The “Transition” to Electric Vehicles is Collapsing
Despite colossal government spending, massive below-cost discounting, and saturation advertising, most people are not buying EVs. Automakers not named Tesla are starting to face reality.
Image: Carscoops.com
Over 90 percent of American households own or have access to a car. Personal mobility, on average, is the second largest household expense after mortgage or rent. So the centrality of the car within the economic and social structure of modern American society is quite clear.
But recent moves by a dozen or so states to ban the internal combustion engine (ICE), which is used in the kind of car that is purchased by 93 percent of Americans every year, might seem counterintuitive. These states are purposely eliminating the choice of car a majority of their citizens actually want.
The states claim the goal is to cut carbon dioxide emissions at the tailpipe by “transitioning” to “zero-emission” electric vehicles. It is inevitable, we are told, that EVs will take over the entire automobile market because they are less complex than ICE vehicles, less expensive to maintain, easier to use, and cleaner for the environment.
Are you convinced that this is inevitable, that EVs are clearly superior to ICE vehicles in the aforementioned ways? Has the market begun its “transition” away from ICE and embraced EVs as the future of personal transportation?
With very few exceptions, the auto industry has been all in favor of this movement, even though EV sales have stalled and many automakers (including Tesla!) have announced cuts in their EV production due to a glut in dealer inventory. This has resulted in some automakers slashing EV prices to stimulate demand, adding to their already staggering per-vehicle losses.
Now that market reality is setting on an industry pushing an obviously niche product with limited utility that has been touted for years as mainstream, automakers are facing their “gradually, then suddenly” EV moment. With EV inventories piling up and the market unwilling to pay a premium for EVs over their ICE equivalents, automakers not named Tesla are beginning to reverse course on their EV ambitions so that they don’t go completely bankrupt.
Ahh, a truth bomb is detonated!
The universe of likely EV buyers is far smaller than that which automakers expected. Anyone really wanting an EV over an ICE vehicle already has one. And now that over 100 EV models are available and enough time has passed for the EV market to have expanded – it has been 16 years since Tesla introduced the original Roadster, – there is ample evidence to prove that EVs appeal to nobody except a tiny segment of the overall car market.
Despite massive subsidies, colossal government spending, and saturation advertising bordering on wartime propaganda, EVs are just not selling. People are not going to pay thousands more to go electric and deal with all of the associated costs and hassles of EV ownership they did not experience with their ICE vehicle.
Legacy automakers not named Tesla are starting to realize that they cannot forever afford to lose tens of thousands of dollars on each EV. After colluding with government for over ten years, taking billions of taxpayer dollars to chase wild fantasies of electrified travel across the country, and forcing yesterday’s technology onto the public while hiding its hideously dirty realities, the auto industry has no other choice at this point but to pump the brakes on its mad rush into the EV “transition.”
Honda has announced it has scrapped its plans to co-develop a sub-$30,000 EV with GM, claiming a "shifting EV business environment.” Translation: “We’re not going down this money burning rabbit hole any longer.” Toyota’s past chairman has long stated that the auto industry should continue to invest in other options beyond EVs, coming just short of admitting the truth that EVs have no future in a market economy. Even GM, ever the cheerleader of EVs and recipient of massive government investments in EV production re-tooling, announced it was delaying the opening of an EV truck factory, claiming “evolving EV demand.” And Ford continues its layoffs and work shift cuts at the plant where it builds the electric F-150 Lightning pickup as demand falters and inventory piles up.
My personal experience
I just leased a 2024 Hyundai Elantra Limited, the dealership of which had only three other gas- powered Elantras on the lot. On the day I visited there 59 IONIQ 5 and 20 IONIQ 6 in stock. These EVs were lined up all around the showroom and parked outside three deep. And there are a couple of dozen more in transit and arriving soon according to the dealer website.
The sales manager, a really talkative guy who took a shine to my wife and me on a slow selling day, admitted that inventory levels of their IONIQ EVs had him very concerned and he was heavily discounting brand new IONICs just to deal with lack of consumer demand. When I asked his opinion of the EV business in general, he said “it’s just not going to happen, most people won’t pay more for them over (gas powered) cars.” This from a guy selling cars for over twenty years in Southern California, the largest EV market in the U.S.
Anecdotal? Sure, but I’d wager a bet that the same concern is taking place at EV dealerships around the country.
But, but, but…Tesla!
This is where EV fanboys will put up Tesla numbers, claiming that this is proof of the incredible market demand for EVs. “Omigod, Tesla posted record profits this quarter and the Model Y and Model 3 are the best-selling EVs in the world, and everybody is rushing to buy an EV, and they can’t make them fast enough, and if you don’t agree with me then you will someday die and be replaced with a person who can think correctly!” (That last part is what someone on LinkedIn actually told me.)
Insisting that the success of Tesla proves that everyone loves EVs is like saying the success of Viper is proof that everyone loves to play darts. Tesla is a first-mover manufacturer of a boutique product favored by status-seeking car buyers who most likely own other ICE vehicles for hauling, towing, and long-distance driving. It is a luxury, niche product of limited utility, not a mainstream product for the average driver.
Tesla can survive where the legacy automakers will fail because Tesla can manufacture its EVs at a volume where they can achieve economies of scale, thus being able to price their base level cars where the “almost wealthy” can afford them. Tesla also created demand by targeting the wealthy and playing to their need for showing their “green” street cred. And, of course, Tesla was wise enough to install its Supercharger network to mitigate the range anxiety people have when searching to fill up their EVs on the road.
Tesla attracts niche EV customers that have the means to afford them. Ford, GM, Honda, Toyota, and Hyundai are going broke trying to sell EVs to people who are buying Teslas. The remainder of the consumer market is looking for affordable transportation, not an overpriced battery-operated toy to show off to their friends.
Game over.
The EV revolution has collapsed. Consumers are aggressively rejecting EVs, and legacy automakers not named Tesla who bet heavily on the EV “transition,” either by coercion or choice, are at a point where they will need to stop the financial bleeding. Can they successfully navigate a retreat back to producing profitable vehicles that consumers want? Will states such as California follow through on their plans to outlaw the sale of ICE vehicles in a few years, effectively torpedoing around 15 percent of California’s yearly GDP? Can the auto industry finally fess up and admit it was wrong to go all-in on EVs with yesterday’s dead-end technologies being touted as “the future of transportation?”
Lofty goals are important, but fairy tales sink entire industries. It is time for a managerial house-cleaning and overhaul of the American auto industry, the largest since Honda and Toyota came in and dominated Detroit Big 3 in the 80’s. This will be costly and painful, but it needs to happen.
Because EVs are just not happening.
Interesting article Keith. After your previous article about how EV's suck so badly, I decided to pay more attention to see if they really did. I mean as a long time "car guy" I should pay attention, right? I would hate it if we became a country of self driving golf carts. Soon after, someone decided to total my beloved BMW by running into the back of it while I was stopped, so I was forced into a new car. Much to my surprise, I ended up with the cheapest Tesla, more out of curiosity than anything else. My driveway still has two BMW's, a VW, a Saab and a Subaru for the four drivers in my family to choose from. All but the VW with stick shifts. We like to really drive, not just commute. In the process I got a first-hand lesson in of how poorly the other brands understand EV's. My experience at VW, Ford, Hyundai, Kia and BMW showrooms demonstrated how the manufacturers will never sell EV's until they get dealers on board. Not one dealer I spoke with was the least bit interested in selling an EV, except of course Tesla. And even if they feigned being interested, they were devoid of any knowledge or understanding. I suspect they want that recurring income from oil and filter changes, tune-ups and all that stuff EV's don't need. Or maybe they are just slow learners or averse to change. So it's no wonder they aren't selling. It's a self-fulfilling prophecy. If you suck at selling and have no enthusiasm, you won't make the sale.
So how do I like my Tesla? Love it! I've purchased about 23 cars since I started driving 52 years ago, and none has made me smile more. It's not perfect, but it's pretty damn good! I've put 14k miles on it since June 28, which is not insignificant in 4 months. Five longish trips in addition to the daily commute and I can say without any doubt that I will not buy an ICE car ever again. In my situation I see no benefit. None. Thanks to the price reductions to clear out the old models before the "Highland" facelift, its net cost after incentives was no more than a typical Toyota Corolla. An on top of that I've saved roughly $1300 in fuel alone compared to my BMW. And no real scheduled maintenance. So tell me how "It is a luxury, niche product of limited utility, not a mainstream product for the average driver." Life with a Tesla is just so easy and stress free! "Range anxiety" is something that ICE drivers imagine. In practice it's not an issue. I can't speak for other brands but beginning every morning to a fully charged vehicle that is ready to go for 5 normal commuting days without requiring an overnight recharge while I sleep is my definition of "a mainstream product for the average driver".
I still believe the transition is inevitable, but I also agree that there are instances where an ICE vehicle may still be preferable for some people. If you can't charge at home or work, tow often, can't use the extensive Supercharger network, or some other complication. So maybe it won't be 100% transition. And there will be speed bumps and regional differences. But that will change as technology continues to progress, and the infrastructure grows to meet demand. BP's latest deal with Tesla for Supercharger technology is an indicator that big oil is hedging their bets if they're smart.