Chronicle - Feb 18, 2024
Peak of the Electric Vehicle Era?
Ford's recent announcement to scale back investments in electric vehicle (EV) echoes similar moves by Volkswagen, General Motors, and Toyota. Are we witnessing the peak of the EV era?
Last week, Ford revealed plan to slow investment in EV capacity and stop launching new EV models until they can be profitable. Share price jumped after the announcement.
Launched in 2022, the all-electric Ford Model E has faced challenges in meeting its high expectations. Initially selling 25,000 units per quarter in its first year, sales have plateaued at 34,000 to 36,000 units per quarter since 2023. Compounding the issue is its declining profitability, with losses increasing from $0.6 billion per quarter in 2022 to $1.6 billion in the last quarter. In the last quarter, Model E division booked a negative 98% EBIT margin!
Ford management has attributed the poor performance of its EV to lower pricing and high material costs. Customers were unwilling to pay a premium for EVs compared to comparable combustion and hybrid models. The company's focus is now on improving margins before launching new EV models or expand EV production capacity.
Prior to Ford, other car manufacturers have also halted further EV productions.
In September 2023, Volkswagen halted the production of EV at its German facilities. The decision was motivated by increased competition from Tesla and Chinese automakers, alongside reduced demand caused by high inflation and subsidy cuts. Indeed, Volkswagen has recently reduced the prices of its EV cars by as much as €7,000. For instance, the VW Pro Performance model saw a decrease from €51,000 to €44,000.
In October 2023, General Motors announced the abandonment of its plan to build 400,000 EVs by mid-2024 in order to enhance profitability. It also abandons plan to develop affordable EV with Honda Motor. Despite this decision, CEO Mary Barra continues to advocate for all-electric vehicle sales by 2035, effectively transitioning GM into a pure-play EV company.
While General Motor’s CEO Mary Barra remains a believer in the long-term potential of EVs, Toyota Motor's chairman, Akio Toyoda, boldly predicts that the adoption of all-electric cars will peak at just 30%. As a staunch proponent of hybrid cars, Mr. Toyoda argues that people will "finally see reality" that all-electric vehicles are not feasible for everyone. Consequently, Toyota has slashed its EV sales forecast by almost 40%, from 202,000 units to only 123,000 units.
Even pure-play EV makers like Rivian are facing challenges. Despite raising its production target from 52,000 to 54,000 units per year, Rivian has reduced selling prices by approximately 5%. In reality, for every EV Rivian sells, it incurs a loss of $33,000.
On the other hand, other automakers such as Tesla, BYD, and Hyundai are continuing with their EV plans. While both Tesla and Hyundai have recently reduced prices to compete with Chinese automakers, Hyundai is persisting with its EV production efforts. With a bold target of 680,000 units of EV sales per year by 2030, a substantial leap from the current 26,000 units per year, Hyundai is aiming for significant growth in the EV market.
Time will tell if the recent struggles of some automakers signal the peak of the EV market or are just isolated challenges in a competitive industry.
IPO — New Listing
TELO 0.00%↑ Telomir Pharmaceuticals, Inc., a pre-clinical-stage pharmaceutical company focused on the development and commercialization of TELOMIR-1, a novel small molecule being developed to function as an oral in situ therapeutic treatment for human stem cells.
TBBB 0.00%↑ BBB Foods Inc, a pioneer and leader of the grocery hard discount model in Mexico and one of the fastest growing retailers in the country as measured by sales and store growth rates.
MGX 0.00%↑ Metagenomi, Inc., a precision genetic medicines company committed to developing curative therapeutics for patients using our proprietary, comprehensive metagenomics-derived genome editing toolbox.
HLXB 0.00%↑ Helix Acquisition Corp. II, a blank check company incorporated as a Cayman Islands exempted company.
UMAC 0.00%↑ Unusual Machines, Inc. The company will acquire Fat Shark Ltd. and Rotor Riot, LLC which are first-person view (“FPV”) drone technology market leaders.
IPO — Performance
