Electric vehicle makers trimming staff and output as sales sink

Ford's decision to cut production of its all-electric F-150 Lightning pickup truck last month underscored a sobering reality for the once-buoyant world of electric vehicles: The industry's rapid growth has stalled, and now comes the painful fallout.

Major automakers, including General Motors and Volkswagen, have also recently trimmed production of their electrified models, and layoffs or slowing assembly lines are cropping up at a range of startups and niche players, including BYD, Lucid, Polestar, and Fisker.

The culprit seems to be a convergence of factors hitting all-electric and plug-in hybrid cars at once: A tidal wave of new models has flooded the market in recent years, giving shoppers ample options yet also making it harder for any one model to stand out. Inflation and rising interest rates have also squeezed budgets, with some shoppers opting for cheaper gas-powered cars or holding onto their current vehicles longer.

And then there's the war in Russia and Ukraine, which has exacerbated supply-chain woes, especially for minerals crucial to battery production. All of that has added up to slowing sales: In the United States, for instance, electric vehicles accounted for only about 5% of new vehicle registrations in 2022, down from roughly 6% in 2021, according to the Edmunds.com auto shopping site.

Tesla, the world's most valuable EV maker, is weathering the storm for now. But it posted its first annual sales decline last year since its 2011 initial public offering, and its stock price has dropped by about half over the past year.

The company has laid off about 10% of its workforce, with CEO Elon Musk citing a "very tough economic downturn," and suspended output of its lowest-selling Model S sedan and Model X SUV. In December, Musk also tweeted that the company's Berlin and Texas factories "are struggling with supply chain issues & economics," and "will be production constrained for foreseeably future."

Tesla managed to avoid the brunt of the semiconductor crisis that hamstrung other automakers during the COVID-19 pandemic by innovating new ways to use fewer chips, and it has also been weathering the mineral supply woes better than some competitors.

The company also makes most of its battery cells in-house, avoiding supply chain headaches affecting other automakers. And it's been able to keep prices relatively stable while competitors raise prices with inflated commodity and shipping costs — something that Tesla itself predicted would happen in a 2019 SEC filing.

But with the company's stock price down from a high of more than $1200 in November 2021 to under $200 today, Tesla's fortunes could be on the downturn.

"They were the ones that were sort of carrying the torch for EV adoption," said Jessica Caldwell, an analyst with Edmunds. "Now that they're facing these same challenges, it's not a good sign for the industry as a whole."

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