Will EV Sales Pick Back Up?

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tesla charging station
Photo credit: Pexels

Automakers are betting big on electric vehicles (EVs), backed by government pledges to phase out the sale of internal combustion engine (ICE) vehicles in favour of the less polluting EVs. And demand has been rapidly increasing as the market becomes more competitive, making EVs more affordable. However, there has been a slump in U.S. EV sales in recent months, which is making several automakers consider their electrification strategies. 

Delays in EV Spending 

Automakers and industry experts have forecast huge growth in EV sales over the coming years thanks to favourable policies and falling EV prices. The North American EV market is expected to grow at a 16.1% CAGR from 2023 to 2030 to reach $228.47 billion. The U.S. government has been encouraging consumers to shift away from ICE vehicles to less-polluting, electric alternatives, and consumers have been listening. EV sales in North America rose 376,720 in 2019 to 898,963 in 2022. This market growth has been supported by the expansion of EV charging infrastructure, enhancing accessibility across the country. 

In the third quarter of 2023, there was a 50% increase on EV sales compared to the same period in the previous year, which would normally seem positive, but in a market with such high forecasts, automakers are beginning to worry. Many traditional automakers and rising EV stars have plans to invest billions of dollars into their EV business, and the threat of less than anticipated demand could drive them to alter their spending strategies. 

In November, General Motors, Ford Motor and Tesla posted lower sales and suggested they may delay spending to better understand market trends. The Biden administration has provided EV buyers with generous federal tax credits to encourage uptake, but many consumers are feeling the pinch from rising prices and high inflation. Mary T. Barra, the CEO of GM, stated “Our commitment to an all-E.V. future is as strong as ever.” However, she added, the market appears “a bit bumpy”. This has led GM to delay the release of certain new electric models by several months. 

The demand for EVs is still high in the U.S., however the sales of certain models have fallen. This has led the market leader Tesla to cut car prices in recent months, to encourage greater uptake. Meanwhile, some industry experts suggest that the mass market still has a lot to learn about EVs and is waiting until automakers offer cheaper vehicles with a better performance to make the switch. 

Also Being Seen in Europe 

The market slump is also being felt in Europe, where it appears consumers are waiting for more affordable options to hit the market. Automakers believe high interest rates and a subdued market are deterring customers from purchasing EVs. While a lot of European consumers are planning to make the switch to electric, mainly due to the threat of ICE vehicle sales bans coming into place, many are gambling on cheaper options with better technology hitting the market within two to three years. In Germany, one poll showed that the intention to buy an EV has stayed constant over the last year, even if sales increases have dipped. Waiting, consumers believe, will also provide governments and EV companies with the time needed to invest in charging infrastructure, which continues to be limited, particularly in rural areas. 

In addition, electricity prices remain high in Europe following a year of energy shortages and high inflation. The uncertainty around the running costs of an EV is also putting consumers off. However, if the market slows, the investment by automakers into their EV business could also slow, causing a vicious cycle, as not enough new, low-priced models hit the market to encourage uptake within the anticipated time frame. 

Ford Cuts Electric F-150 Production

In December, Ford Motor announced it planned to produce an average of 1,600 electric F-150 Lightning pickup trucks per week in 2024, which is around half of the level it had previously stated. This reflects the lower-than-expected sales seen in the U.S. in recent months, as automakers reassess their spending strategies. Meanwhile, GM reduced its goal of producing 400,000 EVs by mid-2024 in October, and Rivian now hopes to manufacture 52,000 EVs by the end of 2023, compared to a previous estimate of 150,000. 

Ford’s CFO, John Lawler, stated “Given the dynamic EV environment, we are being judicious about our production and adjusting future capacity to better match market demand.” Ford also said it will scale back the size of one of the four battery plants it has under development in the U.S. in response to the slump. Despite this reduced aim, Ford expects production levels and sales of its EVs to continue increasing year on year. 

While fears of a prolonged EV market slump are driving automakers to reevaluate their production plans and delay projects, the market is continuing to grow and show promise. Many consumers are waiting for greater financial stability when it comes to inflation and consumer costs, while others are waiting for the EV market to become more competitive, which is expected to drive down EV costs. The momentum has begun and even if it is delayed, the mass consumer shift to EVs is looming in the distance. 

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