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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--"You can lead a horse to water," goes the adage, "but you can't make it drink." That aptly characterizes the U.S. electric vehicle (EV) market right now.
Despite a $7,500 federal incentive to people who buy or lease an EV, multibillion-dollar investments in new battery manufacturing facilities and the availability of federal cost-sharing dollars for companies to build out a national EV charging network, automakers are slowing their EV investments and recalibrating their growth trajectories, according to third-quarter earnings calls. To use another old transportation metaphor, they appear to be reluctant to put the cart before the horse.
Industrial Info is tracking 117 active EV-related projects in the U.S., with a total investment value of nearly $108 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Industrial Manufacturing Project Database can click here for a list of detailed project reports.
Click on the image at right to view a graph showing U.S. EV-related investments by project type.
But a growing number of states have a Plan B to ensure the transportation sector is electrified: require that all or most of the new vehicles sold in their state have zero tailpipe emissions by a not-too-distant date. California went first: Last year, it required all new vehicles sold to have zero tailpipe emissions by 2035. That law included specific milestone requirements: by 2026, 35% of all new vehicles sold in the state must have no tailpipe emissions. By 2030, that level rises to 68%.
Last month, Colorado joined the EV parade when its state air quality commission accepted a recommendation from Democratic Governor Jared Polis that 82% of all new vehicles sold in the state be electric by 2032. More than a dozen other states, including New York, New Jersey, Massachusetts, Oregon and Connecticut, have enacted laws limiting or banning the future sale of vehicles powered by an internal combustion engine (ICE).
Though there is no comparable zero-emission law at the federal level, President Joe Biden wants to have electric vehicles account for 50% of all new vehicle sales by 2030. The Infrastructure Investment and Jobs Act, enacted in 2021, included $5 billion to help build a national network of EV charging stations.
There have been about one million EVs sold in the U.S. so far in 2023. Each year, about 15 million new vehicles are sold in the U.S., which suggests the U.S. has a long way to go and not much time to realize the president's EV ambitions.
In recent weeks, General Motors Company (NYSE:GM) (Detroit, Michigan), Ford Motor Company (NYSE:F) (Dearborn, Michigan) and Tesla Incorporated (NASDAQ:TSLA) (Austin, Texas) cited slower sales and signs that the economy was weakening in announcing that they would delay EV spending, according to a recent article in The New York Times.
"Our commitment to an all-EV future is as strong as ever," Mary Barra, the chief executive of General Motors, told analysts on an earnings call last month, the Times reported. But, she added, the market is turning out to be "a bit bumpy." As a result, General Motors is waiting several months to begin selling some new electric models, including a battery-powered incarnation of the Chevrolet Equinox sport utility vehicle.
In reporting third-quarter earnings on October 24, General Motors said it was trying to "match EV supply with demand to maintain strong pricing while taking immediate steps to enhance the profitability of our EV portfolio." The company said it was expecting EV earnings before interest and taxes (EBIT) to reach "low- to mid-single-digit EBIT margins in 2025."
General Motors said it was "making steady progress in ramping up" its EV production. Company officials told analysts and investors that General Motors manufactured 32,000 EVs during the third quarter, roughly 2% of overall vehicle production of 1.6 million units during the quarter. "Further volume increases planned for Q4'23 and subsequent quarters," GM said.
Overall, the U.S. auto industry reported sales of EVs jumped nearly 50% during the third quarter, but the Times article said carmakers and analysts had expected even higher growth.
David Pickering, Industrial Info's vice president of research for the Industrial Manufacturing sector, said he was not surprised that automakers are slowing their EV spending and recalibrating their EV visions. Pickering calls himself an "EV realist." For more on why he calls himself that, see August 7, 2023, article - Federal Renewable Energy Law Leads to Some New Clean Energy Factories, But Some Newsjacking Too and February 7, 2022, article - Automakers Pledge to Electrify Transportation, but Will the Batteries Be There?
"It can take hundreds of millions of dollars to transform a traditional ICE vehicle assembly plant to an EV factory, and even more if it's a greenfield project," he added. "If demand is lagging projections--for whatever reason--that's a huge yellow flag and a signal for companies to slow their planned spending on EVs," he said in an interview.
"Getting all of the elements of the vehicle supply chain aligned is no small feat during the best of times, and the last few years have not been the best of times," he continued, despite the availability of federal funding and tax credits. "Vehicles still are too expensive, the national EV charging network is not ready and despite what you see on the East and West coasts, the heartland is not interested."
Pickering said companies have announced slowdowns in EV investments, but it's too early to have that show up in project cancellations or delays. "For the most part, automakers are being extra cautions now and slowing down their planning process to see how the market develops. But if we don't see things pick up in in areas like charging station development, the overall economy and consumer enthusiasm, we may see some significant cancelations in 2024."
This slowdown in EV automaking is not affecting the pace of battery development, but that area bears watching because projected supply still falls dramatically short of meeting projected demand. Whether there's a shakeout in EV battery factories depends on how the actual vehicle assembly side falls out in the coming months, he added.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
Despite a $7,500 federal incentive to people who buy or lease an EV, multibillion-dollar investments in new battery manufacturing facilities and the availability of federal cost-sharing dollars for companies to build out a national EV charging network, automakers are slowing their EV investments and recalibrating their growth trajectories, according to third-quarter earnings calls. To use another old transportation metaphor, they appear to be reluctant to put the cart before the horse.
Industrial Info is tracking 117 active EV-related projects in the U.S., with a total investment value of nearly $108 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Industrial Manufacturing Project Database can click here for a list of detailed project reports.
But a growing number of states have a Plan B to ensure the transportation sector is electrified: require that all or most of the new vehicles sold in their state have zero tailpipe emissions by a not-too-distant date. California went first: Last year, it required all new vehicles sold to have zero tailpipe emissions by 2035. That law included specific milestone requirements: by 2026, 35% of all new vehicles sold in the state must have no tailpipe emissions. By 2030, that level rises to 68%.
Last month, Colorado joined the EV parade when its state air quality commission accepted a recommendation from Democratic Governor Jared Polis that 82% of all new vehicles sold in the state be electric by 2032. More than a dozen other states, including New York, New Jersey, Massachusetts, Oregon and Connecticut, have enacted laws limiting or banning the future sale of vehicles powered by an internal combustion engine (ICE).
Though there is no comparable zero-emission law at the federal level, President Joe Biden wants to have electric vehicles account for 50% of all new vehicle sales by 2030. The Infrastructure Investment and Jobs Act, enacted in 2021, included $5 billion to help build a national network of EV charging stations.
There have been about one million EVs sold in the U.S. so far in 2023. Each year, about 15 million new vehicles are sold in the U.S., which suggests the U.S. has a long way to go and not much time to realize the president's EV ambitions.
In recent weeks, General Motors Company (NYSE:GM) (Detroit, Michigan), Ford Motor Company (NYSE:F) (Dearborn, Michigan) and Tesla Incorporated (NASDAQ:TSLA) (Austin, Texas) cited slower sales and signs that the economy was weakening in announcing that they would delay EV spending, according to a recent article in The New York Times.
"Our commitment to an all-EV future is as strong as ever," Mary Barra, the chief executive of General Motors, told analysts on an earnings call last month, the Times reported. But, she added, the market is turning out to be "a bit bumpy." As a result, General Motors is waiting several months to begin selling some new electric models, including a battery-powered incarnation of the Chevrolet Equinox sport utility vehicle.
In reporting third-quarter earnings on October 24, General Motors said it was trying to "match EV supply with demand to maintain strong pricing while taking immediate steps to enhance the profitability of our EV portfolio." The company said it was expecting EV earnings before interest and taxes (EBIT) to reach "low- to mid-single-digit EBIT margins in 2025."
General Motors said it was "making steady progress in ramping up" its EV production. Company officials told analysts and investors that General Motors manufactured 32,000 EVs during the third quarter, roughly 2% of overall vehicle production of 1.6 million units during the quarter. "Further volume increases planned for Q4'23 and subsequent quarters," GM said.
Overall, the U.S. auto industry reported sales of EVs jumped nearly 50% during the third quarter, but the Times article said carmakers and analysts had expected even higher growth.
David Pickering, Industrial Info's vice president of research for the Industrial Manufacturing sector, said he was not surprised that automakers are slowing their EV spending and recalibrating their EV visions. Pickering calls himself an "EV realist." For more on why he calls himself that, see August 7, 2023, article - Federal Renewable Energy Law Leads to Some New Clean Energy Factories, But Some Newsjacking Too and February 7, 2022, article - Automakers Pledge to Electrify Transportation, but Will the Batteries Be There?
"It can take hundreds of millions of dollars to transform a traditional ICE vehicle assembly plant to an EV factory, and even more if it's a greenfield project," he added. "If demand is lagging projections--for whatever reason--that's a huge yellow flag and a signal for companies to slow their planned spending on EVs," he said in an interview.
"Getting all of the elements of the vehicle supply chain aligned is no small feat during the best of times, and the last few years have not been the best of times," he continued, despite the availability of federal funding and tax credits. "Vehicles still are too expensive, the national EV charging network is not ready and despite what you see on the East and West coasts, the heartland is not interested."
Pickering said companies have announced slowdowns in EV investments, but it's too early to have that show up in project cancellations or delays. "For the most part, automakers are being extra cautions now and slowing down their planning process to see how the market develops. But if we don't see things pick up in in areas like charging station development, the overall economy and consumer enthusiasm, we may see some significant cancelations in 2024."
This slowdown in EV automaking is not affecting the pace of battery development, but that area bears watching because projected supply still falls dramatically short of meeting projected demand. Whether there's a shakeout in EV battery factories depends on how the actual vehicle assembly side falls out in the coming months, he added.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
