Mass Layoffs Triggered by Plummeting Demand for Electric Vehicles in the U.S

The shift has been abrupt, with companies like Ford and General Motors having to adjust their strategies rapidly due to changing market conditions. This development marks a stark contrast to previous expectations of job growth and industry expansion in small towns across the nation.

These measures include mass layoffs and the suspension of operations, a significant shift from the industry’s rapid growth in 2022. The surge in EV demand that year, which saw a 76 percent increase in April, had dwindled by the end of 2023, with sales dropping to just 50 percent of previous levels, according to the Wall Street Journal.

This reluctance has contributed to the slowing demand for EVs, significantly impacting the industry. As a result, the price of lithium, a key material for EV batteries, has dramatically fallen.

Both companies have expressed intentions to re-hire employees in the future, highlighting the industry’s current state of flux. “I think what you’re seeing is the slope changing in how fast people are willing to purchase EVs right now because they’re expensive and there is concern about charging infrastructure,” Alan Amici, CEO of the Center for Automotive Research, told NBC News.

Companies like General Motors and Ford are cautiously approaching the expansion of their EV and battery production facilities, despite making commitments to increase production capacity in the coming years.

Mary Barra, the chairman and CEO of General Motors, said in an earnings call, “It’s true, the pace of EV growth has slowed, which has created some uncertainty. We will build to demand, and we are encouraged that many third-party forecasts have U.S. EV deliveries rising from about seven percent of the industry in 2023 to at least 10 percent in 2024, which would mean another year of record EV sales.” 

This trend indicates a growing consumer interest in alternatives that offer a balance between traditional fuel and electric power, challenging the EV market’s growth trajectory.

Major lithium production companies in the U.S., such as Albemarle, have had to pause construction on new plants and lay off a portion of their workforce, reflecting the broader challenges faced by the industry.

Kent Masters, Albemarle’s CEO, pointed out the current economic infeasibility of these projects, attributing the pause to the adverse market conditions that have undercut the projected demand for EVs.

Gabe Daoud, a senior analyst at TD Cowen, highlighted the mismatch between the initial optimistic projections by giants like GM and Ford and the reality of the EV adoption rate, illustrating the challenge of a rapid transition to electric vehicles across the board.

According to NBC News, this reality check has prompted companies to recalibrate their strategies, balancing their investment in EV technology with the current market demand. It’s a delicate dance between pursuing innovation and responding to the immediate needs of consumers.

The New York Times recently reported that Tesla’s stock has plummeted in 2024, losing nearly $130 billion from its market capitalization.

Tesla cited its price drops as a reason for its revenue shortfalls as they are facing increased competition in the North American and Global markets.

According to Reuters, China is the world’s largest auto market, and EV sales have remained strong despite China reducing subsidies and the country’s own economic struggles.

“What’s notable about October’s figures is that EV demand in China continues to reach record highs even though the subsidies were cut … 2023 is set to be another banner year for China in terms of EV sales,” Rho Motion said. (via Reuters)

Some states offer purchasing incentives and there is a federal tax credit that pays offers between $3,700 and $7,500 for people who purchase a new EV. Some states also  also offer grant programs, replacement rebates, and EV development funding.

Chinese electric cars are 40 to 50% cheaper than the ones sold in Europe and the United States, according to CNN. The US should focus on making vehicles more affordable by default, instead of trying to fix the affordability problem with complicated tax incentives and subsidies.

Chinese citizens have experienced air quality issues first-hand, giving them a higher incentive to directly address the problem. The United States on the other hand has dragged its feet on implementing EVs on a large scale.

Over the lifetime of an EV, it will be responsible for nearly half the greenhouse gas emissions that a gas or diesel-powered vehicle will be. EVs emit less than a third of the amount of emissions per mile compared to gas vehicles, per The Washington Post.

Automakers are now tasked with aligning their production plans with the evolving landscape, requiring a flexible approach to both electric and traditional vehicle manufacturing.