The electric vehicle (EV) market, despite numerous government incentives, is experiencing a cooling trend in sales as of late, with notable repercussions in the manufacturing sector. This coincides with a recent announcement by General Motors (GM) that production of its all-electric trucks at the Orion Assembly plant in Michigan will be pushed back to 2025, a year later than its its original planned date.
“We would continue to advise investors to keep their expectations well-managed with respect to the speed of the ramp and the ultimate size and profitability of GM’s electric vehicle business,” wrote Morgan Stanley analyst Adam Jones in a note to clients. “We express this sentiment not just for GM, but for all legacy auto manufacturers.”
The growth rate of EV sales in the United States has dropped by more than 20% in the first half of the year, as dealerships are now grappling with an accumulation of unsold inventory.
According to data from Cox Automotive, U.S. dealers currently hold more than 92,000 unsold EVs, marking an increase of over three times the amount from a year ago.
“After a prolonged period in which EVs quickly disappeared from dealerships, the electric vehicle industry now has the opposite problem: unsold models are piling up,” reported the personal finance magazine Money. “About 92,000 EVs currently sit on dealers’ lots; that’s a 342% increase from a year ago, when only about 21,000 did so, according to automotive research firm Cox Automotive.”
GM has attributed the delay in beginning construction on electric trucks at Orion Assembly to the evolving demand in the EV market. The company also said to use this additional time before the plant’s opening to implement engineering changes aimed at improving the profitability of their electric pickup trucks once production begins.
“General Motors today confirmed it will retime the conversion of its Orion Assembly plant to EV truck production to late 2025, to better manage capital investment while aligning with evolving EV demand. In addition, we have identified engineering improvements that we will implement to increase the profitability of our products,” GM said in a statement.
Other automakers, including Ford and Tesla, are also adjusting their EV plans with a similar goal of increasing revenue.
Tesla slashed prices on some of its models by thousands of dollars amid concerns over slowing consumer spending. Ford also cut prices in an attempt to bring in new buyers, while it deals with a projected $4.5 billion loss on EVs this year. According to Carscoops, the company loses $32,000 for every EV it sells, as their Ford Model E division had already lost about $1.8 billion as of this past July.
Car dealers and auto industry executives have said these adjustments are a direct response to a flattening curve in EV sales. Many consumers willing to pay a premium for EVs have already done so, and the industry now seeks to appeal to a more hesitant market. as conceded that
The issue is, the price they are willing to pay has come down.
Jim Farley, Ford CEO
“The curve isn’t accelerating as quickly as I think a lot of people expected. We’re seeing it flatten a bit,” said John Lawler, Ford Motor’s chief financial officer. “The transition to EVs is happening, it just may take a little longer. It will be a little slower than the industry expected.”
“There was a bit of exuberant thinking that the market would adopt EVs at the same rate early adopters were,” said Beau Boeckmann, president of Galpin Motors, which owns one of the largest Ford dealerships in the U.S. “Customers are not knocking down the door to buy them.”
Efforts to make EVs more affordable for these less eager prospective buyers are already underway. During the summer, the average transaction price for a new EV dropped by nearly 20% year-over-year, while incentives to purchase increased to almost $4,000.
“To expand electric vehicles beyond early adopters, we need to make EVs equitably accessible and affordable to more Americans,” wrote Fabiola Lao, senior equity policy manager at the Center for Sustainable Energy. “Incentives are essential to EV market transformation. Providing an extra incentive for low- and moderate-income buyers, including the ability to stack incentives offered through different public and private programs, can make some new EVs more affordable.”
While overall EV sales continue to rise, industry experts caution that challenges in sustaining growth lie ahead. More than 90 new EV models are expected to enter the U.S. market through 2026, according to AutoForecast Solutions. However, analysts anticipate that many of these models will struggle to achieve profitability.
