It only seems like yesterday when OEMs ranging from VW to Honda released grandiose pledges to eliminate their ICE vehicle lineups and convert to all electric within the next decade or two. Coming out of Tesla’s incredible pandemic-era stock success and sliding into the pole position of highest valued automaker in the world, legacy OEMs quickly jumped aboard the EV train and promised dozens of new EV models by 2030 or 2035. Seeing the potential for enormous profit while satisfying the push for clean emissions, EV exclusivity seemed to be the obvious and linear path forward for OEMs that wished to not only survive, but to actively compete with the likes of Tesla or Rivian. ICE vehicles appeared to be condemned to the history books (and the racetrack), but recent developments over the last two years have shaken automakers’ and consumers’ beliefs in an electric vehicle future to their very core. In this article, we will examine how and why the EV revolution has (temporarily) stalled and what the future might look like for electric vehicles as a part of the greater automotive ecosystem.
Three years ago at the United Nations Climate Change Conference in Glasgow, six OEMs and 30 governments issued a joint pledge to fully halt the sale of gas and diesel vehicles by 2035 in developed markets and by 2040 in developing countries. In the two years leading up to this momentous pledge, companies like GM had promised to fully phase out ICE production by 2030. EV mania reached a new high water mark, and industry insiders prepared to work towards an electrified and technologically advanced automotive industry. Concurrently, President Biden signed the Inflation Reduction Act (IRA), which laid out numerous provisions beneficial to domestic EV production and purchasing by both businesses and private consumers. Shiny new tax credits made EVs an economically viable choice for middle class consumers while write offs and incentives for OEMs encouraged domestic mining, battery manufacturing, and total vehicle assembly. With all signs pointing in the direction of EV supremacy in a matter of a decade, companies and governments went all in. It is no surprise that such lofty goals were set in 2021. It is however surprising what ended up happening next.
Trouble started brewing for these sweeping full EV lineup changes about a year and a half ago. EVs were not moving off of showroom floors and dealership lots nearly as quickly as anticipated, and the market began to slow. This phenomenon is attributable to a litany of economic, political, and social factors coming together at the same time to create a perfect storm of market volatility and consumer trepidation. Tesla, the company leading the charge towards EVs since their mass market introduction over a decade ago, has experienced a downturn in sales volume despite price cuts which saw certain models go on sale by over 50% off of MSRP. Having led the way on price increases during the pandemic, Tesla has also cut prices the most of any OEM to match. Troubled by controversies surrounding billionaire CEO Elon Musk, widespread quality control lapses, and a difficult launch of the Cybertruck, Tesla sales have declined over the last two quarters compared to the same period in 2023. Other very public industry issues such as the failure and liquidation of Henrik Fisker’s revived “Fisker” nameplate, which produced the all EV Fisker Ocean in Austria, and the mass selloff of Hertz’s entire fleet of EV rental cars have soured the fully EV outlook. Adoption has been much more challenging than anyone anticipated three or four years ago, and it will take time for consumer trust and confidence in EV purchasing to rebuild.
Moreover, other economic issues have thwarted mass EV adoption. Recent statistics gathered about EV depreciation have shown that most models lose around 50% of their initial values in just three years, compared to approximately 35% for ICE models. Additionally, perceptions of expensive and arduous maintenance have turned consumers away from purchasing both new and used EVs causing sales forecasts to be downgraded. Put together, consumers are appearing to doubt that EVs are a good investment despite price cuts and tax incentives from most major OEMs. Combine this with infrastructure difficulties hampering charging network development, and suddenly EVs no longer seem like the logical choice for a new vehicle purchase. Now that all of these roadblocks and challenges have come together, it has led to a reactionary moment from OEMs, causing many to slow down EVs and refocus on hybrids and more efficient ICE vehicles.
A few of the companies that have walked back their fully electric lineup pledges are GM, Ford, VW, Volvo, Porsche, Mercedes-Benz, and Honda, just to name a few. All citing lower sales expectations and economic difficulties as reasons, major OEMs are looking for the best ways to navigate uncertain times while still keeping their businesses afloat. Despite the concerning trends we are witnessing currently (pun intended), EVs are far from a lost cause, and most industry experts still believe that they will eventually hold a majority of the automotive market share. A pivot towards smaller and lower priced EVs will also open up the market to more consumers that may not be looking to purchase a full sized vehicle above $50k. Regulatory practices in both the US and EU will increasingly encourage OEMs to produce EVs, while renewed government investment in charging infrastructure will make ownership realistic for more consumers. Lastly, new solid state battery technology is now approaching mass market release, which will make EVs lighter and capable of charging more quickly. This is simply a bump in the road forcing new innovation, and it is likely that the new electric models that come out of this reaction will be better across the board than their predecessors. Perhaps EVs will be a majority of new vehicles sold by 2040/2045 instead of 2030. Either way, all signs point to increasing investment in the long term, and all facets of the automotive industry should be prepared to adapt and thrive in a renewable vehicle environment.
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