The US electric vehicle (EV) market is experiencing slower growth than expected, leading to a buildup of unsold EVs at car dealerships and prompting price cuts. Analysts and industry data suggest that increasing sales above the current 7% market share will be more challenging than anticipated, despite federal and state subsidies.
Car manufacturers in North America have made significant investments in EVs, and the next few quarters will be crucial in determining the success of these ventures. If EV production continues to outpace demand, manufacturers will have to choose between reducing prices and profit margins or slowing down assembly lines.
More than 90 new EV models are expected to enter the US market by 2026, but many of them may struggle to reach profitable sales volumes, experts predict. Established automakers like General Motors, Ford, Hyundai, and Toyota currently have over 90 days’ worth of unsold EVs in their inventories, according to a report from Cox Automotive. In fact, US dealers have over 92,000 EVs in stock, three times more than the figure from a year ago.
The availability of EV models varies across manufacturers. For instance, General Motors has a lower inventory, with 50 days’ worth of Cadillac Lyriqs available as of June 30. However, GM’s main challenge lies in increasing production and delivery of its next-generation EVs built on GM’s Ultium architecture. During the first half of this year, out of the 36,024 EVs that GM delivered in the US, only 2,365 were Ultium EVs. The company aims to build a total of 100,000 electric vehicles in North America in the second half of this year.
Ford also faces a similar situation, with 86 days’ worth of F-150 Lightnings and 113 days’ worth of Mustang Mach-E electric SUVs in its inventory. However, Ford believes that the figures provided by Cox Automotive overstate the actual inventories. The Dearborn, Michigan factory, which produces the electric pickups, is currently shut down for retooling.
Volkswagen, on the other hand, has 131 days’ worth of ID.4 electric SUVs in inventory. The company attributes the recent softening in EV sales to supply chain bottlenecks that have eased, allowing for increased production. However, Volkswagen’s US sales arm acknowledges the strong demand for the ID.4 and states that there is a lack of all-wheel-drive versions of the SUV, which is what the market desires. The company also mentions customer confusion and hesitation due to uncertainty surrounding the tax credit eligibility of EV models.
It is crucial to note that the US EV market is still in its early stages. Many consumers are still evaluating whether EVs suit their needs, and major automakers are still ramping up production. The market is characterized by numerous brands competing for a share. The leading EV manufacturer, Tesla, is using its cost advantage to stimulate demand through price cuts. Legacy automakers are currently operating at a loss on most of their electric models.
Price cuts indicate an equilibrium between demand, supply, and price. When sales are not meeting expectations, automakers resort to reducing prices. However, it is too early to declare that US EV demand has reached a plateau. Experts predict continued growth, albeit with some fluctuations.
Automakers face tough choices in a competitive market, and they also face regulatory pressure from the US government, which plans to make two-thirds of car sales electric by 2032. While some automakers believe this target is unrealistic, they must adapt and accelerate EV sales to support new production capacity.
In conclusion, the US EV market is facing challenges as sales growth lags behind expectations, causing a buildup of unsold EVs and price cuts. The market is still in its early stages, with consumers evaluating the suitability of EVs, and major automakers working to ramp up production. The coming months will be crucial in determining the success of EV ventures, and automakers must make strategic decisions to balance demand, profit margins, and regulatory requirements.
