Although electric vehicles hit another sales record, high production costs and a dwindling new customer base have spawned increasing corporate losses, forcing electric vehicle (EV) makers to scale back on their plans to expand the market. Some experts believe that these problems are a result of government interference in the business of industrial policy.
The Oct. 12 report from Kelley Blue Book revealed that sales of EVs hit a record in the third quarter of 2023, accelerating past 300,000 battery-powered vehicles “for the first time in the U.S. market.”
With 313,086 vehicles sold, that exceeded the record high of 298,039 sold in the second quarter and was an increase of nearly 50 percent from the year-ago quarter. With year-to-date sales topping 873,00 in September, EV sales are predicted to exceed 1 million by Thanksgiving.
In all, EVs accounted for 7.9 percent of car sales between July and September, a record leap of 0.7 percent from the second-quarter numbers.
However, despite the robust sales figures, EVs are now piling up on dealership lots, and manufacturers are losing money. After investing billions of dollars in the EV market, many carmakers are sounding the alarm, saying that demand isn’t keeping up with their expectations.
As they head into 2024, many of these companies are scaling back on their once enthusiastic EV production plans.
Slowdowns, Losses, and Cutbacks
Against the record numbers, sales haven’t translated into anticipated profits.According to reports, data from Edmunds.com show that EVs, which once sold within 21 days, are now sitting on dealership lots for an average of 65 days.
Business Insider reported that EVs are so hard to sell for Mercedes-Benz that the automaker has “put them on clearance at enormously discounted prices” to get them off dealership lots.
Ford Motor Co.’s third-quarter earnings revealed rising losses with EVs, posting an operating loss of $1.3 billion, up from $1.1 billion in the previous quarter and more than double its loss from the year-earlier period.
Ford is now postponing about $12 billion in future EV investments, including the planned construction of a new battery plant, Business Insider reported on Oct. 27. Ford’s Model e (for electric) lost $1.3 billion, translating to a loss of about $36,000 per vehicle delivered.
Yahoo Finance reported in August that EV revenues are so bad that Ford anticipates a loss of roughly $4.5 billion.
Ford, however, isn’t the only company tapping the brakes on EV production.
General Motors Co. (GM) announced on Oct. 25 that it’s abandoning its goal of producing 400,000 EVs by mid-2024. GM is also delaying plans to retool its Lake Orion plant in Michigan for the production of two all-electric pickup truck models: the Chevy Silverado EV and the GMC Sierra EV.
More bad news came on Oct. 25 for those hoping for cheaper EV options. GM and Honda announced the cancellation of their long-planned collaboration to produce a whole range of EVs that would each cost less than $30,000. The joint venture, announced in April 2022, was supposed to make the cheaper EVs available for markets in North America, South America, and China by 2027.
On Oct. 31, Markets Business Insider reported that Tesla took a $41 billion hit as the EV market continues to lose support. Tesla CEO Elon Musk’s ownership of 13 percent of Tesla’s stock accounts for the bulk of his personal wealth. The world’s richest man has seen his fortune fall to $193 billion, according to the latest estimates by Bloomberg’s Billionaire Index. It’s the first time since early June that his wealth has fallen below $200 billion.
Even Hertz, the car rental company that once imagined becoming the world’s premier EV provider, is reconsidering those plans due to tumbling EV resale value and the high cost of collision repairs.
The Verge reported on Oct. 27 that Uber drivers, who rent about 50 percent of Hertz’s Tesla EVs, are causing far more damage than Hertz expected.
According to a recent study from CCC Intelligent Solutions Inc., EVs have a higher repair cost than their internal combustion engine vehicle (ICEV) counterparts. Based on insurance claims for small, nonluxury EV brands with front-end damage that were still drivable, EVs cost an average of $4,041 to fix, about 27 percent more than ICEVs.
Fueled by Government Assistance
EVs are expensive, too. According to Edmunds.com, the average transaction price of a new EV in April was $64,029, compared to the average transaction price of $47,664 for a traditional gas-powered vehicle.The early success of EV sales appears to have been fueled by government assistance.
As the federal government pushes America toward “100 percent, full-electric,” Jason Isaac of the Texas Public Policy Foundation suggests that it has less to do with “mitigating climate” and more to do with “control.”
“I think it was just a political push,” he told The Epoch Times. “You had companies that started to get involved in politics rather than their fiduciary duty and now, it’s backfiring. You’re only now starting to hear about the problems because these companies are losing so much money.
“There’s a spot for EVs, but it’s certainly not 100 percent.”
He said that the only reason that EV sales have been successful is because “the government is forcing this.”
“They’re forcing this transition on us. It’s about control,” he said. “They’re forcing us to go down this path.”
On Aug. 5, 2021, President Joe Biden signed an executive order “setting a goal that 50 percent of all new passenger cars and light trucks sold in 2030 be zero-emission vehicles, including battery electric, plug-in hybrid electric, or fuel cell electric vehicles.”
Starting in 2023, all purchasers of qualifying EVs became eligible for a tax credit of up to $7,500. Corporations, which receive an estimated $216 billion in tax credits, are the primary benefactors of the IRA. Manufacturers that sell 200,000 qualifying EVs are eventually phased out of qualification for the incentives.
So far, only two auto manufacturers, Tesla and GM, have reached the 200,000 threshold. Tesla hit the 200,000 mark in July 2018, and GM followed in November 2018.
Soon after Tesla’s phaseout, demand for EVs dropped, forcing them to cut EV prices by $2,000. After GM lost its eligibility for the tax credits, sales of its EVs slowed so dramatically that the company was forced to lay off 14,700 workers and stop production of both the Chevy Volt and the Cadillac CT6.
In April, the U.S. Environmental Protection Agency (EPA) announced tougher emissions standards for passenger cars and light trucks for 2027. The more stringent requirements build upon those set by the EPA for model years 2023 through 2026. S&P Global predicts that these standards will push EVs to a 67 percent market penetration and 46 percent of all new medium-duty model years by 2032.
Two years later, the infrastructure isn’t capable of supporting current demand.
Codibly, a software company with a mission to “empower the transition” to renewable energy, says the current infrastructure is “expensive” and “poor.”
The logistics, communication, and agreements that are necessary between the grid, utility companies, and charging manufacturers are inadequate, and there are a host of problems with managing the energy drains during peak power-up times.
A trucking company that tried to charge 30 trucks at a facility in Joliet, Illinois, was shut down by local officials because it would exceed the amount of energy required to power the entire city, the American Trucking Associations said in April. In California, a company that tried to charge a dozen forklifts also was shut down.
A video posted to social media shows an enormous line of Teslas as drivers wait hours for their turn at a charging station in Louisiana. Another video shows cars sitting in California where drivers wait about eight hours for a 45-minute charge.
California leads the nation in EV sales, accounting for almost 40 percent of all EV registrations, data from the U.S. Department of Energy shows. However, much of California’s EV success can be attributed to new rules that essentially force people to buy them.
The ‘Five Cs’
Forbes suggests that there are five reasons why EVs are failing in the American market. They include product unfamiliarity, concerns about the distance an EV can go on a single charge, a limited network of charging stations, and high interest rates, coupled with already steep purchase prices.Diana Furchtgott-Roth, an Oxford-educated economist, has her own list of reasons, which she calls “the five Cs.” She serves as the director of the Center for Energy, Climate, and Environment and is the Herbert and Joyce Morgan fellow in energy and environmental policy at The Heritage Foundation.
“There are very real reasons why Americans don’t want to buy these and it all boils down to the Five Cs,” she told The Epoch Times.
“First is cost. They cost more. They cost $10,000 to $30,000 more than a regular vehicle, and most people don’t want to spend the extra money. The best-selling truck in the United States is the Ford F-150 pickup truck. The Lightning version of that costs about $26,000 more.”
Then, there’s “convenience.”
“People just don’t want to have to stop on a long road trip every two to three hours to charge their vehicle,” she said.
The third is “climate.”
“In a cold climate, the batteries in these vehicles lose 20 to 40 percent of their charge. In very hot weather, they lose some of their charge also. That’s why there’s only about 530 registered EVs in Wyoming and about 350 in North Dakota,” she said.
The fourth is “China.”
“People don’t want to be dependent on China, policymakers especially. They don’t want to be dependent on China for an important component of transportation,” she said. “China makes almost 80 percent of the world’s batteries, and it has a lot of the components and minerals that go into the batteries. If we go 100 percent EVs, we’re going to be dependent on China for an important source of transportation.”
The fifth on Ms. Furchtgott-Roth’s list is “children.”
‘Unsustainable’
Ultimately, Ms. Furchtgott-Roth believes that the market will correct the EV problems naturally.“When something is unsustainable, it stops, and I think this is unsustainable,” she said, suggesting that the number of automakers scaling back on production is an indication that “it’s stopping already.”
She also doubts that the goal of making America go 100 percent EV by 2035 will come to fruition.
“I don’t think the auto industry is going to manage to stop making the regular vehicles and switch to 100 percent electric vehicles. I just don’t see it happening. It’s a big mistake for the federal government to get into the industrial policy business and tell people what to buy,” she said.
To demonstrate how good market practices succeed, she cited the sales of Toyota’s RAV4 Hybrid, which has an internal combustion engine and a battery that extends the range of the vehicle to upward of 50 or 60 miles to the gallon. from 20 to 30 miles per gallon.
“It’s something the government hasn’t forced on people,” she said. “They haven’t forced Toyota to make it and there’s no tax credit to buy it. Toyota doesn’t get any big grant to build a manufacturing plant for it, but these things are selling. They’re selling because the company has identified a demand and is making the products that people want to buy.”
An example of how the market deals with a bad product, she said, is the iPhone and the Blackberry.
“First, there was the Blackberry. Then Apple decided they could do that better and they made the iPhone, and Blackberry was out of business,” she said. “It wasn’t that the government came in and said you have to make the iPhone and people are going to buy it.
“Companies are innovative. They identify opportunities for profit and market demand, and this is going to happen in the vehicle industry, too.”
Ultimately, Ms. Furchtgott-Roth believes that the future of the auto industry will be the hybrid.
“The companies that make the products people want will thrive while those who don’t will go out of business,” she said.
“Consumers should have a choice of product. They should be able to decide if they want a dishwasher that uses more or less water. They should be able to decide if they want a gas or an electric stove. They should have a choice of big cars or small cars, energy efficient or non-energy efficient. They will make the choice and the other ones will go out of business.
“It’s by consumer choice that companies innovate what works and you end up with better products.”
Officials at the Environmental Protection Agency and the Department of Transportation didn’t respond by press time to requests by The Epoch Times for comment.
