Despite the growing popularity and increasing sales numbers of electric vehicles (EVs) in the United States, there are some concerning trends that investors and auto makers should be aware of.
According to data provider Cox Automotive, the forecast for new car sales in the U.S. has been updated. The estimated number of units sold is expected to reach approximately 15.4 million this year, up from the initial estimate of 14.1 million units. Comparatively, in 2022, the sales figure stood at around 14.2 million units, whereas before the pandemic, the annual pace was closer to 17 million units.
One of the contributing factors to this growth has been wage growth and strong employment, which have helped offset higher borrowing costs, ultimately boosting sales year over year.
In terms of EVs, sales continue to set new records. In the second quarter, approximately 295,000 units were sold, marking a 48% increase compared to the previous year. EVs accounted for about 7% of all new car sales during this period, with Cox Automotive predicting a rise to 8% for the third quarter. If this prediction holds true, it would equate to roughly 310,000 units sold – yet another record-breaking achievement.
However, the positive indicators for EV sales stop there. Dealer inventories currently account for about 97 days of demand, significantly higher than the 57 days seen for traditional vehicles. This indicates an oversupply issue within the industry. Despite selling in record numbers, EVs are not moving off the lots as quickly as anticipated.
For example, Ford Motor’s EV sales have only increased by approximately 6% year over year through August. In contrast, Tesla’s U.S. sales have experienced a 30% boost from the previous year during the first half of 2023. While production delays have played a part in Ford’s slower growth, the location of strongest demand for EVs is also a factor worth considering.
The Future of EV Sales in California, Michigan, and Ohio
According to Cox, electric vehicle (EV) sales are expected to make up 23% of all new-car sales in California during the third quarter. In contrast, Michigan and Ohio, two states known for their strong ties to Ford and General Motors (GM), are projected to have a significantly lower figure of 3%. The lack of interest in EVs in these states may stem from the impact of cold weather on the vehicles’ performance. Extreme temperatures can reduce an EV’s range by approximately 20% to 25%. For instance, if an EV has an average range of 250 miles per charge, it would decrease to 200 miles when the weather turns cold.
Nevertheless, Michiganders can still consider going electric with a few accommodations. By heating the cabin while the car is plugged in, drivers can mitigate the impact of cold weather. This approach ensures a more comfortable commute and enables the use of heating or air-conditioning systems without relying on an internal combustion engine. Ford and GM should emphasize these benefits to drivers in Michigan and Ohio, along with offering additional incentives and home-charging hookups to increase EV sales.
Given the current state of the EV industry, it is necessary for manufacturers like Ford and GM to take action. The sector has surpassed the early adoption phase, where any new model would attract significant interest. Today, attracting traditional car buyers to adopt EVs requires a combination of intelligent marketing strategies and appealing incentives.
In the stock market, Tuesday was a weak day for various stocks, including Ford and GM. Both companies experienced a decline of 1.1% and 2.3%, respectively. The S&P 500 and Dow Jones Industrial Average also saw decreases of 1.5% and 1.1%.