“Mass Layoffs and Cheap Models” — EV Strategies Overhauled Amid Subsidy Expiration and Weakening Demand

EV Demand Weakens After Subsidy Removal
Tesla’s Record Revenue Accompanied by 37% Profit Drop
Low-Cost Models Could Backfire

Once-booming, the U.S. electric vehicle (EV) market is rapidly cooling as the prolonged chasm of stagnant demand deepens following the phase-out of government subsidies. Major automakers including GM, Ford, and Honda are halting plant operations and initiating layoffs, while Tesla’s attempt to defend demand through the launch of low-cost models is seen as inevitably eroding profitability.

GM Implements Major Layoffs, Temporarily Shuts Battery Plants

On the 30th (local time), The Wall Street Journal (WSJ) reported that GM plans to lay off more than 3,300 workers at its plants in Michigan, Ohio, and Tennessee in response to slowing EV demand. Among them, 1,700 employees will be laid off indefinitely, while another 1,500 are expected to return around mid-2026.

By plant, GM and LG Energy Solution’s battery joint venture Ultium Cells will suspend operations at its battery plants in Warren, Ohio, and Spring Hill, Tennessee, starting January 5 next year, resuming production by midyear. As a result, 1,400 workers at the Warren plant will be laid off indefinitely, and 710 at the Spring Hill plant will be temporarily laid off. GM spokesperson Kevin Kelly explained, “About 850 workers at the Warren plant are expected to return by May next year, while 550 will be laid off indefinitely.”

At GM’s EV-only assembly plant in Detroit, approximately 1,200 of the 3,400 workers will be laid off indefinitely. The plant, which usually operates two shifts, will halt production until November 24 and switch to a single shift starting next year. GM recently booked a $1.6 billion special charge to reflect the declining value of its EV plants and to cover costs related to layoffs and supplier contract terminations.

GM is not the only automaker retreating from the EV business. Ford has reassigned its F-150 Lightning EV production workers to internal combustion engine truck factories, while Nissan has halted production of its 2026 Ariya EV, and Honda has suspended manufacturing of the Acura ZDX electric SUV, built by GM. Commenting on the situation, Kehl Jerg Grüner, CEO of Volkswagen Group of America, stated, “Since the $7,500 subsidy ended late last month, we are now seeing the actual demand for EVs in the U.S.,” adding that “this year and next will require flexible production planning.”

Tesla’s Low-Cost EV Models Raise Profitability Concerns

With tax incentives expiring, Tesla, the leading EV manufacturer in the U.S., is overhauling its business strategy. To counter declining sales, the company has rolled out significantly cheaper versions of its lineup. On October 7, Tesla unveiled the “Standard” trims of the Model Y SUV and Model 3 sedan. The Model Y Standard is priced at $39,990, $5,000 lower than the Long Range RWD model at $44,990. The new variant features a battery pack that is 10% smaller, reducing its maximum range from 575 km (EPA) to 516 km.

While its dimensions and interior space remain unchanged, many interior and exterior options have been eliminated. Leather seats have been replaced with fabric, ventilated seating has been removed, and standard wheels have been downsized from 19 inches to 18. The rear-row touchscreen has been eliminated, and both the steering wheel and side mirrors now require manual adjustment. Frequency-sensitive shock absorbers have been omitted, reducing ride comfort. All changes were made to cut costs. The Model 3 Standard is priced at $36,990—$5,500 less than the premium version.

Tesla’s low-cost models are designed to sustain sales in Europe and Asia, where Chinese competitors are rapidly gaining market share. In the U.S., the company expects the lower prices to offset the loss of federal EV subsidies and ease the financial burden on consumers. According to Reuters, “CEO Elon Musk is pursuing a strategy of boosting revenue and profit by expanding sales volumes, even at the cost of lower per-vehicle margins.”

Tesla: “The Next Several Quarters Will Be Tough”

However, many analysts view Tesla’s strategy as a gamble that could make profitability even harder to maintain. The company’s operating margins are already under pressure. In the third quarter (July–September), Tesla reported $28.1 billion in revenue—its highest quarterly figure ever. This was largely anticipated, as the company’s Q3 vehicle deliveries had reached a record 497,099 units, up 7% year-over-year. The result also exceeded Wall Street’s consensus estimate of $26.37 billion compiled by LSEG.

Despite record revenue, Tesla’s earnings per share (EPS) came in at $0.50, missing the $0.54 consensus, while net income plunged 37% year-over-year to $1.37 billion. Analysts say the figures underscore Tesla’s underlying challenges: though sales rose as consumers rushed to buy EVs ahead of the subsidy phaseout, tariffs and restructuring costs are now weighing heavily on the bottom line.

Tesla also cited reduced revenue from carbon credit sales as another factor behind the profit decline. During its Q2 earnings call in July, CEO Musk warned that the company “will face challenging quarters ahead” due to the expiration of tax incentives and rising tariff burdens. Bloomberg noted that this reflects “the growing pressure faced by automakers amid shifting policies under President Donald Trump’s administration and escalating costs.”

Investor concern over Tesla’s outlook has been clearly mirrored in its share price. On October 23, the day of its earnings release, Tesla’s stock closed 0.82% lower at $438.97 on the NYSE, and dropped another 3% in after-hours trading, falling into the $420 range.