The car industry’s rush toward an all-electric future suffered a detour this year.
According to a Reuters investigation, manufacturers were planning to spend $1.2 trillion by 2030 to transition electric cars from niche goods to mass-market versions, with many using in-house batteries and software.
As the year comes to a conclusion, traditional automakers, as well as Tesla, Rivian, and other EV startups, are reducing investments and rethinking product strategy. Legacy manufacturers are pleading with authorities for further assistance in offsetting the hefty costs of the EV transition, on top of the billions of dollars already invested in EV subsidies.
Global consumer demand for EVs is increasing. However, EV adoption is not occurring as quickly or economically as industry leaders hoped, particularly in the United States.
Because of high borrowing rates, many EVs are now out of reach for middle-income buyers. For purchasers used to adding hundreds of miles of gasoline driving range in a matter of minutes, the lack of charging infrastructure is a deal breaker.
“EVs are going to be the future of the passenger automobile business,” stated Jeff Parent, COO of AutoNation, a car dealership network in the United States. However, he predicted that “the next three to four years will be bumpy” because of customer worries about pricing and billing.
CEOs in the industry are increasing their bets on their objective of transitioning to all-electric fleets by the middle of the next decade.
“We’ll adjust to where the customer is,” General Motors CEO Mary Barra said earlier this month when asked whether the company still plans to be all-electric by 2035.
HIGH HOPES, THEN DISAPPOINTED WITH THE F-150 LIGHTNING
Ford’s F-150 Lightning electric pickup demonstrates how lofty projections were stifled.
Ford recruited a third work team in August at its historic Rouge assembly plant in Dearborn, Michigan, to increase the manufacturing output of the electric pickup truck to 150,000 units per year, according to strong early demand for the Lightning.
However, Ford scrapped the third shift in October, admitting that demand for electric F-150s was insufficient to support the intended manufacturing rate. Around 700 employees were laid off.
Electric vehicle demand continues to outpace automobile demand in China, Europe, and the United States, the three major EV markets.
According to AutoForecast Solutions, global EV production is on pace to treble by 2030 to 33.4 million cars, accounting for about one-third of overall output. According to JATO Dynamics, most of that increase will occur in China, where government subsidies and a pricing war driven by Chinese EV market leaders BYD and Tesla are making EVs cheaper than combustion cars.
According to AFS, the output of battery-electric cars in North America might more than sixfold to over 7 million vehicles by 2030. That is nearly 40% of the predicted US market but falls well short of the Biden administration’s targets.
Applying For Relief
Industry leaders are urging the Biden administration to abandon pollution restrictions that will essentially compel EVs to account for two-thirds of new vehicle sales in the United States by 2032.
Looking forward, industry officials have two worries regarding the difficulty of extending the EV market beyond the most daring early adopters of technology: affordability and charging availability.
Due to the delayed development of charging infrastructure, major legacy automakers struck partnerships with Tesla this year to let owners of their EVs use Tesla’s Supercharger network – a competitive triumph for Tesla.
“The automakers’ surrender to the (Tesla) standard is a clear signal that they are realizing that charging fears are holding back demand,” said Mark Wakefield, co-leader of consultant AlixPartners’ automotive group.
“Affordability” is industry jargon for persuading mainstream, middle-class customers to pay enough for an EV to cover greater manufacturing costs while still profiting. That has so far proved untenable for most older automakers.
Even Tesla, which profits from EVs, has been compelled to reduce costs to maintain production lines in China and the United States functioning at full capacity.
“If our car cost the same as a (Toyota) RAV4, no one would buy an RAV4 or, at the very least, they would be very unlikely to,” Tesla CEO Elon Musk told investors in October. “Our car is still much more expensive than a RAV4.”
Models of the RAV4 begin at $28,475. Model Ys start at $43,990 and are eligible for $7,500 in tax credits until December 31. Tesla has warned that those credits may be decreased when harsher domestic content standards take effect.
