Electric vehicles, which many have viewed as a key to a low-carbon future, have seen their sales and financial conditions booming for the past several years. Now the bright EV prospects are fading a bit.
- Bears are ravaging Tesla’s stock. Tesla (NASDAQ:TSLA) has fallen 50% from its all-time highs, which rose over 116% from its 2010 initial pubic offering. The automaker/solar battery company reported third quarter revenue of $23.45 billion and earnings per share of $0.66, down from Wall Street estimates of $24.1 billion and $0.73/share. Business Insider commented that it expects Tesla stock “to underperform the broader markets in the next 12 months,” due to “its lofty valuation, pricing pressures, and tepid consumer demand.”
- GM says it will delay production of its Chevy Silverado and GMC Sierra EV pickup trucks and the Equinox full-size SUV EV for a year at one of its major assembly plants. GM spokesperson Kevin Kelly told The Detroit News the move is designed respond to “its lofty valuation, pricing pressures, and tepid consumer demand.” In a related development, Reuters reports that Japan’s Honda “and General Motors (GM) are scrapping a plan to jointly develop affordable electric vehicles (EVs), the Japanese company said on Wednesday, just a year after they agreed to work together in a bid to beat Tesla in sales. “
- Ford’s money-losing EV business has led the company to scale back production, according to The Verge, postponing $12 billion in new factories, including a battery plant in Kentucky. The web site said, “The reasons given were an unwillingness by customers to pay extra for its electric vehicles. You see, they’re too expensive, and now Ford’s massive transformation into an EV company is now going to take a lot longer than before.” Ford said it expects to lose $4 billion this year on its EV program.
Business Insider summarized the now sagging, once soaring, EV business: “With signs of growing inventory and slowing sales, auto industry executives admitted this week that their ambitious electric vehicle plans are in jeopardy, at least in the near term.” GM CEO Mary Barra said, “As we get further into the transformation to EV, it’s a bit bumpy.” Mercedes-Benz Harald Wilhelm, chief financial officer, said, “This is a pretty brutal space. I can hardly imagine the current status quo is fully sustainable for everybody.”
The business news site observed that “almost all current EV product is going for under sticker price these days, and on top of that, some EVs are seeing manufacturer’s incentives of nearly 10%. That’s as inventory builds up at dealerships, much to the chagrin of dealers. While car buyers are in luck if they’re looking for a deal on a plug-in vehicle, executives are finding even significant markdowns and discounts aren’t enough. These cars are taking dealers longer to sell compared with their gas counterparts as the next wave of buyers focus on cost, infrastructure challenges, and lifestyle barriers to adopting.”
In Japan, Toyota, the world’s largest car maker in terms of vehicles sold and pioneer of electrified cars (the Prius), has been slow to roll out fully electric vehicles. Former Chairman Akio Toyoda, according to the Wall Street Journal, told a business group that it’s time to realize that there is no silver bullet to carbon reduction. Noting the EV demand reduction in the U.S., he said, “People are finally seeing reality.”
Toyota is promoting its successful line of hybrids and plug-in hybrids and is planning to launch a bigger EV presence when it can roll out advanced, solid-state batteries. The Financial Times reported last week (Oct. 22), “Toyota says it is close to being able to manufacture next-generation solid-state batteries at the same rate as existing batteries for electric vehicles, marking a milestone in the global race to commercialise the technology.” Toyota is looking to mass produce the new batteries, which safer than lithium ion technology and offer a range of 745 miles per 10-minute full charge.
It’s worthwhile to put the recent EV gloom in context. It’s still a growing business, just less profitable. Cox Automotive, using Kelley Blue Book data, reports that Third Quarter 2023 U.S. EV sales “set another record in Q3, as total sales of battery-powered vehicles jumped past 300,000 for the first time in the U.S. market. Year-to-date EV sales through September reached just over 873,000, putting the market firmly on track to surpass 1 million for the first time ever. The milestone will likely be achieved in November.”
Battery electric vehicles have been boosted since August 2022, when President Biden signed the Inflation Reduction Act. The law contained a hefty tax credit of up to $7,500 for the purchase of a new EV to overcome sticker shock on cars that were often more expensive than gasoline burners.
The tax credit rules got somewhat more restrictive for vehicles bought after this April. In addition to fostering EV sales, the law aims to aid domestic production of “critical minerals,” basically lithium, nickel, cobalt, manganese, and graphite. Also, Congress wants to push domestic battery production. So, to get the full $7,500 credit, the vehicles must have 50% of their battery components produced and at least 40% of the critical minerals extracted, processed, or recycled in North America or a country that has a U.S. free trade agreement. If the vehicle hits only one of the requirements, the tax credit is halved. Neither? No tax credit.
Also, the sticker price on the vehicle cannot exceed $80,000 for vans, SUVs, and pickup trucks, and $55,000 for other EVs.
A $4,000 tax credit for used EV purchases before April is no longer available.
–Kennedy Maize
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