Typically, a 50 percent increase in sales is considered very good. But when the number of electric vehicles sold in the United States grew so much during the third quarter from a year earlier, it was a disappointment.
Automakers and analysts expected more. Instead of celebrating, auto executives worried that demand for electric vehicles was declining, raising questions about their plans to invest tens of billions of dollars to develop new models and build factories.
In recent weeks, General Motors, Ford Motor and Tesla cited slower sales and signs the economy was weakening in announcing they would delay that spending. That was a blow to the Biden administration’s plan to fight climate change by promoting zero-emission vehicles, and cast doubt on whether generous federal tax credits for electric car buyers were working as well as consumers had hoped. policymakers.
“Our commitment to an all-electric future is stronger than ever,” Mary T. Barra, GM’s chief executive, told analysts on a conference call last month. But, she added, the market is proving “a little choppy.” As a result, GM is waiting several months to start selling some new electric models, including a battery-powered incarnation of the Chevrolet Equinox sport utility vehicle.
Ford and GM have bet billions on retooling factories and building new ones to produce electric vehicles, batteries and other components. If automakers have miscalculated, the consequences could be serious. (Stellantis, the parent company of Chrysler, Jeep and Ram, has not yet started selling any all-electric vehicles in the United States.)
Sales of electric vehicles in China and Europe are also growing more slowly than a few months ago.
Still, sales of electric vehicles are growing faster than any other major car category, and Americans will buy more than a million of them this year, a record. From July to September, battery-powered cars accounted for 8 percent of new cars sold in the United States, up from 6 percent a year earlier, according to Cox Automotive.
But some once-fashionable models are selling more slowly. Sales of the Ford Mustang Mach-E, which earned a strong profit margin a year ago, fell 10 percent in October from a year earlier, Ford said last week.
“Electric vehicles are still in high demand,” Ford CEO Jim Farley told analysts. But he added that increased competition had driven down prices.
Automakers have introduced at least 14 new all-electric models in the past year, according to Cox, and have increased production of other models that were in short supply. Inevitably, some sell better than others.
“Demand is slowly increasing, but it’s not increasing to the degree that supply and production are increasing,” said Rob Cochran, CEO of No. 1 Cochran Automotive, which owns 34 dealerships in Pennsylvania and Ohio that sell nearly all main brands. , including Ford, Chevrolet, Hyundai and Volkswagen.
Even Tesla, which dominates the electric car market, with about half of all sales in the most recent quarter, has struggled to sell cars and had to cut prices by thousands of dollars.
Some conservatives have seized on recent data to argue that electric vehicles are overrated. Republicans such as Senator JD Vance of Ohio have claimed that electric vehicles are destroying jobs in the auto industry and have proposed reversing policies designed to encourage people to buy battery-powered cars.
A political agenda is driving some of those proclaiming the end of the electric vehicle boom, said Albert Gore III, executive director of the Zero Emissions Transportation Association, an industry group whose members include automakers such as Tesla and Rivian, companies charging companies such as EVgo and ChargePoint, and equipment and raw material suppliers.
“There are a lot of people eager to come to the conclusion that we should be less aggressive on policy,” Gore said.
Some analysts said the uneven growth was not surprising as electric vehicles move from a niche product to a more mass-market offering. Most car owners are still learning about the technology, and car manufacturers and dealers are figuring out how best to sell to them.
“Many early adopters bought expensive electric vehicles,” said Tom Narayan, global auto analyst at RBC Capital Markets. “We are now at the point where the general consumer is looking at electric vehicles”
Ford illustrates the mixed signals that sales figures send. While sales of the Mach-E rose just 1.5 percent in the first 10 months of the year, sales of the F-150 Lightning, a battery-powered pickup truck, rose 43 percent. In total, sales of Ford electric vehicles increased 13 percent from January to October, while sales of cars and trucks with internal combustion engines increased 7 percent. Sales of hybrid vehicles, which combine electric propulsion with internal combustion engines, increased 19 percent.
Weak sales of the Mach-E likely reflect competition from the Tesla Model Y more than any broader trend, analysts said. Many buyers may be comparing the two vehicles, which are similar in size and style. Tesla has reduced the price of the Model Y so that the least expensive model costs $2,500 less than the Ford after federal tax credits are applied.
The end of recent United Automobile Workers strikes against Ford, GM and Stellantis has refocused attention on traditional automakers’ attempts to compete with Tesla.
Electric vehicles played a major role in the UAW negotiations, and tentative contract agreements extend at least some union privileges to workers at the new battery factories. But the agreements will increase manufacturing costs and make it much more difficult for Ford, GM and Stellantis to catch up with Tesla, which is not unionized.
Buyers remain interested in electric vehicles, surveys show, but are struggling to afford them. The average price paid for an electric vehicle in the United States was less than $51,000 in September, according to Cox Automotive. That’s a huge decrease from last year’s $65,000. But it’s still too high for many new car buyers, especially since high interest rates have made monthly car payments more expensive. The average rate on an auto loan is more than 8 percent, according to Federal Reserve data, compared to less than 5 percent in early 2022.
In recent years, automakers have flooded the market with SUVs aimed at wealthy suburban homeowners. And there is still a shortage of cars priced under $30,000 that middle-class buyers can afford.
“A lot of automakers were bringing vehicles to market,” said Kevin Roberts, director of industry insights and analysis at CarGurus, an online auto marketplace. “Now they have a situation in a rising interest rate environment where they are not being priced appropriately.”
Some potential EV buyers may also be concerned about finding enough places to quickly charge cars on road trips. After price, charging infrastructure is the first thing people worry about when considering an electric vehicle, many surveys find.
Public charging is also essential for anyone who lives in an apartment or can’t install a charger at home, a group that tends to be young. “The younger demographic is more open to electric vehicles than the older demographic,” said Cochran, the Ohio and Pennsylvania dealer. “It’s usually the younger demographic that lives in apartments. The fact that the infrastructure is not built is a deterrent factor.”
At least two of Cochran’s customers returned newly purchased electric vehicles after discovering there were not enough chargers near their homes, he said.
For people interested in purchasing an electric vehicle, the good news is that prices are likely to continue falling as automakers increase the number of new factories. Starting in January, dealers will be able to apply federal tax credits of up to $7,500 when a customer purchases a car. Previously, buyers had to wait until they filed their taxes to claim the credit.
The charging system is also improving, albeit slowly. Parts of Tesla’s fast-charging network, the largest in the United States, will open to Ford, GM and other brands next year. Other automakers are building their own chargers. Mercedes-Benz said last week it would install at least 55 stations in high-end shopping centers in the United States and Canada operated by Simon Property Group, a large real estate firm.
Automakers have gotten the message that selling electric vehicles is different from selling gasoline cars. “Charging,” said Andrew Cornelia, CEO of Mercedes’ high-power charging unit in North America, “remains a critical issue to solve.”
