The Shocking Truth About the Electric Vehicle Industry: Is Demand Really Declining?
In a surprising turn of events, the focus has shifted from anticipating the arrival of new electric vehicles to questioning whether consumers even want EVs anymore. This shift in sentiment seems to be a direct result of major EV manufacturers scaling back on production and managing expectations. The once enthusiastic push towards a fully electric future has been put on hold by industry leaders like General Motors (GM), Honda, and Ford.
GM, which had been steadfast in its commitment to EVs, suddenly hit the brakes. It started with a pause on the production of the Chevy Bolt EV and EUV, followed by unspecified delays on several other models like the Chevy Equinox and Silverado EVs, as well as the GMC Sierra Denali EV. Honda, on the other hand, withdrew from its EV collaboration with GM. Ford, too, has scaled back its battery and EV plant plans, signaling a shift in their strategic approach.
Perhaps the most concerning development is the delay and price increase of the highly anticipated $30,000 electric SUV from Chevy. The Equinox EV, originally promised as an affordable option, will now start at $34,995, with a launch edition priced at $48,995 in 2024. Even Tesla’s much-awaited Cybertruck keeps seeing its expected starting price rise, dashing hopes for an affordable electric pickup. Ford’s F-150 Lightning, initially introduced as a $40,000 pickup, has also shifted its focus towards a more expensive version priced at $70,000.
At the recent Los Angeles Auto Show, one would expect a flurry of exciting new EV reveals. However, the standout was a luxury SUV from Lucid, with the CEO proudly announcing that the Gravity would start “under $80,000.” This, coupled with the average price of a new EV hovering around $50,000, albeit lower than in 2022, still poses a significant barrier for many prospective buyers. Even Volkswagen’s upcoming ID.7 electric sedan is expected to come with a price tag of around $50,000. Only the Honda Prologue EV is projected to be slightly below the $50,000 mark.
But Albert Gore, executive director at the Zero Emission Transportation Association (ZETA), urges us not to be swayed by these recent developments. He argues that when analyzing sales data, it’s clear that EVs are experiencing a record-breaking year with consistent growth quarter over quarter. In 2023, global EV sales surpassed the milestone of 1 million units for the first time. Year-over-year, there has been a remarkable 50% increase in EV sales. However, Gore acknowledges that such growth has become the new norm, leading us to overlook its significance.
Gore believes that the shifting narrative around EVs is not reflective of declining demand but rather the slower-than-expected growth in demand. He is critical of automakers like GM, Toyota, Subaru, Honda, and Mazda, which appear to be delaying the transition to full EV production despite mounting sales figures and increasing demand. GM executives referred to their EV plan as a “measured rollout,” citing the need to align production with demand.
Robby DeGraff, an analyst at AutoPacific, echoes Gore’s sentiments, emphasizing that demand for EVs is not fading but growing at a slower pace than automakers had anticipated. This slower growth may be due to supply issues, as noted by Liz Najman, lead researcher at battery reporting company Recurrent. There seems to be a disconnect between consumer preferences and the available options in the market. With delays and cancellations affecting the lower-priced EV models, there is pent-up demand that is currently unmet. Younger shoppers, in particular, are seeking affordable options for their first EV purchase.
DeGraff calls for automakers to keep prices in check and prioritize entry-level EVs, challenging dealers to resist marking up prices excessively. He argues that maintaining reasonable MSRPs (Manufacturer’s Suggested Retail Prices) is crucial for fostering continued consumer interest in EVs.
Changes in policy can also impact end-of-year sales and demand for EVs. Starting in January, the federal clean car tax credit of up to $7,500 will be available at the time of purchase. This makes 2024 an attractive year for qualified buyers to invest in an EV since they no longer have to wait until tax season to benefit from the subsidy. Leasing an EV remains a viable option for those wishing to navigate some of the restrictions. However, starting in 2024, car manufacturers will face new requirements to qualify for the full EV credit amount.
Despite the various factors at play, it is undeniable that the transition to EVs is still underway. As Gore points out, the industry is not easing off the accelerator, but rather adjusting to the evolving dynamics of demand. While recent developments may have raised concerns about declining interest in EVs, the reality is that the shift towards a cleaner and greener future is firmly in motion. The electric vehicle revolution continues, albeit with some bumps along the way.