For some time now, one of the hottest bets in the U.S. economy has been the electric vehicle industry. Until recently, manufacturers struggled to meet consumer demand. However, as 2023 progressed, something unexpected happened. Consumer demand for electric vehicles began to decline. A number of factors – including heightened interest rates – contributed to this development, but the perception of declining demand has set off alarm bells, particularly among EV manufacturers’ suppliers.

In an example both of how the declining demand can affect EV suppliers and the way that the decline can translate into securities litigation, on December 13, 2023, a plaintiff shareholder filed a securities suit against electric vehicle semiconductor supplier ON Semiconductor after the company announced declining sales of its automotive business segment products because of declining consumer EV demand. A copy of the plaintiff’s complaint can be found here.


ON Semiconductor Corporate (“onsemi”) manufactures and sells semiconductor components. A key to its corporate strategy is its development, manufacture, and sale of products incorporating silicon carbide (“SiC”). A number of onsemi’s products are necessary components in systems used in the production of electric vehicles (“EVs”).

The recently filed securities class action lawsuit alleges that during period between May 1, 2023, and October 27, 2023, the company made a number of disclosures concerning the anticipated growth of its SiC business, including statements that the company had confidence that it would reach $1 billion in its annual revenues from SiC products in 2023. Among other things, the company’s CEO said that the company’s outlook was “very predictable.” In meetings with analysts, the company presented what the complaint calls a “bullish picture” of the company’s prospects, particularly with respect to the company’s SiC products for the EV industry.

According to the complaint, on October 30, 2023, the company’s CEO disclosed to investors that the company was now “taking a very cautious approach” with its SiC products due to weakening demand in the Company’s automotive business segment, and also told investors that the company would miss the $1 billion 2023 revenue target by approximately $200 million.

According to the complaint, the company’s share price declined 22% on this news. The complaint asserts further that from a high of $46.6 billion on August 1, 2023, the company’s market capitalization fell to $28.2 billion on October 30, 2023.

The Lawsuit

On December 13, 2023, a plaintiff shareholder filed a securities class action lawsuit in the District of Delaware against onsemi and certain of its directors and officers. The complaint purports to be filed on behalf of investors who purchased onsemi’s securities between May 1, 2023, and October 27, 2023.

The complaint alleges that during the class period the defendants made “repeated misrepresentations to investors” about the “stability” and “demand” for onsemi’s SiC and other products and “the sustainability of onsemi’s revenue growth,” by “overstating the impact of the Company’s long-term supply agreements” on “the achievability of its revenue streams.”

The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to recover damages on behalf of the class.


The declining demand in the EV industry is for real. As the Wall Street Journal put in a November 17, 2023 article (here), “America’s spendthrift relationship with electric vehicles has lost some spark.” According to the Journal, inventories are piling up and prices are falling. The consumer demand for EVs “is clearly weaker than manufacturers were anticipating.”

Several factors seemed to be behind this unanticipated shift in consumer demand. One factor may be heightened interest rates, but at the Journal notes, demand across the entire automobile sector has remained high despite the elevated interest rates, so interest rates alone “can’t be the whole story.”

The Journal speculates that affluent tech enthusiasts who fueled the first wave of interest in EVs already have them. Higher overall vehicle costs compared to conventional vehicles may explain lower demand levels among other buyers, along with concerns about the availability of charging infrastructure.

Other considerations may be the anticipated release of a new Tesla model and the availability next year of a $7,500 tax credit for certain EVs. (The hope is that this credit will give EVs a boost next year, if manufactures can square the circle on all of the prerequisites to qualify for the credit.) The “most powerful brake on EV adoption is probably price.”

Among the fallout from the declining consumer demand is EV manufacturers’ reduced demand from their suppliers. Among other things, the price of lithium and other components of EV batteries has been declining. Along the same lines, EV manufacturers’ demand for products of semiconductor manufacturers has also declined, as the sequence of events at onsemi shows. As this demand decline has become apparent, the share prices of suppliers to EV manufacturers have also dropped, as illustrated by onsemi’s share price. (Motley Fool’s article about onsemi’s share price decline is captioned “ON Semiconductor’s Stock Tanks After an EV Slowdown Looks Possible.”)

The question for D&O insurance professionals is whether or not other companies that have been riding the EV wave may also face securities lawsuits as the EV industry goes through an unexpected shakeout period. It certainly seems possible that other companies facing the consequences of the unexpected decline in consumer demand for EVs that also experienced a share price decline could face the unwanted attention of plaintiffs’ lawyers.

While this possibility undeniably is there, one consideration could hold the plaintiffs’ lawyers back – that is, the downturn was unexpected, across the market. It wasn’t just onsemi that was blindsided by the unanticipated consumer demand decline, it hit all of the EV industry players.

Along those lines, when the time comes for the court to assess the sufficiency of the allegations against the defendants in the new onsemi lawsuit, the court will have to look long and hard to find allegations in the complaint sufficient to satisfy the plaintiff’s obligation to plead scienter with particularity.

That said, it cannot be ruled out that the various companies in the EV industry could find themselves in a securities litigation shooting gallery. EV companies have previously proven themselves to be a popular target for securities class action plaintiffs’ attorneys. During the bust that followed on the heels of the SPAC IPO frenzy that prevailed during the period from late 2020 through early 2021, EV firms that had become public companies through a SPAC merger were a frequent litigation target. By my count, of the 66 SPAC related securities lawsuits filed since January 1, 2021, 20 of those lawsuits (about 30%) were filed against companies in the EV industry.

One of the reasons that the EV companies that had merged with SPACs were such a frequent target was that the fanfare around the developing EV industry caused the share prices of many EV manufacturers to soar, particularly due to elevated estimates of the manufacturers’ vehicle product capabilities. When the actual production figures fell below projections, the lofty share prices plummeted, and the securities suits came flooding in.

Of course, it could be argued that this is exactly the pattern onsemi’s share price showed, as its share price declined on news of slackening demand.

All of which is a long way of saying that it may be time to set a lookout for the possibility of further claims ahead for companies in the EV industry, as the consequences of unexpected declining consumer demand ripple through the industry.

One potentially positive note amidst all this gloom is the message following the Fed’s meeting on Wednesday that the Federal Reserve may be targeting as many as three interest rate cuts in 2024. While even these cuts would leave rates at an elevated level compared to pre-pandemic rates, it could ease the interest rate pressure on consumer demand.