The demand for electric vehicles has continued to decline in 2024, even as automakers aggressively slash prices and offer incentives to convince consumers.
Elon Musk’s Tesla — known for selling the most popular EV on the market, by some metrics — is facing renewed skepticism from analysts and investors. Morgan Stanley analyst Adam Jonas, for example, openly wondered, “Could Tesla lose money (sometime) this year?” in a note to clients yesterday (Mar. 6). Jonah cut his price target for Tesla to $320 from $345, pointing out several concerns with the EV market.
Notably, Tesla shares have dropped by more than 13% since Friday and have steadily fallen over the last three consecutive days. In premarket trading Thursday, the stock has declined almost 2%. Plus, the Austin, Texas-based company is no longer one of the top 10 largest U.S. companies by market capitalization after its value trailed behind Visa when trading closed Wednesday. It’s the first time since in more than a year that Tesla has been surpassed by the digital payments company.
Tesla’s money slump
Over the past week, Tesla has faced a far-left group’s arson attack near its Gigafactory Berlin-Brandenburg in Gruenheide, Germany, which is projected to cost Tesla “in the high hundreds of millions,” and the EV maker reported its lowest monthly sales total in China since December 2022.
The company has also been embroiled in a price war in China, as rival EV maker BYD introduces a whole array of cheaper cars and drastically cuts prices. Tesla and several other companies, including Hyundai Motor and the General Motors-backed joint venture SAIC-GM-Wuling, retaliated with their own price cuts or increased incentives.
“We believe price competition will persist in 2024 and will spur [manufacturers] to expand their cost-cutting efforts [in China],” Jonas wrote.
A wider EV problem
Tesla isn’t alone in grappling with harsh challenges to the EV market.
Electric truck maker Rivian has recently slashed its workforce by 10% — in the company’s third round of layoffs since July 2022 — after failing to match analysts’ expectations for the last quarter of 2023. The once-promising adventure EV upstart is facing a projected $2.7 billion loss in 2024. Another startup, Fisker, has warned that it may collapse before the year ends.
Ford Motor Co. said its EV sales for February grew 81% compared to the same time in 2023, primarily led by robust sales of the Mustang Mach-E crossover and F-150 Lightning pickup. But that came after Ford slashed production of the F-150 Lightning and delayed or pulled some spending on EV battery production.
General Motors has likewise pushed back EV-related investments; CEO Mary Barra has told investors that the company will “build to demand” in the face of slowing EV demand. Rental car company Hertz has dropped a third of its EV fleet and paused purchases of Swedish carmaker Polestar’s EVs because people aren’t buying them.
But all this comes after U.S. EV sales soared above 1 million in 2023, marking the first year the industry has hit that milestone. On a global scale, 14.2 million units were sold, an increase of 35%.
“The growth of electric vehicles isn’t declining — it’s decelerating,” Gil Luria, managing director at D.A. Davidson & Co., told Quartz last month. “The growth of the electric vehicle market is still far faster than the internal combustion market; it’s just not as fast as it was last year.”
Luria pointed to a common sentiment among industry experts — those who really want an EV already have one.
The “early adopters” — people who wanted to get in on new technology before anyone else — are more willing to put up with the quirks of new things, such as difficulties finding charging stations. Getting EVs further ingrained in the mainstream consumer base is more difficult and takes a lot of cash — and potentially a lot of time.
Another barrier is the cost. Even with price cuts and added incentives largely decreasing prices, the average EV sold in January went for $55,353, just a few extra thousand compared to traditional vehicles, according to Kelly Blue Book.
But most EVs sold are still in the premium segment, keeping the eco-friendly options out of many people’s price range.
“ [W]e have lots of people who want to buy our car but simply cannot afford it,” Musk told investors in January. “As interest rates drop and that monthly payment drops, then they’re able to afford it, and they buy the car. It’s pretty straightforward. And there are no tricks to get around this.”
However, there is a bright spot for carmakers. Hybrid vehicles — a neat balance between a gas-guzzler and an EV — are all the rage.
Last month, Ford saw hybrid sales jump 32% year-over-year. CEO Jim Farley has said he wants to achieve a balance between selling EVs and hybrids as Ford explores electrification and expects hybrid sales to quadruple over the next five years. Toyota Motor, the auto industry’s resident skeptic on EVs, sold 2.7 million hybrids last year, which accounted for nearly 35% of total sales.
On Wednesday, Stellantis — the company behind Ram, Jeep, and Dodge — announced a $6.1 billion investment to produce hybrid vehicles in Brazil. Volkswagen Group, GM, Hyundai Motor, and Toyota have made similar plans.