Home Tech Tesla among electric car makers forced to cut prices due to market stagnation

Tesla among electric car makers forced to cut prices due to market stagnation

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Tesla among electric car makers forced to cut prices due to market stagnation

myLon Musk became the richest man in the world by evangelizing electric cars and delivering them by the millions. However, in recent months his company, Tesla, has struggled to maintain its momentum: sales have fallen this year, as has its share price.

Those struggles have become emblematic of a broader reckoning facing the electric vehicle (EV) industry. After skyrocketing demand and valuations during the coronavirus pandemic years, the pace of sales growth has slowed. The industry has entered a new phase, with questions over whether the shift from gasoline and diesel to cleaner electricity faces a problematic stalemate or a temporary hurdle.

Musk acknowledged the difficulties this week, telling investors: “The adoption rate of electric vehicles globally is under pressure, and many other automakers are abandoning electric vehicles in favor of plug-in hybrids.” Musk, of course, insisted it was the wrong decision.

A charging station for electric cars in Norway, where electric vehicles make up 90% of the market. Photography: Andreas Werth/Alamy

However, the sales slowdown is real. Tesla and its closest rival in electric car volumes, China’s BYD, have reported lower electric car sales. Across Europe, battery electric cars fell to a 13% share of all sales, down from 13.9% last year, while sales of hybrids – which combine a battery with an internal combustion engine – rose up to 29% from 24.4%. In the UK, electric cars accounted for 15.5% of total car sales in the first three months of 2024, an increase only marginally on the same period last year.

In recent years, electric car manufacturers have been able to easily sell all the electric cars they have made. Now, however, companies in much of the world are grappling with the end of the era of ultra-low interest rates, which has left less money in households’ pockets.

“The economic headwinds are pretty ugly overall, so I’m not surprised we’re having a slowdown,” said Ian Henry, whose consultancy AutoAnalysis works with several automakers.

Buyers still have to pay more upfront for battery-powered cars (although most would save money by having an electric vehicle because energy is cheaper). And electric car repair costs and insurance costs may be higher in some places due to a shortage of mechanics. Another important factor is the very irregular introduction of public electric chargers, which is giving some potential buyers reason to pause. All of that has been seized upon by EV industry skeptics and turned into a battleground in the culture wars.

The hand of the government

Rico Luman, senior auto economist at ING, an investment bank, said electric vehicle sales had reached a “plateau” and that it would be harder to sell electric cars after the initial rush of early adopters who felt comfortable with the change of gasoline and gasoline. diesel.

However, there is more going on in the confrontation than purely economic factors. Governments are also playing an important role. This is particularly evident across Europe, where electric vehicle sales are taking divergent paths even though buyers face similar pressures. Norway is an outlier. With electric car sales heavily subsidized, EVs now account for 90% of the market. Electric vehicle market share has also increased this year in Denmark, Belgium and France.

However, it has declined in Germany, once the largest electric car market, for one simple reason: the government has withdrawn subsidies.

In addition to affecting demand, regulation also plays an important role in the supply of automobiles. Matthias Schmidt, a Berlin-based electric car analyst, has long expected EV sales growth in Europe to plummet during 2024. This is because January 1, 2025 is the date on which The EU takes its next big step towards zero-emission vehicles: the average reduction of carbon emissions. Carbon dioxide emissions from cars sold by each manufacturer must be reduced by 15% compared to 2021.

The Ford Puma. Photography: SYSPEO/Sipa/Rex/Shutterstock

The rules therefore provide a major incentive for automakers to focus their efforts on electric vehicles next year. Schmidt maintains that the European industry is going through a “replica” of the situation experienced in 2019, when manufacturers put the brakes on their electric cars, before launching an avalanche of new models in 2020.

Sure enough, automakers are launching new mass-market models just in time. Renault’s 5 electric hatchback will cost less than €25,000 (£21,430) when sales begin this autumn, while Ford will launch an electric version of the UK’s best-selling car, the Ford Puma, later this year.

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moaning manufacturers

A man helps assemble an Opel Grandland X SUV at the Opel plant in Eisenach, eastern Germany. Photograph: Martin Schutt/dpa/AFP/Getty Images

Stellantis, owner of the Vauxhall, Peugeot Fiat and Chrysler brands, is also joining the race: it presented its Vauxhall/Opel Grandland electric SUV on Tuesday. But that hasn’t stopped its CEO, Carlos Tavares, from complaining bitterly about how regulations are setting the pace of the shift to electricity.

This week he harangued UK Transport Minister Mark Harper about the government’s zero-emission vehicle (ZEV) mandate, which will force carmakers to sell an increasing proportion of electric cars. He later claimed to reporters that the mandate was a “terrible” policy because it forced automakers to introduce electric models too quickly.

He said: “The consequence of this is that everyone will start pushing BEV [battery electric vehicle]pushing metal onto the market, which then totally destroys profitability, which then destroys companies.”

Schmidt said the automakers’ complaints may have an ulterior motive. EU rules will ban most internal combustion sales by 2035, but are due to be reviewed in 2026.

“Many manufacturers now complaining that it is unrealistic to meet these targets is a message from hidden lobbying,” Schmidt said. “They have done it so often that it is almost the case of the boy who cried wolf. There is definitely a hidden agenda in his moaning.”

But other manufacturers have already slowed their shift, which will mean selling gasoline models – which remain more profitable – for longer. In the United States, General Motors delayed production at a factory in Michigan last year, while Ford postponed construction of a plant in Kentucky. And in the UK, luxury carmaker Bentley said last month it would delay its first battery-powered car by a year to 2026.

“Manufacturers are definitely struggling strategically right now,” Luman said. “Now they are playing with the models’ calendar, but without postponing it too much. Otherwise, they will lose the opportunity in terms of market share.”

Perhaps the biggest reason European and American automakers are unlikely to change course on electric vehicles is China. Chinese sales growth may have slowed in the first quarter of 2024 compared to last year, but they still surpassed 1 million, according to industry data cited by Reuters. A host of Chinese automakers – including leader BYD and well-funded new entrants such as phone maker Xiaomi – are fighting to dominate their domestic market and win a new role as the world’s largest auto exporter.

German Chancellor Olaf Scholz, on his recent trip to China, argued against protectionism and said Chinese manufacturers must still have access to the European market, well aware that penalizing Chinese electric vehicles would lead to swift retaliation against automakers. German cars.

For electric car manufacturers, the huge competition is tough, forcing even Tesla to reduce prices to continue selling its cars. That competition will give auto executives sleepless nights and could force some to merge or face bankruptcy, which could cause job losses. But it could also drive prices down further, making electric cars cheaper than their gasoline equivalents.

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

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