Stalled Transformation: Has the Heartland of U.S. Manufacturing Become an "Investment Trap" for Foreign Companies?

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(Source: The Observer)

【Text / The Observer Zhang Jiadong Editor / Gao Xin】

In Saint Clair, Michigan, a few years ago, an electric vehicle order once made supply chain giant Magna see a new growth curve. According to the order agreement at that time, the company would supply battery casings for GM’s electric pickup trucks and invest hundreds of millions of dollars to build a new factory on a cornfield, aiming to occupy a key position in the U.S. electric wave.

Five years later, this factory, covering over a million square feet, is largely idle and continuously losing money, exemplifying the industry’s intense volatility. Similar projects are not uncommon in the U.S.—as demand for electric vehicles cools, many parts and battery factories have fallen into shutdowns or low-load operation.

The Magna factory in Saint Clair, Michigan Reuters

Most of these projects are concentrated in the traditional manufacturing belt of the American Midwest—from Michigan, Ohio to Indiana—areas that once thrived during the gasoline vehicle industry and declined with industry offshoring, once seen as models of “reindustrialization” in America’s electric transition.

Under the Biden administration’s policy subsidies and capital push, numerous battery, electric drive, and vehicle projects have been rapidly implemented.

However, as the market cools and policies shift, these regions face an awkward “second stall”: new industries have yet to stabilize, while jobs from old industries have already been weakened. Some local governments previously offered hefty tax incentives and infrastructure investments to attract projects, but now they have to face idle factories and empty fiscal returns.

The situation in Saint Clair is a microcosm of this trend.

According to a recent report by The Wall Street Journal, GM has announced a suspension of large electric pickup production in Detroit, directly impacting Magna’s orders. Magna CEO Swami Kothajrit admitted that the industry is experiencing “unprecedented uncertainty,” and it may take another 18–24 months for the Saint Clair plant to regain profitability and find new clients and demand.

The rapid policy shifts further amplify this uncertainty. Within just a year of Trump’s second term, the U.S. government canceled the $7,500 EV tax credit and relaxed fuel economy and emission standards, effectively “braking” the electric vehicle path for automakers.

Ford’s manufacturing line in Michigan, USA Associated Press

Over the past year, Ford has paused production of the electric F-150 and shifted focus to hybrid models; GM, meanwhile, has cut capacity significantly while maintaining its electric route to cope with declining demand.

The Wall Street Journal

Market data confirms this trend. Industry organization Auto Innovation Alliance shows that U.S. EV sales share has dropped from 9.6% in 2025 to 6.5% in the past three months, hitting a new low since 2022. J.D. Power also predicts that overall vehicle sales will continue to weaken, and the short-term EV share is unlikely to rebound.

However, in stark contrast to the shutdowns and shrinking investments of domestic automaker factories, overseas automakers are not “retreating” on the product side.

At the April 1st New York Auto Show, many mainstream manufacturers still launched new electric models intensively: Kia announced it will launch a lower-priced EV3 in the U.S. within the year; Subaru unveiled a three-row electric SUV “Getaway,” further expanding its electric product line.

The Kia Seltos showcased at the 2026 New York Auto Show Reuters

This “market cooling, product expansion” contrast is especially stark in the Midwest manufacturing heartland: on one side, constantly updated electric blueprints at the booths; on the other, idle factories, worker layoffs, and local fiscal pressure.

The statements from automaker executives also show division. On one hand, Nissan’s North America head directly said, “Demand for electric vehicles has disappeared,” believing that the current market largely depends on subsidies; on the other hand, Hyundai observed signs of EV sales recovery in California amid rising oil prices, emphasizing that this is more “market-driven than policy-driven.”

Kia’s seemingly long-term outlook suggests that the U.S. EV market may recover in the next three to four years, but at a noticeably slower pace than previously expected; Toyota plans to continue launching new EV models and bets on demand recovery driven by oil price fluctuations.

This indicates a “tug-of-war” between short-term realities and long-term expectations among U.S. automakers:

On one side, idle factories, shrinking supply chains, and reduced investments; on the other, ongoing product planning and an unchanged technological route.

Parts companies like Denso and BorgWarner have begun layoffs and factory closures. Research organization Atlas Public Policy notes that over $20 billion in EV-related investments in the U.S. have been canceled in the past year.

For small and medium suppliers, the impact is even more direct: initial production line investments are hard to recover, and if automakers cut projects, they can only passively bear losses.

In Saint Clair, local governments once offered tax incentives and infrastructure support to attract Magna, but now they face fiscal pressure from idle factories. Mayor Bill Seida bluntly said the biggest uncertainty is “when new industries will fill the gap.”

Greater uncertainty comes from the policy cycle itself. Both local governments and automakers cannot be sure that if the U.S. government shifts back to supporting EVs in the future, the current reduced capacity and supply chain will not face another costly “rebuilding.”

Foreign media reports indicate that Magna is still trying to find new ways for this factory and improve production flexibility to adapt to different powertrains. Kothajrit said about 80% of the company’s products can be used across different power types to hedge against route changes, and regarding the uncertainty, he said “no one has a crystal ball.”

In the midst of the EV transition, the American Midwest manufacturing belt, once hopeful for a “green revival,” is now caught between the disconnect of old and new cycles—neither fully free from the shadow of traditional industry nor yet experiencing the certain growth of the electric era.

This article is an exclusive piece by The Observer. Unauthorized reproduction is prohibited.