Sales growth of electric vehicles has slowed dramatically this year. Tesla delivered 20% fewer cars in the first quarter of 2024 than in the prior quarter, and BYD, who was previously the world's biggest EV maker, saw sales decline more than 40% over the same period. BYD's EV sales were still up 13% when compared to the same quarter a year earlier, while Tesla sales were down 9%.
Both companies have been slashing prices to stimulate demand. While EV sales overall are still rising, they are rising at a slower rate than before. On top of that, the space has become more competitive as legacy automakers have introduced new EVs and Chinese manufacturers have ramped up exports, overtaking Japan as the world's biggest vehicle exporter last year. Apple, who spent a decade and $10 billion on research, decided in February to end their efforts to build an electric car. The Apple car would have likely cost over $100,000 and would have had lower profit margins than their core consumer electronics business.
Apple's stock price rose on the announcement that they were abandoning their EV project. Hurts the car rental company. announced in January that they would be selling 20,000 EVs from their rental fleet, citing a lack of demand from rental customers and high repair costs. They said that they would use the proceeds to buy more internal combustion engine cars.
Tesla blamed their sales decline on the production ramp-up of the facelifted Model 3, combined with factory stoppages caused by shipping disruptions in the Red Sea, and an arson attack by environmentalists in Germany. It seems that environmentalists now hate electric cars and their solution is to start fires. Hopefully they don't get upset about the coal mining industry any time soon. While Tesla's explanation for its decline in sales could be true, all other EV manufacturers appear to be seeing a similar slowdown in sales. And Tesla did sell almost 50,000 fewer cars than they built during the first quarter, which might imply that the issue is demand rather than supply.
EV component makers have been reporting a slowdown in demand too. CATL, the world's biggest EV battery manufacturer, announced a decline in quarterly profits a few weeks ago, blaming slowing growth in demand for EVs and increased competition. competition.
Abelmarle, the world's largest lithium producer, reduced its 2030 demand forecast for lithium as it now sees the shift to EVs in the US and Europe taking longer than previously expected. The CEO of Daulus, who sell components for both EVs and ICE vehicles, told the FT last month that carmakers are telling their suppliers to switch focus away from electric. models as they deal with a marked slowdown in battery car demand.
He forecasted that carmakers would be forced to cut EV prices again later this year. So why are we seeing this decline in sales? The global auto industry manufactured just over 10 million EVs last year and expects to produce 14 million this year. By next year they expect to sell 20 million cars globally.
almost doubling sales in just two years. Is the slowdown that we have seen so far this year just a blip on the road to mass EV adoption, or are car buyers less enthusiastic about EVs than has been projected? Learning a little every day is one of the most important things you can do, and today's sponsor Brilliant.org helps you build real knowledge in minutes a day, allowing you to learn things like math, data science and computer science interactively through their user-friendly app.
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New vehicle sales in the United States rose nearly 5% in the first quarter, despite the higher interest rates making car purchases more expensive for consumers. EV sales grew only 2.7% over the same period, well below the 47% growth and 7.6% market share achieved last year. Consumers are buying new cars, but they are not buying as many EVs.
Car dealers are saying that mainstream buyers are still skeptical about electric cars due to their higher prices and the lack of good public charging infrastructure. The recent boom in EV sales was led by technology enthusiasts and early adopters, the kind of people who love having the latest new technology. It's possible that most of the people interested in owning an EV already have bought one.
The early adopters are possibly a more forgiving audience than mainstream consumers are about the compromises made when buying an EV. Autotrader recently published a list of the 10 fastest depreciating cars on the market and all 10 of them were electric, with the Tesla Model X leading the pack, down almost 30% after one year of ownership. A big reason for this depreciation is the constant price cuts that manufacturers have made to new cars. A friend told me this weekend about a colleague of his who bought a Porsche Taycan two years ago for £120,000.
This guy wanted to trade it in at the Porsche dealership against a new car and was told that it was now only worth £40,000 and the dealership didn't even want to buy it as they have too many used EVs. and they don't like having cheap used cars on the lot, competing with the new ones they're trying to sell. A quick look on AutoTrader shows those prices to be accurate, with over 800 used Taycans available in the UK at steep discounts.
A lot of people rushed out to buy EVs over the last few years after being told that they're much cheaper to run and much more reliable than petrol or diesel cars. Only then... be hit with depreciation like this. Electric cars are expensive to build and currently cost 30 to 40 more than an equivalent ICE vehicle according to the FT. On top of that they're expensive to insure and repair.
Often there are long wait times for replacement parts meaning that owners or insurance companies often find themselves paying for rental cars for extended periods while they wait for parts to come in to repair an EV. While most of the auto industry believes that developing battery electric vehicles is the best long-term plan for car makers, the growing popularity of hybrids is causing some manufacturers to change their minds. When EV sales grew 46% in 2023, hybrids, a 25-year-old technology, grew 76% according to Edmunds.
Many motorists like hybrid cars as they are cheaper and often more practical than fully electric vehicles, especially if you need to take the occasional long trip. The hybrid market is led by Toyota, whose stock is up over 90% in the last year. Ford, the number two hybrid manufacturer, expects its sales of hybrids to quadruple in the next five years.
General Motors, who stopped. selling hybrids in the US four years ago in favor of EVs now says that it's considering bringing them back. Aco Toyota, the chairman of Toyota predicted in January that demand for battery electric vehicles would hit a ceiling at 30% of the global market, opening the way for more hybrid sales. Toyota has been slower to focus on EVs than other manufacturers. arguing that not all areas of the world will adopt EVs at the same pace due to the high cost of the vehicles as well as a lack of charging infrastructure.
EV adoption has been a lot lower in the United States than in Europe and China and there are a few good reasons for this. The average American drives twice the annual mileage driven by Europeans and Americans take more long road trips than any other nationality in the world. Of the Americans who do own electric vehicles, most also own a combustion-powered vehicle too and are able to charge their EV at home, making it more practical.
Other complications to EV adoption in the States are that there are greater temperature extremes there and both hot and cold climates can degrade the batteries in electric vehicles. Americans also have a preference for larger vehicles like trucks and SUVs which have only recently become available in electric format. The biggest reason given by Americans for not buying electric vehicles is quite simply the cost.
US government programs do offer incentives to EV buyers like a federal subsidy of $7,500 towards the purchase price and on top of that a number of states offer additional credits of between $1,000 and $7,500. Of the top 10 EV adoption states, five of them have state incentives according to the BBC. When the vehicles are subsidized, more people buy them.
but they are a lot less willing to pay full price for EVs. Other countries that surprisingly lag in EV adoption are Japan and South Korea, with Japan being the biggest laggard. Japanese drivers buy a lot of K cars, which are cheap and efficient.
They often cost less than $15,000 and get up to 60 miles per gallon in city driving. It'll be tough to convert people from cars like that to expensive EVs. South Koreans on the other hand live quite densely, making charging infrastructure a problem there, even though the country is behind the idea of EV adoption.
Citigroup argued in a recent report that despite the slower EV adoption, the United States is structurally well set up for rapid EV adoption, given that it averages almost two vehicles per household. The analysts argue that if US households were to decide to own one ICE vehicle and one EV, EV demand in theory could rise overnight. The eventual rollout of subsidized US charging stations under Biden's Inflation Reduction Act could also make EVs more attractive to American consumers. California announced in the summer of 2022 that the state would ban the sale of gas-powered vehicles by 2035, requiring all new passenger cars and trucks sold in the state to be electric vehicles. Within weeks of this announcement, California residents were asked not to charge their EVs to conserve energy as California's electrical grid was overwhelmed due to a heat wave.
China is the country that is most likely to meet its target of EVs, making up 40% of vehicles sold by 2030. EV sales in China already make up 31% of vehicles sold. According to the International Energy Agency, more than half of the electric cars on roads worldwide are found in China. Chinese automakers like BYD started out manufacturing mobile phone batteries. They worked out that battery costs would make up between 30 to 40 percent. of the total manufacturing cost of a fully electric vehicle.
Focusing on this key component, they supplied batteries to American EV manufacturers before going on to build cars of their own. Sales data in China shows that while willing to buy EVs, Chinese consumers are increasingly showing an interest in hybrid vehicles that burn fossil fuels as a backup. Chinese sales of EVs and plug-in hybrids rose 36% last year, which sounds impressive, but that's down from the 96% increase from 2022. While there was growth in 2023, it was slower growth.
According to the China Association of Automobile Manufacturers, Chinese vehicle sales are down 20% this year as the Chinese economy has been slowing. The reduction of sales in China has been a big driver behind the huge growth in EV exports to Europe, as manufacturers have been exporting unsold inventory at rock bottom prices. Over the last decade, Norway has emerged as the world's leader in EV adoption. 87% of the country's new car sales are now fully electric.
This might surprise some viewers, given that the nation's primary export is fossil fuels. In the 1990s though, it looked like Norway could be a leader in EV manufacturing, and for this reason the government made EVs exempt from taxes on new car purchases, which today add an average of $27,000 to the price of each new car sold in Norway. EV owners were additionally made exempt from paying road tolls and parking fees. As the roads grew crowded with electric vehicles, the country began phasing out the free tolls and parking.
And today only the first $45,000 of a new EV's purchase price is tax-free. The reason EVs are so popular in Norway has more to do with the tax savings than a love of electric cars. Government subsidies do increase the sales of electric vehicles, but we have to wonder if sales will continue to grow when subsidies are eventually withdrawn.
The German government abruptly cancelled its electric car subsidy program in December of last year due to a budget crisis. The German government have paid out approximately 10 billion euros since 2016 to encourage EV adoption. According to Bloomberg, sales of new EVs in Germany would need to quadruple over the next three years and rise six-fold by 2030 to reach Germany's goal of having 15 million EVs on the road.
We'll have to wait and see how the withdrawal of subsidies affects this sales growth. Governments can, I suppose, force EV adoption. In 2020, the UK government announced a ban on the sales of EVs.
all cars with petrol and diesel engines by 2030. Last year this was walked back by Rishi Sanak to 2035 to protect hard-pressed British families from unacceptable costs. Last year the Biden administration proposed stricter regulations in the United States requiring two-thirds of new vehicles sold to be electric by 2032. It's impossible to predict what global demand for EVs will be in the coming years when subsidies and incentives are being added and taken away constantly. And this constant flux is likely a significant contributor to the volatility in share prices of EV manufacturers.
Donald Trump has been quite vocal about his opposition to Biden's Inflation Reduction Act, which Goldman Sachs estimates will cost the US taxpayer $1.2 trillion. Trump has described the legislation as the biggest tax hike in history, and he blames Biden's climate policies for undoing his achievement of securing US energy independence. Joe Biden's 2023 infrastructure law will spend $7.5 billion on EV charging stations, $10 billion on clean transportation, and over $7 billion on EV battery components, critical minerals, and materials. If there's a change in administration in the United States in the upcoming election, it's likely that we'll see significant changes in EV incentives, which only adds to the industry's unpredictability. I recently watched two excellent videos on the topic of EV adoption, one by James May and the other by Harry Metcalf.
I'll link to both in the video description. Both James and Harry are EV enthusiasts. James has owned six EVs in total, and Harry has owned both EVs and plug-in hybrids, and has a big solar installation at his house.
Neither has an axe to grind against new green tech. technologies, in my opinion. Harry's video goes through his decision to buy a diesel range rover after shopping around for a new hybrid or EV as a family car. He goes through many of the issues discussed in this video, explaining why EVs are so expensive to run in the UK, and that while fleet buyers are still buying EVs, private buyers have stopped.
He argues that manufacturers stopped looking at what their customers wanted from cars, instead focusing on regulations with the hope that their customers would come along for the ride. He makes some really good points on how automakers make it extremely difficult for a used car buyer to know the condition of the battery in an EV, where some have perfectly good batteries and others have lost more than half of their range due to the climate the car was exposed to. and how frequently it was fast charged.
Harry makes a bunch of smart arguments for what needs to change for the electric car revolution to really take place. Going forward, the only way, true way, to value an electric car in the marketplace at three years old, how healthy is the battery on it? That number should be as proud on the display, on the dash, as the miles it's covered, because it's critical.
That's what values. an electric car. If I saw a car at three years old and the battery health was at 98%, that is worth more than the ones at 74% because it's being constantly fast charged and comes from a hot climate.
We need that information on the dash. The James May video gives an honest breakdown of the pros and cons of EV ownership from an EV enthusiast's perspective. What people call Range anxiety, I actually think is recharging anxiety.
Because if an electric car had a small battery, which would save weight, which is important, and save a lot of money because the battery is the expensive bit. So it has a small battery. It's only got a range of, say, 150 miles, but it recharges in one minute.
I'd be delighted with that. And there are lots of charges. The reason we have cars like my outgoing Tesla, which was the Model S, bloody huge thing.
that weighs slightly more than a Rolls-Royce Silver Shadow, which is a car from the 60s and is a much more lavishly appointed thing, is because of that massive battery. It has to have the massive battery because it's an acknowledgement that charging is an issue. And even with massive batteries, the range of electric cars is not that impressive, not compared with my Polo, which will do easily 450 miles on a tank.
And, you know, on... Top Gear, we had an Audi that was driven for over a thousand miles. It was a diesel on one tank. And it still recharges, i.e. refills, in a matter of minutes. And anywhere.
And anywhere, yeah. I like being part of the experiment. I feel an obligation as a car enthusiast to do my bit.
Sorry, I'm on a bit of a roll. Go on. People like me are bad evangelists for the electric car because I have two homes.
This is going to sound very first-worldy, I know, but I've got two homes, and that's my most regular journey between those. And you can charge at both. I can charge at both indoors.
They've both got garages. They're only 100 miles apart. I've got numerous other cars to use if I need to go somewhere else.
So they're perfect for you. Yeah, they're absolutely fine. Because when they're not perfect, you take something else.
Exactly. But that doesn't mean they are ready for widespread adoption yet. A lot of people argue...
that new battery technology or better ways of charging are just around the corner and that these will be game changers. Others argue that prices will fall due to economies of scale as more people make the switch to EVs. But if this is true, buyers would still be better off waiting rather than buying an inferior car today that will collapse in value once the new version becomes available.
Cars are big purchases for most people. and they don't want to take a risk of buying something that quickly becomes obsolete the way they might with a new mobile phone. It's worth noting that EVs are very practical for an awful lot of people, especially if they can charge them at home and their daily commute is well within the range of the vehicle. I've even considered buying one as most of my driving is within a short distance from my home, but I'm not yet convinced of their reliability and I'm also not crazy about all the screens on their dashboards.
I'd rather just wait and see. For a lot of people, The collapse in used EV prices does mean that they might be able to get a good deal on a second-hand EV right now. While a few of the popular models do appear to have questionable build quality, consumer surveys of EV owners do show that most say that their next car will be another EV.
So people who have bought them do seem to like them, and they will only get better with time as the market becomes more competitive. As I said earlier, it's impossible to predict what EV demand might look like in the coming years, as so much of it is driven by political decisions which can change at a moment's notice. I'd be really interested to hear your views in the comments section, in particular if you are an EV owner or if you are considering buying one.
If you found this video interesting, you should watch my video on the challenges of electrification next. Don't forget to check out our sponsor, Brilliant.org, using the link in the video description. See you in the next video. Bye.