EVs: The Honeymoon Phase Is Over

Last week’s headlines confirmed that the EV transition is still losing speed faster than Hillary’s server deleting emails. To make matters worse, the sectors earnings results delivered a harsh dose of reality for carmakers. 

First up, Porsche splashed cold water on their EV ambitions on Monday by admitting their transition is taking way longer than they thought five years ago. Then, General Motors hopped on the delay train by hitting pause on a Buick EV and a new factory in Michigan. Ford faced its steepest stock plunge since the dark days of 2008, grappling with a $1.1 billion loss in its EV division. Not wanting to be left out, Tesla, the rock star of EV’s saw its stock take a nosedive after reporting a staggering 45% drop in quarterly profits and a 7% dip in car sales revenue. The only bright spot? Their energy generation and storage business is doing surprisingly well. Go figure.

(Source: Sherwood News)

As I dug more I learned these delays aren’t just isolated incidents. Ford, Nissan, Volkswagen, and Mercedes-Benz have all taken their foot off the gas in the race to boost EV production. Even though EV sales shot up from 3 million in 2021 to almost 14 million last year, both the old guard and the new kids on the block are seeing demand fizzle out.

As of right now dealerships are burdened with lots that look like EV graveyards. According to Cox Automotive data (cited by The Wall Street Journal), the average dealership had a 125-day supply of EV's as of early June. That’s a lot of cars just gathering dust.

(Source: Sherwood News)

Sure, the sticker shock of once sky-high prices of EVs have come down to earth. I mean four out of the five most discounted new models this year were EVs. But buyers still aren’t biting. 

(Source: Moneywatch)

In fact, Goldman Sachs analyst Kota Yuzawa is waving the caution flag, saying their bearish outlook on EV sales is looking more likely. The world’s push for carbon neutrality means demand for EVs will eventually grow, just not at the breakneck speed everyone hoped. So, what’s slowing down EV’s? Kota points to three main roadblocks. First up, the cost of EVs is giving people pause. Used EV prices are  plunging. Nobody wants to buy a car that loses value faster and takes 20 minutes to charge.

(Source: Center Square)

Second, the political scene is murky. With Biden being kicked to the curb, it’s hard to predict what government policies will look like.

And then there’s Infrastructure.The shortage of rapid-charging stations is making everyone nervous(not to mention how long it takes to charge them). It’s like planning a road trip but realizing there’s no Buc-ee’s on the way. Several automakers have noted that concerns about driving range and the availability of charging stations are making potential buyers think twice before jumping on the EV bandwagon.

Many Americans worry how those fancy batteries will perform when they visit grandma for Christmas in the frigid North. It’s obvious there are a mountain of problems, but these concerns are sticking around like that one friend who never knows when to leave the party.

(Source: Tenor)

But here’s the thing. With all this uncertainty, many car buyers are playing it safe and going for hybrids instead. Toyota’s hybrid strategy is proving to be a winner, and even Lamborghini’s CEO is bullish on hybrids, calling them a “success story.” It looks like the happy medium between gas and electric is where the action is right now.

(Source: New York Times)

So, while the EV market is hitting some rather large speed bumps, there are still plenty of opportunities on the horizon, especially for auto makers that can roll with the punches and offer a mix of options. As the world continues to get serious about carbon neutrality, the demand for EVs will eventually grow, but at this point it looks like they’ve lost their spark. The question remains: Will the average American stomach spending nearly $50,000 for a new EV. I don’t think so. EVs are not a one-size-fits all solution and won’t be for many years.

Stocks.News has positions in Ford, GM, and Tesla.