The Electric Vehicle Market Enters the Slow Lane Due to Obstacles

Automakers are pulling back on the speed of their ambitious electric vehicle (EV) rollouts due to a complex mix of changing consumer interests, escalating interest rates, persistently high costs, and concerns over the recharging infrastructure.

This pivot points to the reality that the much-anticipated EV revolution is not dead but simply progressing at a slower rate than previously projected by car manufacturers. Consequently, the challenge remains to maintain the steady production of gasoline-powered trucks and SUVs — their profit-generating core — while continuing to channel investments into the EV domain.

General Motors and Ford have put a pause on constructing new EV production facilities and have also downsized their sales goals. Honda has entirely ditched a $5 billion project aimed at producing affordable EVs in collaboration with GM. Top battery manufacturers Panasonic and LG Energy Solution have also echoed concerns over a potential slowdown in the EV market. Tesla, too, has announced a deceleration in its plans to establish an EV production unit in Mexico. In comparison, Toyota has decided to continue expanding, investing an additional $8 billion in its North Carolina-based battery plant.

Despite the pessimistic outlook, EV sales have shown robust growth, outpacing all other segments in the U.S. auto industry. This year, the EV market is set to surpass the landmark figure of 1 million annual sales for the first time. Automobile manufacturers have sold approximately 876,000 electric cars in 2023 thus far, according to Cox Automotive. EV sales increased by 50% in the third quarter compared to the same period in 2022. This figure, however, represents a slight off-pace from the record 71% growth observed from Q3 2021 to Q3 2022.

Cox anticipates that EVs will account for 8% to 9% of U.S. car sales in 2023, a goal already surpassed by manufacturers like BMW (15.6%), Audi (12.7%), Volvo (12.6%), Volkswagen (12.2%), and Mercedes (12%).

Nonetheless, attracting typical car buyers to EVs remains difficult due to high prices, which averaged $50,683 in September, despite a 22% fall from last year. An increase in interest rates, adding to car financing costs, poses an additional hurdle, while the lack of charging stations, with only 141,714 public ones reported in Q2 2023, presents another significant barrier. Leasing has become a popular alternative to navigate these challenges and tax credit limitations.

Other Electric Vehicle Market Factors

Electric car enthusiasts are enjoying significant price cuts, but industry experts warn that manufacturers may risk outstripping market demand. More automakers are offering EVs, leading to aggressive price competition. Still, some drivers prefer hybrid vehicles over EVs, despite lower prices.

The U.S. has witnessed record EV sales in the quarter ending in July, raising concerns about overproduction. Kelly Blue Book reported a 20% price drop from a peak of $66,390 in 2022. In Q2 2023, almost 300,000 new EVs were sold in the U.S.

Tesla’s drastic price cut of up to $13,000 earlier this year prompted other companies like Ford and General Motors to follow suit, leading to cheaper EVs flooding the market.

Many social media users are posting about the problems of charging their EVs and how they want to see more hybrid vehicles instead of pure electric vehicles in the future.