Automakers are scaling back EV production, meaning their suppliers will struggle to meet the sales volume they anticipated and agreed to before this unexpected deceleration.

Electric vehicle production seemed primed for rapid expansion. Ford, GM and Stellantis invested heavily in EV production in a shift toward the future of personal vehicles. Their suppliers followed suit. However, the big three domestic automakers then experienced prolonged labor strikes, higher-cost union contracts and an underwhelming rise in demand for their vehicles.

As a result, a contraction has hit those automakers and the industry at large, and EV parts suppliers find themselves in a difficult spot. Major automakers are scaling back production of their EVs, meaning their suppliers will struggle to meet the sales volume they anticipated and agreed to before this unexpected deceleration.

Alarm bells had been ringing in this sector since before the union strikes. EV charging infrastructure in the United States has been severely lacking compared to our European counterparts, and this, along with high vehicle pricing, has contributed to lower-than-expected demand for EVs in the United States. These problems are compounded by supply chain bottlenecks and disruptions.

Despite the many questions facing the EV space right now, automakers and legislators alike seem to have faith and conviction in an electrified future. The timing of that future, however, may not be as swift as previously thought. In this article, I’ll discuss the current situation around domestic EV manufacturing, the outlook for EV manufacturing in the short and long term and how suppliers can survive a complex and difficult situation.

Examining the EV Manufacturing Slow-Down

In December of 2023, Ford announced they would nearly halve their F-150 Lightning pick-up truck production due to changing market demand. A month earlier, they restarted production on their battery plant, but with around a $1.1 billion decrease in total investment. Overall, Ford reported $4.7 billion in losses on their EV business in 2023, and they expect that number to climb in 2024.

Similarly, GM noted that the UAW strike cost them $1.1 billion, and the new contract will increase labor costs by $1.5 billion. In the company’s Q4 2023 earnings call, they also stated that they expected their EV production to nearly halve in 2024.

Both organizations face lower demand than expected, and they aren’t alone. In January 2023, Tesla reduced prices on certain models by 20% in response to slower-than-expected growth. Meanwhile, Rivian is struggling to gain further traction in the market.

Automakers across the board appear to have overestimated the demand in this market while also being challenged by high labor costs and supply chain issues. The rate of growth in EVs simply hasn’t maintained its momentum. As automakers pause and reassess their EV plans, however, suppliers are left with limited options to recoup their investments in EV production.

EV Industry Outlook

The current situation is cloudy for suppliers and automakers, and it might take a while for some clarity. Despite relatively strong EV sales numbers in 2023, the rate of growth left much to be desired. Through the first 10 months of 2022, EVs represented 5.6 percent of the vehicle market, but that number only increased to 7.4 percent over the same period in 2023.

EV demand could be plateauing due to several consumer concerns. For example, EVs remain a high-priced product, often well out of the range of the typical consumer. J.D. Power reports that EVs sell for, on average, $14,000 more than gas-powered vehicles. That sticker shock is leaving EVs on dealership lots for significantly longer than gas-powered and hybrid vehicles. If a typical car owner is going to invest in an EV at that price point, they need a refined, reliable product.

Recurring national stories of Tesla recalls paint a difficult picture for the consumer looking for a long-term, dependable vehicle. Additionally, these vehicles are notorious for worsened performance in extreme heat and cold. In the cold, the driving range constricts due to battery issues, and the potential for an overheated battery worries consumers in warmer climates. Public EV chargers, of which there are not nearly enough, also experience performance problems depending on the severity of the weather. Indeed, there was notable publicity of frozen chargers and dead EVs during a severe cold snap this past winter.

The rest of the market may not share the enthusiasm of early adopters, instead prioritizing reliability and affordability over exciting new technology. In general, people are holding onto their vehicles much longer now. The average age of a car on the road in the United States was 12.5 years in 2023. New and used cars remain expensive as the industry still lags behind pre-COVID manufacturing rates.

Despite all these headwinds, EV adoption will continue to increase over time, and suppliers shouldn’t be too quick to abandon their EV investments. Federal investment in EV infrastructure continues to soar, and states are following suit as they hope to expand urban charging facilities. New tax credits have rolled out for EV purchases, as well. The demand isn’t there currently, but these moves should positively impact that in the coming years.

The big three domestic automakers may be slowing down their EV plans, but even GM hopes to ramp back up to their previously intended pace of production by 2025. Major players still see an opportunity and want to get this right, but it will take longer than expected due to factors of demand, pricing, supply chains, labor costs and more.

How Suppliers Can Respond to These Challenges

For some suppliers, this slowdown presents an opportunity. If you haven’t already invested in EV part R&D and manufacturing, your business has a chance to catch up now. Of course, with the benefit of hindsight, it’d be wise not to overleverage too quickly on EVs, but the window to become a player in this space has cracked open. Leaning into still-profitable ICE parts production can also be reasonable in the short term.

However, the situation is trickier for suppliers who have already made lofty EV investments to fulfill volume that may not materialize any time soon. Suppliers have long been at the mercy of inflated order projections from automakers. Rarely are there any penalties when an automaker doesn’t require the amount of volume for which they were quoted, leaving suppliers with hefty sunk costs to absorb. One remedy is to seek acceleration of any EV tooling payments owed by customers or reimbursement of EV capital expenditures that are not being absorbed due to the lack of volume.

While some may find rare luck inserting price-adjustment clauses into their automaker contracts to offset potential costs of volume changes or other input costs, most lack the leverage to win those terms. However, suppliers can approach their customers for short-term or permanent price increases if they are prepared with a detailed presentation supported by sufficient data. It can be an exhausting process, but it could be worth the results.

For the time being, it’s still important to work with your customers to reduce capital expenses as much as possible until the volume materializes. Otherwise, look to reduce expenditures where you can to help weather the storm.


The EV industry may struggle to deliver on the steep growth trajectory it projected over these last few years, especially in the near future. As automakers stall on their planned production due to increased labor costs, supply chain issues and lower consumer demand, suppliers will need to be nimble. The industry continues to receive significant government resources and private investment, but many of those projects may take years to come to fruition.

Suppliers might not have that much time, though, due to unfulfilled volume. While the threat to your business may be serious, it doesn’t have to be existential. With an effective restructuring strategy, your business can survive this slowdown and position itself in time for what could be a more sustainable EV upswing.