 329 horsepower — considerably more than the Atlas — and gets an EPA-estimated 35 mpg combined in the front-wheel-drive EX trim. Even the all-wheel-drive Telluride Hybrid gets 31 mpg combined.

That's a big difference when you're driving a three-row family SUV every day.

The Telluride Hybrid starts at $46,490 before destination, and a fully equipped version costs roughly what Volkswagen charges for its top-of-the-line Atlas.

So think about that. You've got two roomy, well-equipped, three-row SUVs. Both have attractive interiors, modern technology, and plenty of room for the family. But the Kia gives you more horsepower, substantially better fuel economy, and a longer powertrain warranty.

That's going to be a pretty easy comparison for a lot of buyers.

Hyundai and Kia have been doing an excellent job lately. They understand the American market, they offer a lot of equipment for the money, and they're giving customers a choice of gasoline, hybrid, and electric vehicles.

Volkswagen knows it's missing something. At the 2026 New York International Auto Show, Volkswagen Group of America CEO Kjell Gruner confirmed that hybrids are coming to the Atlas, Atlas Cross Sport, and Tiguan.

But we're not getting an Atlas hybrid right away. It's planned for a future midcycle refresh, which industry reports suggest could put its arrival around the 2029 or 2030 model year.

That's a long time to wait when your competitors already have theirs in showrooms.

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New York Daily News/Getty Images

Giving buyers a choice

Now, Volkswagen isn't abandoning electric vehicles altogether. The company continues developing EVs for other markets, and there's certainly room for electric Volkswagens in America if they offer the right combination of price, range, and practicality.

But I find the Chattanooga decision especially interesting.

Here's a company that invested heavily in building electric vehicles in America, and now it's using that factory capacity to build more gasoline-powered SUVs. Volkswagen clearly sees where the demand is.

And changing course isn't cheap. In its April financial report, the company disclosed roughly half a billion euros in costs associated with adjusting its American product strategy.

The good news is that the redesigned Atlas is an excellent vehicle. It's roomy, comfortable, attractive, and loaded with technology. I think a lot of families are going to be very happy with it.

But I also think Volkswagen missed an opportunity by launching it without a hybrid. Kia and Hyundai already have compelling alternatives that offer better fuel economy without asking drivers to change how they use their vehicles.

That's what more buyers want: options. Some want gasoline. Some want hybrids. Some want electric. And plenty of people just want a reliable, comfortable family SUV they can afford to own and drive.

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