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EV Sales are Surging, so Why Are Automakers Planning Layoffs?

Ford follows Tesla in announcing plans to cut staff.
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While electric vehicles are enjoying an unprecedented surge in popularity, ongoing supply chain problems, and growing recession fears are beginning to hit the automotive industry.

EV sales rose 65% in Europe last year and doubled in the United States. 

But  automakers are facIng higher material and labor costs along with supply chain woes.

The popularity of electric vehicles has increased during the past two years as more automakers have launched additional options for sedans, SUVs and pickup trucks, but obstacles remain as the global economy slows down amid higher inflation and interest rates.

Ford ( (F) ) said on June 22 that it chose Valencia, Spain to increase its production of EVs in Europe instead of Saarlouis, Germany. Yet a Ford spokesperson told Reuters that there would be "significant" cuts to the number of employees working there along with its manufacturing plant in Saarlouis. 

Restructuring would occur in the near-term and the number of jobs eliminated would be "significant," the spokesperson said without providing details.

Ford spokesperson Michael Baumann told TheStreet that "we are not building full electric vehicles at this point in Valencia." However, "in order to make that happen, there will need to be restructuring in Valencia compared to today’s situation."

The other contender for the project was Ford's plant in Saarlouis,, which will continue to produce its Focus passenger car through 2025.

"We now will evaluate future site opportunities in Saarlouis, Germany that will also need to include restructuring," Baumann said. 

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Ford Wants to Sell a Lot of EVs in Europe

Ford's goal is to sell 600,000 EVs in Europe annually by 2026. It is continuing its plan of investing $2 billion to convert its Cologne, Germany plant so it can start manufacturing EVs there in 2023. Ford has planned to electrify its Ford Puma for consumers and the electric Ford Pro vehicles for its commercial segment.

Ford’s plan to add EV models is part of the company's goal to sell more than 2 million EVs by 2026 and have a  10% company adjusted EBIT margin by 2026.

In Europe overall, the number of EVs sold rose by 65% to 2.3 million in 2021, according to the International Energy Agency's global EV outlook in May 2022.

The European Parliament voted in June that  light-duty vehicles must be 100% zero emissions by 2035.

In the U.S., the number of EVs sold almost doubled from 308,000 in 2020 to 608,000 in 2021, including plug-in hybrid EVs, according to the U.S. Department of Energy. EV sales increased by 85% from 2020 to 2021, while sales of PHEVs rose by 138% over the previous year.

Tesla Also Planning Layoffs

Ford is not the only automaker facing financial woes. Tesla ( (TSLA) ) recently said it is planning to lay off 3.5% of its total workforce.

CEO Elon Musk said at a Bloomberg event that the EV manufacturer plans to eliminate 10% of its salaried employees during the next three months while adding more hourly workers.

Tesla's stock has declined by 29.6% during the past six months. Musk, who also is CEO of SpaceX, made a $44 billion takeover offer for Twitter in April, raising fears among some that he'll be distracted from Tesla if the deal goes through.

The company was also sued in June by two former employees who claim Tesla violated U.S. federal laws about “mass layoffs.” Tesla is also dealing with allegations of racist actions against its black employees. The company was sued by the California Department of Fair Employment and Housing in February due to complaints concerning racial discrimination and harassment.