Is The Demand For EVs Already Dying?

Last week, three pieces of bad news came from car manufacturers that want to, or are, in the EV business. Ford and GM reported that demand for EV pickups was “choppy.” Then, Tesla turned in poor earnings. Revenue from Tesla’s auto business rose only 5% to $19.6 billion. Free cash flow for the company dropped 74% to $868 million.

Tesla says it has an excuse for its poor financial results since it has dropped prices on a number of its models to gain market share. However, if EVs are indeed quickly grabbing market share from gas-powered cars, why would downward price pressure be an issue? It’s a problem when the market leader struggles with the ability to charge premium prices.

Tesla already has a profitable business, and it is almost impossible for that to change. It has too much of the market and is lowering its cost of goods sold. GM and Ford, on the other hand, have spent billions of dollars on EV development, and profits from these businesses are far off and may never materialize.

Ford has the most to lose, both financially and on Wall St. Tesla’s stock is up 1,343% in the last five years. Its market cap is $713 billion. Ford’s stock is up 39% for the same period, well below the performance of the S&P 500. Ford’s market cap is $47 billion.

Ford has said it will produce several hundred thousand EVs next year. This is a year later than its previous estimate. Its EV flagship, the F-150 Lightning pickup, has had only a few thousand unit sales this year. The same truck’s gas-powered version has been America’s best-selling vehicle for over four decades. Ford’s pickup brand advantage should have boosted the EV version. It did not.

The problem with EV sales in the US boils down to a broad rejection of these vehicles by the US public. Several surveys show many Americans want to stay with gas-powered cars, albeit with smaller engines. Why? These surveys of potential buyers report that EVs take much longer to “fuel” than gas-powered ones. It is hard to find EV charging stations, they also believe. There are 125,000 gas stations in the US. And people are worried about the range of EVs. Trips of over 300 miles mean at least one stop, and often at an inconvenient charging station.

Tesla made its decision about EVs when it was founded. Its risk of disappointing Wall Street is modest and is based on whether its profits are more or less each quarter compared to the same quarter the year before. For Ford and GM, this is an existential moment. These two century-old companies could fall apart in less than a decade, if their EV sales do not explode upward.

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