Tesla among electric car manufacturers forced to cut prices as market stalls | Automotive industry

Elon Musk became the world’s richest man by spreading the gospel about electric cars – and delivering them by the millions. Yet in recent months his company, Tesla, has struggled to maintain its momentum: sales have fallen this year, and so has its share price.

The struggle has been symptomatic of a broader reckoning facing the electric vehicle (EV) industry. After years of increased demand and inventory due to the coronavirus pandemic, the pace of sales growth has slowed. The industry has entered a new phase, with questions about whether the transition from gasoline and diesel to clean electricity is facing a crisis or a temporary acceleration.

Musk acknowledged the difficulty this week, telling investors: “Global EV adoption is under pressure, and many other automakers are moving away from EVs and looking to plug-in hybrids instead.” Musk, of course, insisted that was a bad decision.

The decline in sales is real, however. Tesla and its closest rival in the electric car rankings, China’s BYD, have both reported low sales of electric cars. Across Europe, battery-electric cars fell to 13% of total sales, from 13.9% last year, while sales of hybrids – which combine a battery and an internal combustion engine – rose to 29% from 24.4%. In the UK, electric vehicles accounted for 15.5% of total car sales in the first three months of 2024, slightly down from the same time last year.

In recent years electric car manufacturers have easily been able to sell every electric car they have made. Yet now, businesses around the world are grappling with the end of an era of low interest rates, which have left less money in the pockets of households.

“Economic crises are generally bad, so it’s no surprise that we’re downsizing,” said Ian Henry, whose AutoAnalysis consultancy works with a number of automakers.

Buyers still have to pay more upfront for battery cars (although many can save money by owning an electric car because of cheaper energy). And electric car repair costs and insurance costs can be higher in some areas because of the shortage of mechanics. Another important point is the weak introduction of public electric chargers, which gives some buyers reason to pause. All of that has been jumped on by critics of the EV industry – making them a battleground in the culture wars.

The hand of the government

Rico Luman, a senior automotive economist at ING, an investment bank, said that EV sales have reached a “peak”, and that it will be harder to sell electric cars after the initial push by early adopters to relax and switch from petrol and. diesel.

However, there is much more going on with the conflict than just economic factors. The government also has a big role. That’s particularly evident across Europe, where EV sales are taking a different path even though buyers are facing similar pressures. Norway is a foreign country. With heavily subsidized electric vehicle sales, EVs are now 90% of the market. EV market share has also increased this year in Denmark, Belgium and France.

However, it has declined in Germany, which used to be the biggest market for electric cars, for one simple reason: the government has removed subsidies.

As well as affecting demand, regulation also plays a major role in what cars are offered. Matthias Schmidt, an electric vehicle analyst based in Berlin, has been expecting the growth of electric sales in Europe to slow down during 2024. That’s because January 1, 2025 is the date when the EU takes its biggest step towards zero-emission cars: the average carbon . Dioxide emissions of vehicles sold by each manufacturer must decrease by 15% compared to 2021.

The law therefore provides a major incentive for automakers to focus their efforts on electric vehicles next year. Schmidt says that the European industry is going through a “repetition” of the situation found in 2019, when manufacturers stopped their electric cars, before launching a range of new models in 2020.

In fact, automakers are releasing new mass-market models from time to time. Renault’s electric hatchback will cost less than €25,000 (£21,430) when it goes on sale this autumn, while Ford is expected to launch an electric version of the UK’s best-selling car, the Ford Puma, later this year.

Mourning makers

Stellantis, owner of the Vauxhall, Peugeot Fiat and Chrysler brands, is also joining the momentum: it launched its electric Vauxhall/Opel Grandland SUV on Tuesday. But that hasn’t stopped the chief executive, Carlos Tavares, from complaining bitterly about how regulations enforce the speed of the switch.

This week he blasted Britain’s transport minister, Mark Harper, over the government’s zero-emissions (ZEV) mandate, which will force carmakers to sell an increasing number of electric vehicles. He then claimed to reporters that the mandate was a “terrible” policy because it was forcing automakers to introduce electric models too quickly.

He said: “The result of this is that everyone will start pushing BEV (battery electric vehicle), pushing steel into the market, which will completely destroy the profits, which then destroys the company.”

Schmidt said the automakers’ complaints may be malicious. EU rules will ban most sales of internal combustion engines by 2035, but are due to be reviewed in 2026.

“Many developers now complaining that it’s impossible to achieve those goals is a covert persuasive message,” Schmidt said. “They have done it too many times like the story of the boy who cried wolf. There is definitely a hidden agenda in their lamentation.”

But some manufacturers have already reduced their changes, which will mean selling petrol models – which are still more profitable – in the long run. In the United States, General Motors last year delayed production from a plant in Michigan, while Ford postponed the construction of a plant in Kentucky. And in the UK, luxury car maker Bentley last month said it would delay its first battery car by a year to 2026.

“Manufacturers are definitely struggling right now strategically,” said Luman. “Now they are playing close to the time of the models, but not too far off. Otherwise they will miss the boat in terms of market share.

Perhaps the biggest reason European and American automakers are unlikely to switch to EVs is China. Chinese sales growth may have slowed in the first quarter of 2024 compared to last year, but they still grew by a million, according to industry data cited by Reuters. Many Chinese automakers – including leader BYD and new, well-funded startups such as phone maker Xiaomi – are fighting to dominate their home market and win a new role as the world’s biggest car seller.

German Chancellor Olaf Scholz, on a recent trip to China, railed against protectionism and said Chinese manufacturers must still have access to the European market – well aware that punishing Chinese EVs would face swift retaliation against German automakers. .

For electric car makers, the intense competition is hurting — forcing even Tesla to cut prices to keep selling its cars. The competition will give car executives sleepless nights – and could force others to merge or go bankrupt, potentially leading to job losses. But it could also lower prices further, making electric cars cheaper than their petrol equivalents.

“It’s probably a good thing for consumers,” Ian Henry said. “Whether it’s a good thing for developers who are trying to make money is a different question.”