According to recent reports, auto manufacturers are scaling back electric vehicle production as consumer demand falls. Over the past few years, the automotive industry has experienced a state of “euphoria,” where companies have laid out ambitious sales forecasts and optimistic targets for EV growth that were pleasing to Wall Street.
However, this sentiment is deteriorating as auto companies have to cater to consumer choice, which no longer aligns with the optimistic outlook. “Automakers from Ford Motor and General Motors to Mercedes-Benz, Volkswagen, Jaguar Land Rover and Aston Martin are scaling back or delaying their electric vehicle plans,” CNBC reported.
While EV sales are still forecasted to continue increasing, the market has undeniable headwinds. According to reports, Q4 EV sales grew 40% year over year, which, despite being a solid metric, represents a notable decline from previous quarters, such as Q3, which saw a 49% increase. In Q4 2022, EV sales grew at a rate of 52% year over year.
Some have cited a variety of issues unique to EV ownership as a driver of consumer hesitancy toward purchasing a battery-powered vehicle. For example, a full battery charge cannot match the driving range of a full tank of gas, which could require significantly altered driving behavior. Additionally, the vehicles are more expensive than gas-powered vehicles, an important consideration given the historically high inflation that Americans have experienced over the past several years.
While many agree that EVs will be the car of the future, consumers are gravitating toward hybrid vehicles. “EVs may be ‘the future’ but are struggling in the present,” said Morgan Stanley analyst Adam Jonas. “Hybrid sales are growing 5x faster than EVs in the US.”
“EVs are going to be the future of the passenger automobile business,” said Jeff Parent, COO of AutoNation. However, the executive noted that given the various concerns around the current viability of EVs, “the next three to four years, things are going to be bumpy.”
Many auto companies are abandoning their ambitious EV targets to realign themselves with consumer preferences. “We’ll adjust to where the customer is,” General Motors CEO Mary Barra told the Detroit Automotive Press Association earlier this month when questioned on GM’s target to be all-electric by 2035.
“The automakers’ capitulation to the (Tesla) standard is a clear signal that they are realizing that demand is held back by fears on charging,” explained Mark Wakefield, co-leader of consultancy AlixPartners’ automotive practice.
The American Tribune reported on calls from thousands of car dealerships urging the Biden administration to pull back on its efforts to encourage EV adoption among American consumers. The group noted that while EVs have a promising future, there is insufficient current demand to push them on consumers aggressively.
“Mr. President, it is time to tap the brakes on the unrealistic government electric vehicle mandate. Allow time for the battery technology to advance. Allow time to make BEVs more affordable. Allow time to develop domestic sources for the minerals to make batteries. Allow time for the charging infrastructure to be built and prove reliable. And most of all, allow time for the American consumer to get comfortable with the technology and make the choice to buy an electric vehicle,” the letter read in part.