The US auto industry is bracing for an EV winter. Here’s why.
EVs were once the future in the US. Now, they’re at risk of short-circuiting. Policy changes, tariffs, and supply chain disruptions have sparked warnings of an EV deep freeze. One analyst told BI that the US was at risk of falling behind just as China’s EV giants race ahead. Electric vehicles are facing a perfect storm in the US — and it’s threatening to throw the industry into a deep freeze. A nightmare combination of policy changes, tariffs, and supply chain upheavals has prompted automakers that once set ambitious EV targets to revise their strategies, lay off workers, and double down on hybrids and gasoline vehicles. CEOs have been sounding the alarm bells for a while. The end of the $7,500 tax credit for new electric vehicles in September prompted Ford boss Jim Farley to predict that EV market share in the US would nearly halve to around 5% in the near term, while Tesla CEO Elon Musk warned in July that the company could face a “rough few quarters” as federal support for electric cars was rolled back. The initial signs suggest they may have been right. After hitting a record in September as buyers rushed to beat the tax credit deadline, EV sales collapsed nearly 49% in October, according to data from Cox Automotive. Stephanie Valdez Streaty, Cox Automotive’s director of industry insights, told Business Insider that the rollback of government support would “shift the timeline” for EV adoption. She estimated that EVs would now make up around 24% of new car sales by 2030, far from the aspirational target of half set by the Biden administration four years ago. “We’re not going to see a huge growth in the next couple of years,” Valdez Streaty said, adding that a lack of affordable EVs was still the main barrier for adoption. A perfect storm With the outlook for EV demand looking decidedly chilly, carmakers are tightening their belts. GM announced plans to lay off 1,750 workers last month, citing slowing electric vehicle demand after taking a $1.6 billion charge over changes in its EV strategy. Rivian also announced layoffs last month, equivalent to 4.5% of its workforce. The global auto industry is still reeling from the impact of US tariffs and has faced a pileup of supply chain headaches, including a temporary shortage of crucial chips and a fire at a major Ford aluminum supplier. “The whole combination of everything in the water right now is causing some automakers to either cancel or delay electric vehicle programs,” Stephanie Brinley, an associate director at S&P Global, told Business Insider, adding that the impact would leave consumers with fewer choices over the next few years.