Executives with General Motors, Ford, and Mercedes-Benz this week conceded there is a weakening demand for electric vehicles, with some announcing they would pull back on their own EV targets.
“It’s been a challenging situation, for sure,” Ford CEO Jim Farley said Thursday in an earnings call with investors, referring to the American market for EVs, according to an earnings call transcript.
“Matter of fact, our business is never short of challenges, especially right now with the evolution of the EV market and new global competitors from China, as well as the technology disruptions,” he said. “A great product is not enough in the EV business anymore,” he said,“ adding that ”we have to be totally competitive on cost“ because ”affordability is an issue” for consumers.
As a result, the firm suspended $12 billion in EV spending on manufacturing capacity.
“Given the dynamic EV environment, we are being judicious about our production and adjusting future capacity to better match market demand,” said Ford CFO John Lawler on Thursday. “All told, we have pushed about $12 billion of EV spend, which includes capex, direct investment, and expense,” he added.
In an interview with The New York Times, Ford’s Executive Chairman Bill Ford said that high prices were the primary reason the company is having issues selling its EVs. “Electric vehicles are expensive,” he said earlier this month. “We know prices will come down, and as that happens, we will have a bigger ramp-up of EVs.”
The reason why, she explained, is because the firm has to “adjust to slower near-term growth in demand, and implement engineering efficiency and other improvements that will make our vehicles less expensive to produce, and more profitable,” referring to EVs.
She also told investors that GM would suspend its target of manufacturing 400,000 EVs from 2022 to June 2024 due to demand. However, she said that GM is committed to its own goal of having an all-electric lineup of cars by 2035.
“As we get further into the transition to EVs, it gets a bit bumpy, which is not unexpected,“ Mrs. Barra told analysts on a conference call Tuesday. ”GM will be agile to make sure the portfolio is in the right segments ... and we have the right entrants that people want to buy,” she said.
At the same time, GM and Honda issued a joint statement announcing they would end a $5 billion partnership to manufacture affordable EVs, coming a year after the initiative was started, according to reports.
In doing away with plans to develop lower-cost models, Honda CEO Toshihiro Mibe said that it’s difficult to forecast the EV environment.
As for Mercedes-Benz, company financial chief Harald Wilhelm said in a call this week that some companies are selling EVs below the pricing level of traditional, gas-powered cars despite EVs being more costly to manufacture.
“I can hardly imagine the current status quo is fully sustainable for everybody,” he said. “I would say this is a pretty brutal space.”
In another sign of problems with the EV market, rental car firm Hertz Global announced Thursday that it would slow down the rate at which it adds EVs to its fleet.
Hertz CEO Stephen Scherr stated in a third-quarter earnings update on Thursday that “our in-fleeting of EVs will be slower than our prior expectations.”
“MSRP declines in EVs over the course of 2023, driven primarily by Tesla, have driven the fair market value of our EVs lower as compared to last year, such that as salvage creates a larger loss and therefore greater burden,” he said.
Meanwhile, Tesla CEO Elon Musk said earlier this month on a call that he’s concerned about high interest rates putting a damper on car buyers. “If the macroeconomic conditions are stormy, even the best ship is still going to have tough times,” he said.
However, for some executives, the recent announcements may come as no surprise.
“People are finally seeing reality,” Toyota Motor Chairman Akio Toyoda said during a recent auto show. The Toyota executive has long been critical of the push toward EVs.
The company has long championed hybrid vehicles that combine gas-powered engines with larger batteries, including the popular Prius and Camry hybrid models.
