Volkswagen Germany is reducing the production of electric vehicle (EV) models in two plants due to declining demand in Europe and reduced government subsidies.

Volkswagen Germany will halt production of its ID.3 and Cupra’s Born electric models at its main EV factory in Zwickau until October 16. Additionally, it’ll halt assembly of the ID.3 at a smaller plant in Dresden until October 14.

Volkswagen is currently in discussions with local labor representatives to determine the production plan for Zwickau in the second half of October. Assembly in Dresden’s Glaeserne Manufaktur will return to normal during that time.

The interest in EVs in Europe has been hindered by increased energy, living, and borrowing costs. In addition, many consumers are worried about insufficient charging infrastructure and battery range.

Earlier in September, the German government halted subsidies for electric cars in business fleets. This caused new EV registrations to be 171 percent higher in August 2023 compared to August 2022, according to the Financial Post.

Previously, Germany had the most generous EV subsidies in Europe.

Given this context, Germany has been advocating for the continued use of internal combustion engine (ICE) cars within the European Union. Germany is pushing for climate-friendly ICE cars that are powered by e-fuels.

E-fuels are gasoline alternatives that are created by removing CO2 from the air and hydrogen from water. The molecules are then combined to create zero-emission fuels. However, energy experts criticize e-fuels for being inefficient and expensive.

Earlier this month, Volkswagen announced the release of 269 temporary workers in Zwickau. The layoffs were caused by the decline in orders for business cars following Germany’s subsidy phaseout. Company cars accounted for approximately 70 percent of the Volkswagen-branded EVs produced in Zwickau.