MORNING RANT: The Electric Vehicle Transition Just Collapsed, and a Day of Reckoning Has Hit for Auto Manufacturers Who Bet Wrong on EVs

The wheels have fallen off the electric vehicle revolution. Consumers are assertively rejecting EVs, and traditional auto manufacturers who bet heavily on “the EV transition” are at a day of reckoning.

The past few weeks appear to be the “gradually, then suddenly” moment when the problems with the EV transition suddenly collapsed into total failure, and auto manufacturers not named Tesla have had to admit that they bet wrong on EVs as they seek to stop the financial bleeding.

Usual Disclaimer: Tesla is a successful manufacturer of a boutique product favored by status-seeking luxury car buyers who have access to other vehicles for hauling, towing, and long-distance driving, and who have access to overnight charging. It is a niche product of limited utility.

As auto manufacturers started looking at their third-quarter financial results, they finally had to acknowledge that their EV commitments are, ahem, unsustainable, and that they cannot continue to sink billions more capital into the failed notion that EVs will replace internal combustion (“ICE”) vehicles. Here are some of the stories that have just broken:

“Ford again warns on EV results, withdraws 2023 forecast” [Reuters – 10/27/2023]

Ford said its EV unit posted a higher-than-expected loss in earnings before interest and taxes of $1.3 billion.

Ford sold 20,952 electric vehicles in Q3 2023. The $1.3 billion loss in that quarter averages out to $62,000 per unit. That is catastrophically bad.

The company has forecast a full-year loss of $4.5 billion for the Ford Model e unit.

With Ford referring to its EV division as “Model e,” a commenter here once referred to it as the “Model e-dsel.” That’s funny, but Ford survived its Edsel debacle, it may not survive its EV misadventure.

The automaker said its EV business was experiencing "sharply compressed" prices and profitability, and said customers were not willing to pay a premium for EVs over comparable combustion and hybrid models.

Correct. Customers willing to pay a premium for a less-functional vehicle want a very exclusive hood ornament. Those customers purchase Teslas, not Ford e-dsels.

“Ford will postpone about $12 billion in EV investment as buyers become more cautious” [CNBC – 10/26/2023]

[Ford CFO John Lawler] said that Ford will postpone about $12 billion in planned spending on manufacturing capacity for EVs, including a planned second battery plant at a new campus in Kentucky.

Something is puzzling here, because Ford is saying that it is not yet killing off its massive “Blue Oval City” EV plant that is under construction near Memphis, but previous reports about Ford’s $12 billion EV commitment included the Memphis plant in that commitment. Perhaps Ford will re-purpose Blue Oval City for ICE vehicles if it actually gets built.

Reality has also hit at General Motors. It just announced that the manufacture of electric pickups at one of its plants was being pushed back to late 2025 due to ”evolving EV demand,” which is a polite way of saying consumers will not buy them.

“GM delays EV truck production by a year at Michigan plant” [Reuters – 10/17/2023]

General Motors said on Tuesday it will delay production of the electric pickup trucks at its Orion Township, Michigan, plant as it grapples with "evolving EV demand."

In addition, GM has just announced that several other new EVs that were about to hit the market are also on hold.

“GM Delays Launch Of Chevy Equinox EV, Silverado EV RST and GMC Sierra EV” [GM Authority – 10/24/2023]

The announcement that the launch of the Chevy Equinox EV, Chevy Silverado EV RST, and GMC Sierra EV Denali would be delayed was announced by GM CEO Mary Barra during GM’s Q3 earnings presentation.

Here is what General Motors’ CEO Mary Barra had to say about the delay in launching these new EVs, after which I will translate it from corporate word-salad into English.

“The software organization team is optimizing the software strategy in fine-tuning the plans for our new vehicles to help make sure we execute with the highest possible quality and customer experience while positioning the company to drive significant revenue growth from subscriptions in the future,” Barra said during the presentation.

Translation: “GM dealers don’t want to stock these new electric albatrosses because customers won’t buy them.”

Beyond the problem traditional auto manufacturers have selling EVs to luxury car buyers with the means to afford them is that there is effectively zero market for EVs among less affluent buyers who just need affordable transportation. The auto manufacturers are finally waking up to this reality.

“GM, Honda scrap plans to co-develop ‘affordable’ sub-$30,000 EVs” [CNBC – 10/25/2023]

General Motors and Honda Motor have canceled plans to jointly develop affordable electric vehicles as they face slower-than-expected demand and changing market conditions.

Contrary to the expectations of elite executives with their fancy degrees, demand for EVs is not slower than I expected. In fact, the consumer rejection of EVs was absolutely expected by people like me, and entirely predictable by anyone not blinded by climate ideology or impaired with an elite university degree.

At least Honda has accepted the inevitable:

Honda CEO Toshihiro Mibe told Bloomberg Television on Tuesday that the company determined the affordable EV program “would be difficult as a business.”

Over at Toyota, Chairman Akio Toyoda is gloating, as well he should. He battled internal pressures as he promoted hybrids and traditional ICE vehicles, while correctly predicting that consumers would reject EVs.

“Toyota’s Chairman Is Having His ‘I Told You So' Moment About EVs” [Jalopnik – 10/25/2023]

Speaking as head of the Japan Automobile Manufacturers Association, the Wall Street Journal reports that Toyoda said automakers should have continued investment in hybrids instead of going all-in on EVs.

Toyota has taken a “wait and see” approach with EVs, deciding to invest in hybrid models like the new Prius, Corolla Cross Hybrid, even full size hybrids like the Sequoia SUV and Tundra pickup.

Meanwhile Toyota can’t keep up with hybrid demand. The Journal said that in September 2023, Toyota dealers had “a little more than a week’s worth of Prius hybrids in stock, compared with more than two months’ supply of its electric SUV, the bZ4X.”

Even Mercedes dealers are choking on lots full of unwanted luxury EVs.

“Despite Mercedes' zeal for EVs, models are slow to sell” [Automotive News – 10/20/2023]

Mercedes retailers interviewed by Automotive News blame their bloated stockpiles on the product and on the brand's unwillingness to respond to increased competition with sales programs.

A Mercedes store operator said he has a more than six-month supply of EVs compared with about a 50-day supply of gasoline-powered vehicles. "The EVs are coming whether or not you asked for them or earned them," he said.

Over in Europe the bloom is off the rose too. VW has made a serious commitment to electric vehicles, but EVs still make up less than 10% of its product sales, and car buyers are sending a message about what they want going forward:

“Volkswagen says EV orders are down 50% in Europe” [Electrek – 10/26/2023]

Volkswagen CFO and COO Arno Antlitz explained on a media call that EV orders in Europe are down to 150,000. That’s 50% lower than last year’s total of 300,000.

Even rental car companies are weary of EVs:

“Hertz pulls back on EV plans citing Tesla price cuts, high repair costs” [CNBC – 10/26/2023]

An important part of the revenue model for rental car companies is selling the cars when they are pulled out of livery service. In contrast to ICE cars, used EVs do not hold their value well. It’s even worse for those selling used Teslas. That is because Tesla keeps dropping new car selling prices, which further erodes the re-sale value of those who bought when the price was higher.

Hertz is pumping the brakes on plans to electrify more of its rental car fleet after EV repair costs came in higher than the company anticipated, and after Tesla price cuts reduced the resale value of the majority of electric cars in its fleet by about one-third.

Hertz’s Q3 results fell short, causing its stock price to plunge. CEO Stephen Scherr wasn’t afraid to point blame at the problems EVs are causing them.

The rental car company reported lower than expected margins for the period ending September 2023, and the CEO said EV repairs were one challenge. “Our direct operating expenses remained controlled in the quarter as they grew with transaction volume. On a unit basis, we achieved productivity gains across most categories of auto. The exception remained vehicle damage costs, particularly those on our EVs.”

The EV revolution has met its Waterloo. The challenge for poorly managed companies like Ford and GM is can they navigate a successful retreat back into what they are capable of doing profitably, specifically, producing ICE vehicles that consumers want.

Blue states like California have outlawed the sale of non-EVs in just a few years. It will be interesting to see how they respond to the reality that mass market EV production is not going to happen.

There was much discussion about EVs in the latest Cut Jib Newsletter podcast. Jim Lakely of the Heartland Institute joined JJ Sefton and CBD to discuss the climate craziness and the various political battles we’re having to fight against the climate cultists. Here is a link to the podcast. I encourage you to give it a listen.

[buck.throckmorton at protonmail dot com]

posted by Buck Throckmorton at 11:00 AM

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