The E.V. Road to Zero Emissions Stalls Out

And then, just like that, people stopped buying electric vehicles. In early 2023, the electric car and light truck market surged, up forty-eight percent over the previous year. Then, in the third quarter, sales dropped. And they dropped more in the fourth quarter. This came as a surprise to the industry, which had been expecting continuous growth going forward. But there it was. Consumer pushback. There were immediate reasons. 

Earlier this winter there was a cold spell across the country. The media was chock full of stories of people having problems with their electric vehicles. They stalled out. Or they failed to charge. Or the charge didn’t last long enough to get where the driver wanted to go. In some places people abandoned their cars to get home. These stories get around. But mostly it was a general, ambient reaction to the hype versus reality about E.V.s, which, along with the nation’s electronic charging grid, are not really ready for prime time.

Plenty of parking.

The Wall Street Journal, for instance, had a recent piece, subtitled: Automakers went all in on battery power, but buyers have proven more hesitant. The article notes that Ford is cutting the production of F-150 Lightening electric trucks – a formerly hot number – in half. Even though President Biden himself visited the plant where they’re made in 2021, and test-drove the pickup. This truck was very popular, and Ford was poised to expand production. But buyers are no longer quite as thrilled as all that. “Reality has set in,” said Matthew Schulte, who inspects trucks at the Detroit area factory, told the Journal.

That is, despite all of the state and federal mandates about what percentage of cars sold must be electric by what year, and various zero-emissions policies, in the end, if consumers are unwilling to shell out the big bucks – and higher prices for E.V.s are definitely part of this equation – then it doesn’t happen. It turns out that last summer, car dealers began turning down more E.V.s, because unsold earlier ones were clogging their lots. Not only was this the case for Ford, General Motors, and Volkswagen, but even the perennially hot Tesla company was cutting vehicle deliveries for 2024. Tesla reported a ten percent decline in sales in the fourth quarter of 2023.

One reason for consumer lack of interest, is undoubtedly price. The average retail price for an E.V. is almost $14,000 more than a gas powered car, according to research firm J.D. Power. That is even after some E.V. manufacturers lowered prices as sales began to lag. Other manufacturers cut production. Ford, for instance, halved planned production instead of cutting prices. According to the Los Angeles Times, “Marin Gjaja, head of Ford’s E.V. arm, recently told stock analysts that Ford will launch the next generation of E.V.s only ‘when they can be profitable'.”

Barra: better late than never?

That won’t be 2024. Ford lost $4.7 billion on E.V.s, last year, and expects to lose more on them this year. It’s worth noting that Ford is increasing production of hybrid cars, which run on both electricity and gas. “Ultimately, we’ll follow the customer,” said GM Chief Executive Mary Barra, this month, in a better late than never moment.

While car companies misjudged consumer demand – and that demand shifted downward as consumers became more sophisticated about the realities and compromises of owning E.V.s – those companies also face government mandates about auto emissions and other "environmentally friendly" aspects of performance, which push them toward producing E.V.s. The Biden administration, meanwhile, pushed E.V. production with hundreds of billions of dollars in subsidies for battery production, consumer tax breaks, and E.V. chargers.

One reason customer demand fell was the huge rise in interest rates on car payments. Last fall average interest rates on an E.V. purchase went from 4.9 percent to 7 percent, raising payments significantly. “Suddenly, once-long waiting lists for E.V.s shrank and buyers dropped reservations,” the WSJ reported. This happened in October. Within days, GM, Ford, and Tesla all cut E.V. production projections significantly. Some retailers are selling E.V.s at a loss to clear inventory.

But it wasn’t just price. It was the lack of charging stations, the fact that E.V.s don’t go as far on a charge as is claimed, high repair costs, and the short life expectancy of batteries, along with the problems with resale, given the expense of new batteries. For those reasons, even among buyers who care about being "environmentally friendly," the sale of hybrids, which had been dismissed as "half measures," took off.

It'll be fully charged when he's in college.

If there's a lesson in this tale of a plummeting E.V. market, it is that you can only go so far on political hype, which is at the core of the marketing of electric cars and trucks. Sooner or later the realities of what you are actually getting when you buy one, push out the charms of being an "early adopter," or a "climate change" hero. This very pointed meme appeared on Facebook last week:

Imagine we lived in a world where all cars were E.V.s, and along comes a new invention, the ‘Internal Combustion Engine!’ Think how well they would sell: A vehicle half the weight, half the price, that will almost quarter the damage done to the road. A vehicle that can be refueled in 1/10th of the time and has a range of up to 4 times the distance in all weather conditions. It does not rely on the environmentally damaging use of non-renewable rare earth elements to power it and uses far less steel and other materials. Just think how excited people would be for such technology. It would sell like hot cakes.

Exactly. Those with a stake in selling E.V.s, including the car companies and the government, don’t understand this, but average car buyers increasingly understand that they are being asked to pay more for less -- as the decline in the E.V. market demonstrates.