The moment of truth has dawned for the electric-vehicle industry
The nosedive in U.S. sales of electric vehicles since the elimination of the federal EV tax credit at the end of September is the latest moment of truth for the sector.
And that truth, when free market forces determine the true value of a product stripped of artificial sweeteners and incentives for buyers, is harsh.
Ford’s report last week was a grim reminder of how precarious the way forward for EVs has become. Sales of its EVs fell more than 60 per cent last month, continuing a downward trend from October. Ford said that due to weak demand, it had paused production of its F-150 Lightning EV pickups to focus on gas-powered trucks.
Despite strong EV sales in the third quarter – when buyers raced to make purchases before the tax credits expired – Ford said its EV business lost US$1.4-billion in the period.
But Ford was not alone. Sales of Hyundai’s Ioniq EV models dropped 50 per cent in November, as did sister company Kia’s EV sales. Honda EV sales dropped 80 per cent.
The post-tax credit tumble exposes the wide valley of death between the ideological aspirations of early EV adopters and the economic reality holding back the next wave of buyers.
Prices of EVs are still too high. Charging infrastructure is still inadequate to ease range anxiety. The quality of the products made by legacy automakers continues to lag that of pure-play manufacturers such as Tesla. And the development of new models has been slow and inconsistent.
Even Tesla’s not looking at a particularly bright future. As was the case with Ford, its U.S. sales were juiced in the third quarter by buyers trying to beat the expiry of the rebate, but its international numbers were down sharply.
Many blame U.S. President Donald Trump for hobbling the sector by eliminating the tax credits as part of his crusade to dismantle the green agenda of his predecessor, Joe Biden, which included incentives of US$7,500 for new EVs and US$4,500 for used vehicles.
But Mr. Biden had a golden opportunity to advance the EV ball and fumbled. Early in his term he earmarked nearly US$8-billion to build a nationwide network of EV changing stations. By the time he left office, the program had created only a handful.
The EV faithful also complain that legacy automakers are partly to blame because gas and hybrid models are more profitable and there is no incentive for manufacturers to fast-track EV design and production – and no penalty for not doing so.
But automakers are not charities, and altruism is not a winning corporate strategy in a competitive global marketplace, especially with high-quality, competitively priced Chinese models gaining share.
Like any business, automakers prosper, grow and create jobs based on their ability to meet customer demand. And the economic reality is that there is a huge universe of car buyers out there who remain unconvinced that EVs are right for them.
Two recent moves by big legacy automakers in Canada underline the point.
Ford’s decision to shelve plans to convert its Oakville, Ont., assembly plant to EVs was made well before Mr. Trump imposed tariffs on Canadian-made vehicles. The rationale for the move was market-driven – weak demand for its EVs – and the company made the call to convert the plant to build strong-selling heavy-duty trucks instead.
Stellantis blamed tariffs in part for its recent decision to halt the conversion of its Brampton, Ont., plant to EV production, but it is worth noting that the company’s redeployment of resources and people from Canada to several U.S. plants is not focused on EVs.
The hard truth is this: The EV sector needs to start standing on its own. For it to grow and avoid becoming a footnote, legacy automakers in particular must step up and address the deficiencies themselves.
Recent history has shown that it is hard enough to push forward with an administration such as Mr. Trump’s that doesn’t favour EVs. But having an ineffectual champion such as Mr. Biden has been no help, either.
Prices need to come down, charging station deployment needs to become a priority, model refreshment must keep customer engagement high, and quality must at least match that of Chinese rivals.
For too long, the EV sector has been living the charmed life of an adolescent whose mom and dad (in this case, taxpayers) have paid the freight. When the tax incentives expired, it was akin to the teenager being kicked out of the house and forced to make it on his own. He stumbled, and even recent rebates from automakers did not soften the fall.
The EV sector is out of the nest now, at least in North America. It needs to prove it is a viable, sustainable business that can survive and thrive without being propped up in an artificial environment of subsidies and incentives. Simply put, it needs to grow up – and quickly.
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