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The EV Demand Problem (Reuters)

15 July 2023


Reuters title: The EV Demand Problem
By: Joseph White, Global Automotive Correspondent
Date: 10 July 2023

“Global demand for electric vehicles is growing – but not fast enough and not at the prices most automakers need to make money.

That’s one conclusion to draw from the messy, mystifying and now failed effort by automakers in China to call a truce in that market’s EV price war, and signs that EV demand in the United States is falling well short of the industry’s and Washington’s expectations.

Let’s start with China

Last Thursday, Tesla and 15 other automakers competing in the Chinese signed on to a pledge to avoid “abnormal pricing” – code for steep price cuts. The agreement brokered by the China Association of Automobile Manufacturers (CAAM) appeared to be a truce in the EV market price war that has been led by Tesla and BYD.

You may be thinking: Wait, isn’t that an anti-trust violation?

Great question, and as Breakingviews commented, one that should have occurred to the CAAM members before they announced their move.

But nevermind, because on Friday Tesla began offering fresh discounts, which coincided with disclosure of layoffs at the company’s Shanghai manufacturing complex.

Other automakers followed suit – including General Motors Cadillac brand which slashed the price of its just launched Lyriq electric SUV in China by 14%, after Volkswagen cut prices on its line of EVs. (GM said U.S. prices for the Lyriq are not changed. The U.S. Lyriq starts at $58,590 – about $6,000 more than the Chinese version.)

The good news is that the discounts Tesla, BYD, VW and others are throwing at Chinese consumers helped propel a 25% jump in electrified vehicle sales last month. (More on that below.)

The bad news is that whatever profit forecasts automakers had for China are out the window, absent significant new cost-cutting. Shares in Chinese automakers fell Monday.

The EV market situation in the United States has similar challenges: EV demand is growing, with help from Tesla’s price choppingTesla beat Wall Street’s guesses for quarterly deliveries and Rivian’s second quarter deliveries also outperformed expectations.

But EV sales are not growing fast enough to support the sales ambitions of every player.

U.S. auto dealers ended June with 100 days’ worth of unsold EVs on their lots, according to WardsAuto. That’s roughly double the levels of inventory Detroit Three executives have said they want in the new, post-COVID, post-supply chain shock world.

Detroit executives talk about selling EVs with “no negotiation” and a build-to-order approach. Not with that many vehicles gathering pollen on dealer lots.

Second quarter sales reports contained other discouraging data for non-Tesla EV producers.  

Sales of Ford’s Mustang Mach-E electric SUV fell 21% in the second quarter from a year ago.

Sales of the F-150 Lightning electric pickup more than doubled from a year ago – but from a very low base. Ford sold just 4,466 Lightnings between April 1 and June 30 – well short of what’s needed to support the company’s plan to boost Lightning output to 150,000 vehicles a year.

GM sold just 1,348 Lyriqs in the United States during Q2 and 47 Hummer EVs – two of the lead products from its Ultium EV architecture. GM’s EV sales champ remained the Chevy Bolt, with 13,959 sold during the latest quarter. But the Bolt and its last-generation tech are headed for the history books at the end of this year.

Slow sales for legacy auto brands’ EVs will amplify the concerns of the United Auto Workers union and Detroit automakers about the Biden Administration’s goal to push EVs to two-thirds of U.S. new vehicle sales by 2032 as part of its broader response to climate disruption.”



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