AM radio is probably the simplest type of radio transmission, and because it is so simple, it has inherent noise issues. AM stands for Amplitude Modulation, which means that it encodes the signal by changing the “amplitude” of a fixed frequency (i.e. how “loud” the signal is). To decode AM, you simply filter off everything except that frequency then basically track the peaks of the signal. This means that anything on the same frequency or close to it gets mixed in with your decoded signal. There is no way to differentiate out the noise.
The bandwidth allocations for AM are also rather narrow. You want good hi-def audio? Not with AM. The bandwidth is too narrow.
Because of all of these technical limitations, most radio stations switched to FM in the 1970s. FM is frequency modulation, so it encodes the signal by changing the frequency. To decode it, your decoder just tracks the frequency changes. The decoder is going to lock on the strongest signal in that frequency range, so it will naturally block out less powerful noise signals. The bandwidth allocated to FM radio is also much wider, so you can get much better sounding audio (and in stereo!). So basically, as radios got better to the point where you could easily hear the difference, everyone moved the heck away from that crappy AM stuff.
By the 1980s, the FCC was starting to look at what could be done with AM radio, because it was basically a bunch of dead frequencies that could be better served by allocating them to something else. But then in the late 1980s and early 1990s, talk radio and sports broadcasting really took off on AM radio, and the FCC abandoned their plans to toss existing AM stuff into the trash can and give the frequencies to something else.
Now with satellite radio, AM is once again dying. It’s not quite dead yet, but it’s not exactly healthy. As was said upthread, EVs make a lot of electrical noise, and there is no way to filter off that noise on AM radios since some of that noise is going to be on the same frequency as the AM signals. So if AM radio is going to sound crappy at best, it’s hardly used at all these days, and it’s going to sound even worse due to all of that EV noise, why keep it?
Because AM radio is so crappy, the FCC did allow AM stations to simultaneously broadcast using digital signals and digital compression to improve the signal quality. The encoding and decoding of digital signals also bypasses all of the noise, so you end up with a proper noise-free signal back out of it at your radio receiver. Finally, a couple of years ago, the FCC allowed AM stations that were using digital simulcasting to drop the crappy sounding analog portion of their signal and broadcast only in digital.
So there is a solution for the crappy signal problem, but there aren’t many stations using it.
It doesn’t surprise me at all that car manufacturers are dropping AM. Aside from some resurgence in the late 1980s and early 1990s for sports and talk radio, it has long been a dying format. As far as I am aware, sports and talk radio still make it popular enough that the FCC isn’t considering abolishing it altogether, but it wouldn’t surprise me at all if AM radio completely disappears in the next decade or two.
There were quite a few car radios that didn’t have AM in the 1980s, so it’s not like this is anything new.