Yearender: In 2023, bold EV strategies took a punch from reality

AutoNation

11/12/2023 11:00

By Joseph White
       DETROIT, Dec 11 (Reuters) - This was the year the auto
industry's race toward an all-electric future took a detour.
    Heading into 2023, automakers were gearing up to invest $1.2
trillion by 2030 to move electric vehicles from niche products
to mass-market models - many with batteries and software
developed in-house, according to a Reuters analysis. 
    As the year closes, legacy automakers as well as Tesla
 TSLA.O , Rivian  RIVN.O  and other EV startups are throttling
back investments and reworking product strategies. Legacy
automakers are appealing to policymakers for more help to offset
the high costs of the EV transition, on top of billions of
dollars already pumped into EV subsidies. 
    Consumer demand for EVs is growing worldwide. But EV
adoption is not happening as fast or as profitably as industry
executives anticipated, especially in the United States. 
    High interest rates have pushed many EVs out of reach for
middle-income consumers. Lack of charging infrastructure is a
deal-breaker for buyers used to adding hundreds of miles of
gasoline driving range in just a few minutes.
    "EVs are going to be the future of the passenger automobile
business," said Jeff Parent, COO of AutoNation  AN.N , the U.S.
auto dealership chain. But because of consumer concerns about
price and charging, he said, "the next three to four years,
things are going to be bumpy."
    Industry CEOs are amplifying hedges on their goals of
shifting to all-electric fleets by the middle of the next
decade.
    "We’ll adjust to where the customer is," General Motors
 GM.N  CEO Mary Barra told the Detroit Automotive Press
Association earlier this month when asked if GM still aims to be
all-electric by 2035.
    
    THE F-150 LIGHTNING: HIGH HOPES, THEN DISAPPOINTMENT
    Ford's  F.N  F-150 Lightning electric truck shows how
bullish forecasts got corralled.
    Buoyed by enthusiastic early demand for the Lightning, Ford
in August added a third work crew at its historic Rouge assembly
complex in Dearborn, Michigan, to triple the production rate of
the electric pickup truck to 150,000 vehicles a year. 
    But in October, Ford cancelled the third shift, conceding
that demand for electric F-150s was not enough to sustain the
planned production pace. About 700 workers were furloughed. 
    In China, Europe and the United States - the main EV markets
- electric-vehicle demand is still growing faster than demand
for vehicles overall. 
    Global EV production is on track to triple by 2030 to 33.4
million vehicles, about a third of total production, according
to AutoForecast Solutions. Much of that growth will happen in
China, where government subsidies and a price war led by Chinese
EV market leader BYD  002594.SZ  and Tesla are making EVs more
affordable than combustion vehicles, according to an analysis by
JATO Dynamics.
    In North America, production of battery-electric vehicles
could increase sixfold to nearly 7 million vehicles by 2030,
according to AFS. That is equivalent to roughly 40% of the
projected U.S. market - but well short of the Biden
administration's goals.
    
    LOBBYING FOR RELIEF
    Industry executives are lobbying the Biden administration to
back away from emissions rules that effectively require EVs to
account for two-thirds of U.S. new-vehicle sales by 2032.
    Looking ahead, industry executives raise two concerns about
the challenge of expanding the EV market beyond adventurous
early adopters of technology: Affordability and access to
charging.
    The slow pace of charging infrastructure development forced
major legacy automakers to cut deals this year with Tesla to
allow buyers of their EVs to use Tesla's Supercharger network -
a competitive coup for Tesla. 
    "The automakers' capitulation to the (Tesla) standard is a
clear signal that they are realizing that demand is held back by
fears on charging," said Mark Wakefield, co-leader of
consultancy AlixPartners' automotive practice. 
    "Affordability" is industry code for convincing mainstream,
middle-income consumers to pay enough for an EV to cover higher
production costs and still yield a profit. For most legacy
automakers, that has so far proven impossible.  
    Even Tesla, which makes money on EVs, has been forced to cut
prices to keep assembly lines running at full speed in China and
the United States.
    "If our car cost the same as a (Toyota  7203.T ) RAV4, no
one would buy a RAV4, or, at least, they would be very unlikely
to," Tesla CEO Elon Musk told analysts in October. “Our car is
still much more expensive than a RAV4."
    RAV4 models start at $28,475. Model Y's start at $43,990,
and until Dec. 31 come with $7,500 tax credits. Tesla has warned
those credits could be reduced as tougher domestic content rules
kick in.     
    

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Ford shares fall after pulling full-year forecast, wider losses
in EV unit     urn:newsml:reuters.com:*:nL4N3BX3ZZ
FACTBOX-More automakers plug into Tesla's EV charging network   
 urn:newsml:reuters.com:*:nL4N3C74DF
Tesla joins GM, Ford in slowing EV factory ramp as demand fears
spread     urn:newsml:reuters.com:*:nL1N3BP127
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 (Reporting by Joe White in Detroit
Editing by Matthew Lewis)
 ((Joe.White@thomsonreuters.com;))