General Motors (GM) and Ford Motor are cutting billions in fixed costs, including laying off thousands of workers, and Chrysler parent Stellantis is taking even more drastic measures to reduce spending. According to Reuters, Ford Motor is taking a $19.5 billion write-down and is removing several electric-vehicle (EV) models from its line-up, as the auto industry retreats from battery-powered models in response to weakened EV demand and the Trump administration’s policies. GM and Stellantis have already shifted more of their production to combustion engine vehicles, also taking financial hits. GM wrote down $1.6 billion in EV assets and indicated that more write-downs are expected. Due to the push for electric vehicles by Western governments, automakers overestimated their demand and are now making a detour to correct the costly error.
Sales of new electric vehicles in the United States, especially more expensive models, have slowed since the beginning of 2024. The Trump administration rolled back financial incentives for consumers to buy electric vehicles in the One Big Beautiful Bill Act by removing tax credits at the end of the fiscal year, further depressing sales. The administration is also modifying automobile efficiency standards from those approved by the Biden administration to eliminate the requirement forcing EV purchases.
Companies Will Continue with EV Production at a Reduced Level
According to Reuters, Ford will switch production at a new factory in Tennessee to gas-powered pickup truck models from electric models, cancel an electric commercial van model, remake the F-150 Lightning vehicle into a hybrid from a pure electric vehicle; and convert its Kentucky EV-battery factory into a battery-storage business for utilities, wind- and solar-power developers, and data centers that train artificial intelligence. It is also planning to build a medium electric truck with a $30,000 price target by 2027 to be competitive with Chinese automakers. That was the first in a line of low-cost electric vehicles. CBS News reports that, by 2030, Ford expects about half its global volume to consist of hybrids, extended-range vehicles, and electric vehicles, up from 17% this year. Hybrids are believed to be more affordable and practical to consumers who are wary of pure electric vehicles due to their high sticker prices, worries over battery range, and access to charging stations.
Western vehicle makers are aware of the competitive threat posed by Chinese EV automakers, whose models are popular at home and abroad. U.S. automakers see Americans want smaller, affordable EV models like those made by Chinese automakers and sold outside the United States. Currently, Chinese vehicles are banned from U.S. markets because of tariffs. Ford’s changes are expected to put it on a better footing to compete with Chinese automakers.
Besides the $19.5 billion write-down Ford is taking, its EV losses since 2023 have totaled $13 billion, according to the Wall Street Journal, making its total EV junket at least a $32.5 billion mistake. American automobile buyers were charged more for their gas and diesel vehicle purchases to help pay for the misguidance of automakers producing electric vehicles, with overall vehicle prices hitting new heights. Many Americans felt vehicles were becoming unaffordable.
Via Electrek, GM is halting production of its electric vehicles due to slower EV industry growth and customer demand. Production of the Cadillac Lyriq and larger Vistiq, both of which are built at a Spring Hill, Tennessee facility, will be reduced during the first five months of 2026. GM plans to suspend one of its two shifts at the facility, resulting in layoffs for workers on the second shift. GM is also delaying the start of a second shift at its Fairfax assembly plant outside of Kansas City “indefinitely,” where the new Chevy Bolt EV was scheduled to enter production this year. GM also plans to slow production of the GMC Hummer EV and Cadillac Escalade IQ at its Factory Zero plant in Detroit.
Automakers Turn to Producing Energy Storage Batteries
According to the Wall Street Journal, automakers and battery manufacturers are repurposing electric-vehicle battery plants to serve the fast-growing data-center and utility markets, as slowing EV demand pushes companies to seek alternative revenue streams. General Motors, South Korean conglomerate LG, and Chrysler parent Stellantis have shifted toward producing batteries for energy-storage systems to help offset the downturn in electric-vehicle sales.
Tesla has already built a sizable business in the segment, generating billions of dollars in sales from energy-storage batteries. Revenue from its energy-generation and storage division, which also includes solar panels, rose 67% last year to $4 billion, partially cushioning a $6 billion decline in EV revenue.
GM is also exploring a partnership to supply energy-storage batteries to Redwood Materials, a battery-recycling startup. Under the proposed arrangement, GM would provide Redwood with a mix of new and used batteries for large-scale storage projects. Meanwhile, a Chinese-owned battery manufacturer that had planned to supply Mercedes-Benz is now considering pivoting to energy-storage products in an effort to revive a stalled factory project in Kentucky.
U.S. electricity demand is growing again due to demand from artificial intelligence data centers, manufacturing, and increased electrification, which was pushed by the Biden administration and continues to be pushed in blue states. These factors make energy storage a growing business.
Europe Waters Down Its Ban on New Gas-Powered Vehicles
As reported by the BBC, the European Union has watered down its ban on new gas-powered vehicles, easing rules approved two years ago that required all new vehicles sold from 2035 onward to have zero carbon emissions, which would have effectively barred the sale of hybrid vehicles as well as traditional internal combustion engines. Instead, it is using a strict emissions cap that leaves room for gas and hybrid models. Instead of a 100% tailpipe carbon dioxide reduction target in 2035, it has a 90% fleet reduction. The change still forces automakers to sell mostly zero-emission vehicles, but it opens a path for a small number of plug-in hybrids and highly efficient combustion cars, particularly those that can run on certified carbon dioxide-neutral e-fuels or advanced biofuels.
Analysis
The so-called EV revolution is beginning to stall as automakers repurpose their EV production capacity in favor of gas-powered vehicles and batteries for energy storage. Slowing EV sales and the removal of subsidies and mandates by the Trump administration and congressional Republicans have signaled to these manufacturers that their efforts are better served by meeting consumer demand rather than government incentives. Even in Europe, politicians are starting to realize that forcing automakers to sell only EVs would raise prices and force consumers to drive cars that can’t travel as far.
For inquiries, please contact wrampe@ierdc.org.
