All eyes are on the electric vehicle market as automakers, politicians and consumers push for clean energy. But what do the numbers actually show in terms of demand? On this episode of Inside Automotive, we welcome back Kevin Tynan, senior automotive analyst for Bloomberg Intelligence, to discuss the latest production and delivery data from EV companies.
Tynan notes that the EV segment has suffered under the same economic constraints that all OEM brands are currently experiencing, despite substantial gains in the production rate. Interest rates and inflation continued to suppress demand, even as new-car inventory returned over the course of Q1. Consequently, EV-focused manufacturers, especially industry newcomers, have built more battery-powered cars than they are able to sell, a situation that Tynan finds troubling. “To miss deliveries relative to production this early in the game is a little concerning,” he explains. Brands will lose substantial amounts of money by failing to push sales above factory output. Rivian, for example, has seen $1.5 billion in cash burn for the last six quarters.
Tesla has introduced seven price cuts since January, sparking concerns that a price war would start. However, most brands have explicitly declined to make price adjustments in response, with the only exception being Ford which slightly lowered prices for the Mach-E. Tynan explains that legacy automakers have little incentive to offer discounts since they can easily reduce EV production if the market proves to be unprofitable. Unlike EV-focused brands, established OEMs have the gas-powered and hybrid markets to fall back on, allowing them to scale their operations as needed. But for companies such as Tesla, Lucid and Rivian, EVs are the sole source of revenue, making price wars far more risky.
However, this is not to say that legacy automakers are going to give up on EVs. While much of the conversation around EVs has focused on climate change, Tynan believes that manufacturers have more than enough incentive for accelerating the electric transition. “The overall U.S. market is not growing,” he notes. “Since 2013…where the growth has come from is that mix-shift to truck from car…the problem is Ford, General Motors, Stellantis [and other] domestic brands are 90% truck already, there’s almost nowhere to go.” EVs present a solution to the industry’s stagnation, as they offer an entirely new technology to push growth and profit. Unfortunately, while the car-to-truck shift was profitable almost immediately, most companies are losing money by producing electric cars at their current rate. “That’s why this is so messy where we are right now,” remarks Tynan. However, since automakers stand to see substantial profit in the long term, he argues that they are motivated enough to continue supporting the EV segment, although at a much slower pace than originally anticipated.
