Confidence in electric vehicles among automakers in the United States and other countries has dipped as many are concerned that their large bets on EVs may take longer to pay off, according to a KPMG survey of 1,000 auto executives from 30 nations.
Expectations for profitable growth in the automotive industry over the next five years have weakened in Japan, Western Europe, and the United States, according to survey results published on Jan. 4. While executives saying that they were “extremely confident” about profitability dropped to 43 percent in 2023 from 48 percent in 2022 in the United States, the same metric fell by 7 percentage points in Western Europe and a massive 22 points in Japan. This change in sentiment is “remarkable,” professional services firm KPMG noted.
“Just a year ago, executives were excited about the prospects for transforming the industry with new kinds of cars. Now, they remain optimistic, but they are more sober about how difficult it will be to manage the transition and preserve or increase profits,” it stated.
“The reasons for concern are clear. Companies have made huge bets on electric propulsion and are increasingly concerned about near-term headwinds that could postpone the payoff. While a flood of new EV models is coming to market, demand has weakened and some players may come under extreme pressure as competition intensifies.”
Two years ago, executives said that EVs would account for 20 percent to 80 percent of new car sales by 2030. In the new survey, the range of estimates “has narrowed considerably.”
China is expected to have the highest EV penetration rate by the end of this decade, at 36 percent of new vehicles. In the United States, Western Europe, and Japan, penetration is expected to be 30 percent to 33 percent.
“The estimate of EV penetration by executives in our survey are far below those of clean energy advocates. The Rocky Mountain Institute in late 2023 predicted that EVs would account for more than two-thirds of global auto sales by 2030,” KPMG noted.
“Having committed more than half a trillion dollars to the EV transition, the industry is asking when companies will see a return on the investment,” Gary A. Silberg, partner-global automotive sector leader at KPMG in the United States.
“Right now, almost all automakers are losing money on their battery-electric vehicles, possibly presaging a shakeout among EV manufacturers and suppliers.”
The charging infrastructure for EVs is another major problem that automakers “continue to wrestle with,” KPMG said.
Not only is there pressure on automakers to build profitable electric vehicles, they also have to ensure that customers have access to excellent charging infrastructure.
“Pressure to build an effective charging network will only grow because car owners are becoming increasingly demanding about charge times in secure locations,” the company stated.
EV Troubles
The survey comes as automakers are scaling back on their EV investments. General Motors and Honda have already announced that they’re scrapping a $5 billion plan to jointly develop EVs, with GM stating that it was slowing down the company’s electrification strategy.GM is “moderating the acceleration of EV production to protect ... pricing, adjust to slower near-term growth in demand, and implement engineering changes that will bolster profits,” the company’s chief financial officer, Paul Jacobson, said in October 2023.
In November 2023, Ford announced that it was reducing EV investments by $12 billion. It also scaled down a battery factory’s production capacity, leading to 800 job cuts.
Last month, Ford revealed that just above half of all of the company’s dealers in the United States have opted to sell EVs in 2024, which is lower than the two-thirds of dealers who'd earlier expressed an interest in doing so.
In November 2023, nearly 4,000 car dealers across the United States wrote a letter to President Joe Biden seeking to halt the administration’s EV mandate. Last year, the Biden administration proposed regulations that would require 67 percent of new car sales sold in 2032 to be electric vehicles.
The letter noted that “the reality, however, is that electric vehicle demand today isn’t keeping up with the large influx of BEVs (battery electric vehicles) arriving at our dealerships prompted by the current regulations. BEVs are stacking up on our lots.”
While there was a lot of hype around EVs in 2022, that enthusiasm has now “stalled,” the letter said. The supply of unsold EVs is “surging” as dealerships are unable to sell them as fast as they’re arriving. The lack of sales is happening even after providing deep price cuts and incentives.
“With each passing day, it becomes more apparent that this attempted electric vehicle mandate is unrealistic based on current and forecasted customer demand,” the letter stated.
“It is time to tap the brakes on the unrealistic government electric vehicle mandate,” the dealers wrote, while asking for more time for EVs to become affordable, battery technology to advance, and reliable charging infrastructure to be built.
According to a recent report by car insurance app firm Jerry, only 41 percent of survey respondents said that “they were interested in buying or leasing an EV as their next vehicle,” which is down by 49 percent from a year earlier.
