Electric Vehicle Industry’s Challenge: Tesla, GM, and Ford Scale Back Production Amidst Growing Demand Concerns


Tesla, General Motors, and Ford have been cautious about expanding electric vehicle production capacity due to economic uncertainties and concerns about a slowdown in demand. Tesla CEO Elon Musk expressed concerns that higher borrowing costs could prevent potential customers from affording its vehicles despite substantial price cuts. He will wait for clarity on the economy before ramping up its planned factory in Mexico.

Musk’s comments, which sent Tesla shares down more than 4% in aftermarket trading, come after warning bells from other automakers and EV startups. GM and Ford have both temporarily halted production of their electric pickup trucks, with GM causing a year-long delay in production and Ford reducing one shift. EV startup Lucid reported a near 30% plunge in third-quarter production and only a marginal increase in deliveries despite big discounts, raising concerns about demand for its Air luxury sedan.

Rivian, an Amazon-backed company that produces electric pickup trucks and sport utility vehicles, has disappointed investors by not raising its full-year production forecast despite stronger-than-expected third-quarter numbers. Analyst Tom Narayan suggests that there could be a slowdown in EV demand in the near term, but this is more due to pricing and affordability than a rejection of EVs. He expects this to be a “dip” that improves as EV prices fall and lower-priced variants become available.

Automakers have billions of dollars in EV-related investments based on the next few quarters, and concerns about slowing demand are rising as companies grapple with supply chain constraints. Tesla, the market leader, has been aggressive in slashing prices to prevent demand from waning.

Tesla CEO Elon Musk has warned that rising interest rates may offset price reductions in the company’s Mexico factory, as consumers struggle to afford gas-guzzling vehicles. If interest rates remain high, it will be harder for people to buy the car, and Musk plans to accelerate the expansion of the Mexico factory if interest rates decrease. This expansion is expected in the US until June 2024, with economic data suggesting the central bank may keep interest rates higher.

Car manufacturingElectric VehicleElectric Vehicle Industry ChallengeFordGMScale Back Production Amidst Growing Demand ConcernsTesla