New model launches. Price cuts. Lavish tax credits. You’d think that sales of electric vehicles (EVs) would be rising exponentially, right? Instead, legacy automakers are pulling back from what had been feverish investments in battery gigafactories and excited announcements of new EVs models. Now Ford is delaying billions of dollars of investment in battery plants. GM is walking back its target of 400,000 EVs by mid-2024. Tesla is willing to wait for the Cybertruck to get animated about sales again.
What’s changed their perspectives so quickly? Is this attitude shift aligned with valid assessments of consumer confidence, or is it a reaction to convoluted interpretations of economic forecasts?
The IEA concludes, “Thanks largely to the Inflation Reduction Act in the United States, we now project that 50% of new US car registrations will be electric in 2030.” That’s a huge ramp up, as battery-powered cars currently make up only 7.4% of the overall US auto market.
One out of every 5 cars sold in California is powered by a battery, registration data released Wednesday by the California New Car Dealers Association shows. California has led the way toward zero emissions transportation, with Governor Gavin Newsom stating he’ll phase out sales of new gasoline-powered cars by 2035 as part of the state’s fight against climate pollution.
That is all good — so what’s going on with the legacy automakers?
A June, 2023 Cox Automotive survey showed trends that placed EVs in an increasingly favorable light. At that time, while 53% of consumers agreed that EVs will eventually replace traditional ICE-powered vehicles, dealers were more cautious, with only 31% agreeing on an all-EV future. In fact, 45% of dealers felt that EVs had yet to prove themselves in the automobile marketplace.
Just a month later, Cox Automotive indicated that automakers were scheduled to release 150 new EVs by 2026. Foreshadowing, however, suggested that these objectives were becoming entangled in decreased consumer demand and a rigorous competitive pricing culture — the former of which was triggered by Tesla to boost sales numbers.
Meanwhile, the US Senate was forced to vote on a bill introduced last month by Senators Ted Cruz (R-TX) and Cynthia Lummis (R-WY) that proposed to strip the salary from a Biden administration official overseeing federal fuel efficiency regulations. The Senate rejected the bill, as reported by Fox News. Really?
We in the CleanTechnica family know that EVs produce significantly lower lifetime emissions than conventional ICE cars, even when accounting for mining for critical minerals, EV manufacturing, and the electricity for charging. Many of us were early adopters, and we’ve been watching with great enthusiasm for our family and friends to join the battery-powered transportation world.
Suddenly, it seemed, though, EV sales fishtailed to a stop. Tesla and legacy automakers declared intentions to temporarily tap the brakes on their battery electric vehicle investments, pointing to high interest rates and prices that are limiting demand. And it’s not just in the US. Volkswagen had been researching optimal locations for a battery gigafactory in the Czech Republic, Hungary, Poland or Slovakia, but chair Oliver Blume revealed on Wednesday that no decision will be made at this time.
Are Legacy Automakers Missing Out on Opportunities for Disruption?
This week’s ARK Disrupt newsletter addressed the turn of events in which legacy automakers slowed their plans to EV expansion. Because Ford and GM announced delays in their EV plans during their respective earnings calls, Sam Korus wondered, “Are they suggesting that EVs are not ready for prime time?”
For so long it seemed to make sense that legacy automakers, who possessed decades and decades of experience and scale, would not only master the battery electric marketplace but come to dominate it. That deduction has proven to be false. Korus suggests “that, by circular inference, their failure suggests that the timing is not right for EVs.”
If timing is all and EVs are assumed not to be in sync with the cultural and economic times today, then why, Korus asks, are “innovative companies like BYD and Tesla scaling the production of affordable EVs profitably, undercutting legacy assumptions, and leading the way?”
Founded in 1995, BYD Auto has established core technologies of the new energy vehicle (NEV) industrial chain, including batteries, electric motors, and electronic controllers. Admittedly, as a state-owned enterprise, BYD’s compensation of its workers has been questioned over the years.
Tesla also has had well over a decade of researching, developing, and manufacturing its battery electric vehicles, and with that history came many false starts. The company learned a lot from its mistakes, and now Tesla also has an established charging network and 6 massive gigafactories located in Fremont, California; Sparks, Nevada; Berlin, Germany; Shanghai, China; Austin, Texas; and Buffalo, New York.
Korus reminds us that “pure-play EV companies seem to be disrupting traditional automakers.” Instead of embracing disruption, the legacy automakers are delaying plans for aggressive EV investments. Such moves “could exacerbate the challenges to their future that traditional automakers are facing,” Korus says.
Dealers’ Reluctance is Partially to Blame for Slow EV Sales
When I taught 8th grade years ago, the students loved it when I brought out children’s books that captured the same theme as the new novel I was introducing. You see, it’s much easier to work with something that is familiar and does not interrupt the comfortable flow of knowledge.
That’s very similar to what’s going on with dealers, sales staff, and EV sales. Because dealers are not emphasizing EV sales and not providing professional development to their sales staff about the in’s and out’s of owning an EV, consumers aren’t getting the benefit of personalized knowledge to help them learn enough about EVs to feel comfortable making the purchase.
As a result, the days’ supply for new EVs has doubled since last year to 88 days; the average days’ supply for internal combustion engine (ICE) -powered vehicles is 59 days.
“There’s concern about public-charging infrastructure, even though most of the charging you’ll be doing will be at home,” Jeff Aiosa, who owns Mercedes-Benz of New London, CT told CNBC. “There’s still concern about those long trips.”
And what about the large number of US car dealers who refuse to stock EVs, or educate their customers about them, or train their sales staff how to answer questions about them? To many dealers, EVs still represent a niche market. And it’s hurting EV sales just went the electrification of transportation was taking off. Charging infrastructure shouldn’t be blamed as the sole cause of lagging EV sales.
As my colleague Jennifer Sensiba wrote, dealers are “sending customers off in an EV with just enough information to get themselves into trouble. If they don’t know the different levels of charging, don’t know how to find stations, and don’t know that the car won’t go the EPA-rated range going 85 MPH down the interstate, their first road trip is going to be a real learning experience, and not the pleasant kind.”
Dealers are clearly only one problem in the stalled EV market. However, grassroots enthusiasm goes a long way toward viable trends.
Making the charging experience easy is also important in attracting more EV buyers, and the growth of EV charging networks and stations is another step for legacy automakers to consider. As Simon Ouellette, the CEO of ChargeHub, puts it, “One of the most important expectations of EV drivers is that charging should be as simple as filling a gas tank,” so offering a seamless and simplified charging experience is one of the challenges facing the EV ecosystem as a whole.
“Having multiple accounts to charge on different networks will become a major challenge soon, hence the importance of accelerating EV roaming to offer the vision that EV drivers should be able to charge anywhere using their preferred method of payment and activation (favorite eMobility application, RFID card, car’s infotainment system, credit card, etc.) to charge seamlessly.” – Simon Ouellette
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