Electric Vehicle Manufacturers Losing Money, Despite Record Sales

Electric vehicles hit another sales record—but manufacturers are losing money. Experts blame government interference in the free market.

Though electric vehicles hit another sales record, high production costs and a dwindling new customer base have spawned increasing corporate losses, forcing electric vehicle (EV) manufacturers to scale back on their plans to expand the market. Some experts believe these problems are a result of government interference in the business of industrial policy.

The Oct. 12 report from Kelley Blue Book revealed that sales of electric vehicles hit another record in the third quarter of 2023, accelerating past 300,000 batter-powered vehicles "for the first time in the U.S. market."

With 313,086 vehicles sold, that exceeded the record high of 298,039 sold in the second quarter and was an increase of nearly 50 percent over the year-ago quarter. With year-to-date sales topping 873,00 in September, EV sales are predicted to exceed the 1 million mark around Thanksgiving.

In all, EVs accounted for 7.9 percent of car sales between July and September, a record leap of 0.7 percent over second-quarter numbers.

However, despite the robust sales figures, EVs are now piling up on dealership lots and manufacturers are losing money. After investing billions in the EV market, many manufacturers are sounding the alarm, saying demand is not keeping up with their expectations.

As they head into 2024, many of these companies are scaling back on their once enthusiastic EV production plans.

Against the record numbers, sales have not translated into anticipated profits. According to reports, data from Edmunds.com show that EVs, which once sold within 21 days, are now sitting on dealership lots for an average of 65 days.

Business Insider reported that EVs are so hard to sell for Mercedes-Benz that the automaker has "put them on clearance at enormously discounted prices" to get them off dealership lots.

Ford Motor Company's third-quarter earnings revealed rising losses with EVs, posting an operating loss of $1.3 billion, up from $1.1 billion in the previous quarter and more than double its loss from third quarter 2022.

As Business Insider reported Oct. 27, Ford is now postponing around $12 billion in future EV investments, including the planned construction of a new battery plant. Ford's Model e lost $1.3 billion, translating to a loss of about $36,000 per vehicle delivered.

Yahoo Finance reported in August that revenues are so bad for EVs that Ford anticipates a loss of roughly $4.5 billion.

General Motors (GM) announced on Oct. 25 that it is abandoning the goal of producing 400,000 EVs by mid-2024. GM is also delaying plans to retool its Lake Orion plant in Michigan for production of two all-electric pickup truck models, the Chevy Silverado EV and the GMC Sierra EV.

More bad news came on Oct. 25 for those hoping for cheaper EV options. GM and Honda announced the cancellation of their long-planned collaboration to produce a whole range EVs that would cost less than $30,000. The joint venture, announced in April 2022, was supposed to make the cheaper EVs available for markets in North America, South America, and China by 2027.

On Oct. 31, Markets Business Insider reported that Tesla took a $41 billion hit as the EV market continues to lose support. CEO Elon Musk's ownership of 13 percent of Tesla's stock accounts for the bulk of his personal wealth. According to the latest estimates by Bloomberg's Billionaire Index, the world's richest man saw his fortune fall to $193 billion. It's the first time his value sat under the $200 billion mark since early June.

Even Hertz, the car rental company that once imagined becoming the world's premier EV provider, is reconsidering those plans due to tumbling EV resale value and the high cost of collision repairs.

The Verge reported on Oct. 27 that Uber drivers, who rent about 50 percent of Hertz's Tesla EVs, are causing far more damage than they expected.

According to a recent study from CCC Intelligent Solutions Inc., EVs have a higher repair cost than their internal combustion engine vehicle (ICEV) counterparts. Based on insurance claims for small, non-luxury EV brands with front-end damage that were still drivable, EVs cost an average of $4,041 to fix, about 27 percent more than ICEVs.

EV repairs also have a higher percentage of returns to a repair shop by a customer for more work after pickup.

EVs are expensive, too. According to Edmunds.com, the average transaction price of a new EV in April was $64,029. The average transaction price for a traditional gas-powered vehicle was $47,664. However, the early success for EVs sales appears to be is fueled by government assistance.

As the federal government pushes America toward "100 percent, full-electric," Jason Isaac of the Texas Public Policy Foundation suggests it has less to do with "mitigating climate" and more to do with "control."

"I think it was just a political push," he told The Epoch Times. "You had companies that started to get involved in politics rather than their fiduciary duty and now it's backfiring. You're only now starting to hear about the problems because these companies are losing so much money."

"There's a spot for EVs, but it's certainly not 100 percent," he added, suggesting that the only reason why EVs sales were so successful is because "the government is forcing this."

"They're forcing this transition on us. It's about control," he said. "They're forcing us to go down this path."

On Aug. 5, 2021, Joe Biden signed an executive order, "setting a goal that 50 percent of all new passenger cars and light trucks sold in 2030 be zero-emission vehicles, including battery electric, plug-in hybrid electric, or fuel cell electric vehicles."

The Inflation Reduction Act (IRA), signed into law on Aug. 16, 2022, provides $394 billion in energy and climate funding, the majority of which comes in the form of tax credits..

Starting in 2023, all purchasers of qualifying EVs became eligible for a tax credit of up to $7,500. Corporations, which receive an estimated $216 billion in tax credits, are the primary benefactor of the IRA. Manufacturers that sell 200,000 qualifying EVs are eventually phased out of qualification for the incentives.

So far, only two auto manufacturers, Tesla and GM, have reached the 200,000 threshold. Tesla hit the 200,000 mark in July 2018, and GM followed in November 2018.

Soon after Tesla's phaseout, demand for EVs dropped, forcing them to cut EV prices by $2,000. After GM lost its eligibility for the tax credits, sales of its EVs slowed so dramatically that the company was forced to lay off 14,700 workers and stop production of both the Chevy Volt and the Cadillac CT6.

In April, the U.S. Environmental Protection Agency (EPA) announced tougher emissions standards for passenger cars and light trucks for 2027. The more stringent requirements builds upon those set by the EPA for model years 2023 through 2026, S&P Global predicts that these standards will push EVs to a 67 percent market penetration and 46 percent of all new medium-duty model years by 2032.

The Infrastructure Investment and Jobs Act signed into law by Biden on Nov. 15, 2021, authorizes $1.2 trillion for transportation and infrastructure spending, including $7.5 billion to build a national network of EV charging stations, considered to be a critical element in the administration's "plan to accelerate the adoption of EVs" among the American populace.

According to Codibly, a software company with a mission to "empower the transition" to renewable energy, the current infrastructure is "expensive" and "poor."

The logistics, communication, and agreements that are necessary between the grid, utility companies, and charging manufacturers are inadequate and there are a host of problems with managing the energy drains during peak power-up times.

American Trucking Associations reported in April that a trucking company that tried to charge 30 trucks at a charging terminal in Joliet, Illinois, was shut down by local officials because it would exceed the amount of energy required to to power the entire city. In California, a company that tried to charge a dozen forklifts was also shut down.

A video posted to social media shows an enormous line of Teslas as drivers wait hours for their turn at a charging station in Louisiana. Another video shows cars sitting in California where drivers wait approximately eight hours for their 45-minute charge.

Data from the U.S. Department of Energy shows that California leads the nation in EV sales, accounting for almost 40 percent of all EV registrations.

However, much of California's EV success can be attributed to new rules that essentially force people to buy them.

On Aug. 25, 2022, Gov. Gavin Newsom's office announced that the California Air Resources Board approved the Advanced Clean Cars II rule, mandating that 100 percent of all new car sales in California must be zero-emission vehicles by 2035. The new rule codifies the light-duty vehicle goals set by Gov. Newsom’s Sept. 23, 2020 Executive Order N-79-20.

Forbes suggested that there are five reasons why EVs are failing in the American market, product unfamiliarity. They include concerns about the distance an EV can go on a single charge, a limited network of charging stations, and high interest rates coupled with the already steep purchase prices.

Diana Furchtgott-Roth has her own list of reasons, which she calls "the five Cs."

Ms. Furchtgott-Roth is an Oxford-educated economist who serves as the director of the Center for Energy, Climate, and Environment and the Herbert and Joyce Morgan Fellow in Energy and Environmental Policy at The Heritage Foundation.

"There are very real reasons why Americans don't want to buy these and it all boils down to the Five Cs," she told The Epoch Times.

"First is cost," she began. "They cost more. They cost $10,000 to $30,00o more than a regular vehicle and most people don't want to spend the extra money. The best selling truck in the United States is the Ford F-150 pickup truck. The Lightning version of that costs about $26,000 more."

"People just don't want to have to stop on a long road trip every two to three hours to charge their vehicle," she said.

"In a cold climate the batteries in these vehicles loose 20 to 40 percent of their charge," she explained, adding, "in very hot weather, they lose some of their charge also. That's why there's only about 530 registered EVs in Wyoming and about 350 in North Dakota."

"People don't want to be dependent on China," she insisted, "policymakers especially. They don't want to be dependent on China for an important component of transportation. China makes almost 80 percent of the world's batteries, and it has a lot of the components and minerals that go into the batteries. If we go 100 percent EVs, we're going to be dependent on China for an important source of transportation."

"If you have a lot of children, you can't fit them into an EV because they tend to be smaller," she said.

Ultimately, Ms. Furchtgott-Roth believes the market will correct the EV problems naturally.

"When something is unsustainable, it stops, and I think this is unsustainable," she proposed, suggesting that the number of manufacturers scaling back on production is an indication that "It's stopping already."

She also doubts that the goal of making America go 100 percent EV by 2035 will come to fruition.

"I don't think the auto industry is going to manage to stop making the regular vehicles and switch to 100 percent electric vehicles. I just don't see it happening," she asserted, saying, "it's a big mistake for the federal government to get into the industrial policy business and tell people what to buy."

To demonstrate how good market practices succeed, she cited the sales of a Toyota's RAV4 Hybrid, which has an internal combustion engine and a battery that extends the range of the internal combustion engine from 20 to 30 miles per gallon and upwards of 50 or 60 miles to the gallon.

"It's something the government hasn't forced on people," she noted. "They haven't forced Toyota to make it and there's no tax credit to buy it. Toyota doesn't get any big grant to build a manufacturing plant for it, but these things are selling. They're selling because the company has identified a demand and is making the products that people want to buy."

An example of how the market deals with a bad product, she said, is the iPhone and the Blackberry.

"First there was the Blackberry. Then Apple decided they could do that better and they made the iPhone and Blackberry was out of business," she recalled. "It wasn't that the government came in and said you have to make the iPhone and people are going to buy it. Companies are innovative. They identify opportunities for profit and market demand and this is going to happen in the vehicle industry, too."

Ultimately, Ms. Furchtgott-Roth believes the future of the auto industry will be the hybrid, saying "the companies that make the products people want will thrive while those who don't will go out of business."

"Consumers should have a choice of product," she advised. "They should be able to decide if they want to dishwasher that uses more or less water. They should be able to decide if they want a gas or an electric stove. They should have a choice of big cars or small cars, energy efficient or non-energy efficient. They will make the choice and the other ones will go out of business. It's by consumer choice that companies innovate what works and you end up with better products."

Manufacturers have been dropping prices on a regular basis, forced to by Tesla which has a massive head start and scale of production. The $7500 rebate helps. Tesla is also trying to keep its market share thus it is fighting newcomers with pricing. Tesla also has the charging network in place; though this can be utilized by others using an adapter (meanwhile many other EV manufacturers have adopted the Tesla charger as standard starting next year).

There are some who think the EV market is near saturation, too. Hertz rental company also has a problem - the constant dropping of prices is forcing them to write down the value of their fleet and because there is no serious 3rd party player Tesla controls all the repair and replacement parts. It’s very expensive to run a fleet of them.

“a record leap of 0.7 percent over second-quarter numbers.”

Epoch Times is usually better than this. Calling a less than 1% increase a “record LEAP”. Despite the massive push and $7500 tax payer dollars on each sale they could not even increase sales 1% of the market. Now that more of the problems are becoming known the sales are tanking

There appears to be some sort of rewards given by the EV manufacturers to some of the old car pubs. They all seem to be pushing the duds. Motor Trend picked one as car of the year, Jalopnic did a laughable counter of a tech article that shows just how much more of an EV costs “per mile” than a conventional IC machine. The bottom line, though, is that without support from the government, EVs would be as dead as their batteries. I’m a EE, and would love an electric car. An electric car that doesn’t consume rare earth resources, charges within 15 or 20 minutes via charging stations are as common as filling stations, one that has a national power grid capable of handling the load and...oh yeah...reliable and inexpensive power generating capabilities.

We’ll lose a little bit on each car, but make it up in volume.

The case of Tesla is a lot like Amazon. They lose or lost money for many years but the capital markets float them the cash. Ford can't go out and raise $50 billion from investment funds. They can (or could). So these companies can lose money knowing they have capital reserves and ways to tap more.

Tesla has been able to make some profits by selling carbon credits - whatever scam that may be. Longer term, Tesla may be able to generate recurring revenue from their charging stations (say, $20 per charge I think is roughly the going rate here in CA) and various accessories. They bought SolarCity (which iirc was founded by himself and his brother) and sell the entire package from rooftop panels to in-home battery packs to power a home. They also have incredible technology inside the cars some of which is only minimally operational due to regulations. But that tech may be licensed to other manufacturers in time.

They may also make a mint on repairs; and heaven help those who will eventually need to replace their batteries. May be more value to the owner to just buy a new car than swap all the batteries.

> Ford Motor Company’s third-quarter earnings revealed rising losses with EVs, posting an operating loss of $1.3 billion… <

At some point, Ford’s stupid decisions will cause its stock price to crash. As of today, it’s $10.31 per share. I’m watching Ford, and I believe I’ll be a buyer if it drops to $5 per share.

Comments, anyone?

“Green Energy” is a social-engineering and political crony skimming scheme

It has only survived to this point by a previous 15 years of zero interest rates, rapidly growing government debt for propaganda and subsidies, cheap oil, globalization and world peace

All those things have started to reverse. The “green energy” scam won’t survive much longer

Depends on what you are calculating. 0.7% of the entire automotive market (which would include all cars on the road of any type and age) is a big number. If it’s just 0.7% of new car sales then yeah, it’s a small increase.

> Wait for it [Ford] to go to $0.50, and then the government bailout <

Ha, yes. I’m factoring in a government bailout as part of my grand strategy.

Disclaimer: All of my previous grand strategies have failed. That’s why I’m sitting in my lower middle-class home, clipping grocery coupons. But, hey. You never know what tomorrow might bring!

“Record sales” — these are NOT HONEST sales. When you get free money from Uncle Sugar, there should be a HUGE asterisk next to the “sales record.” Just like there should be asterisks next to Barry Bonds and Mark McGwire.

It’s like comparing Hank Aaron to Barry Bonds without an asterisk.

It’s like “Lia” Thomas setting “women’s records” in swimming.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.