DETROIT, Dec. 11 (Reuters) – This year marked a detour in the auto industry’s race toward an all-electric future.
Automakers are preparing to invest $1.2 trillion by 2030 to move electric vehicles from niche products to mass-market models by 2023, much of it in batteries, according to a Reuters analysis. We develop our own software.
As we head toward the end of the year, traditional automakers, Tesla (TSLA.O), Rivian (RIVN.O) and other EV startups are reining in investment and retooling their product strategies. Legacy automakers are pleading with policymakers for more help to offset the high costs of transitioning to EVs, on top of the billions already poured into EV subsidies.
Consumer demand for EVs is increasing around the world. But EV adoption is not as fast or profitable as industry executives expected, especially in the United States.
High interest rates are pushing many EVs out of reach for middle-income consumers. For buyers accustomed to adding hundreds of miles of gas mileage in just minutes, the lack of charging infrastructure is a deal breaker.
“EVs will be the future of the passenger car business,” said Jeff Parent, chief operating officer of U.S. auto dealership chain AutoNation (AN.N). But “the situation is going to be volatile over the next three to four years” as consumers worry about prices and rates, he said.
Industry CEOs are hedging toward the goal of moving to all-electric vehicles by mid-decade.
General Motors (GM.N) CEO Mary Barra was asked earlier this month at the Detroit Automotive Press Association whether GM was still aiming to go fully electric by 2035. “We will adjust it according to the customer’s situation,” he said.
F-150 Lightning: Great expectations and disappointment
Ford’s (FN) F-150 Lightning electric truck shows how bullish predictions have been contained.
Buoyed by early and enthusiastic demand for the Lightning, Ford in August added a third worker to its historic Rouge assembly facility in Dearborn, Michigan, tripling the electric pickup truck’s annual production rate. The number has been raised to 150,000 units.
But in October, Ford acknowledged that demand for the electric F-150 was insufficient to maintain the planned production pace and canceled the third shift. About 700 workers were furloughed.
In the major EV markets of China, Europe, and the United States, demand for electric vehicles is still growing faster than demand for cars overall.
According to AutoForecast Solutions, global EV production is expected to triple to 33.4 million units by 2030, accounting for about one-third of total production. According to JATO Dynamics’ analysis, much of that growth will occur in China. Government subsidies and a price war led by Chinese EV market leaders BYD (002594.SZ) and Tesla have made EVs more affordable than combustion vehicles in China, according to analysis by JATO Dynamics. That’s what it means.
According to AFS, production of battery electric vehicles in North America could increase sixfold to nearly 7 million vehicles by 2030. That’s about 40% of the projected U.S. market, but far short of the Biden administration’s goal.
Lobbying for relief
Industry executives are lobbying the Biden administration to reverse emissions regulations that would effectively require EVs to account for two-thirds of new U.S. car sales by 2032.
Looking ahead, industry executives are raising two concerns about the challenge of expanding the EV market beyond the technology’s adventurous early adopters: affordability and access to charging.
The slow pace of charging infrastructure development forced major traditional automakers this year to terminate their agreements with Tesla to allow buyers of their EVs to take advantage of Tesla’s Supercharger network, which It was a competitive coup for Tesla.
Mark Wakefield, co-leader of the automotive practice at consultancy AlixPartners, said: “The reason automakers capitulated to[Tesla’s]standards was because they recognized that demand was being held back by concerns about charging. It’s a clear sign that there is.”
“Affordability” is an industry norm designed to persuade mainstream middle-income consumers to pay enough for an EV to generate a profit while covering higher production costs. For most legacy automakers, that has so far proven impossible.
Even Tesla, which makes money from EVs, has been forced to cut prices to keep assembly lines running at full capacity in China and the United States.
Tesla CEO Elon Musk told analysts in October, “If our car costs the same as Toyota’s RAV4, no one will buy the RAV4.” “At least the chances of them buying it are extremely low,” he told analysts. “Our car is still much more expensive than the RAV4.”
Pricing for RAV4 models starts at $28,475. Model Y prices start at $43,990, with a $7,500 tax credit available through December 31st. Tesla has warned that these credits may be reduced as domestic content regulations tighten.
Reporting by Joe White in Detroit; Editing by Matthew Lewis
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