Introduction to the Shift in the Auto Industry
A few years ago, America’s auto industry had visions of an all-electric future. However, this conversation has largely died down after the Trump administration eliminated federal incentives for the technology. The near future does not look too promising, with the end of the $7,500 tax credit for electric vehicles (EVs) expected to send sales plummeting in the coming quarters and possibly years.
The Global Auto Industry’s Continued Investment in EVs
Despite the bleak outlook, the global auto industry has not given up on EVs. Car manufacturers continue to invest in an electric future, albeit not as aggressively as they had initially planned. The industry is still uncertain about the regulatory future of gas-powered cars in large parts of the United States and other markets worldwide. Moreover, they do not want to fall behind China’s massive EV surge. According to Daniel Ives, a tech analyst at Wedbush Securities, "You’ve tempered your attitude to an all-EV future. I think Ford, GM, Stellantis, and many other car manufacturers will still go aggressively on the EV path, but they’ll do it more carefully than a few years ago."
Recent Developments and Sales
The end of the $7,500 tax credit led to an EV sales surge in the third quarter, as interested buyers snapped up cars before the discount ended. Tesla, Ford, and General Motors all sold more electric cars than ever before, with GM selling over twice as many EVs in America as it did a year earlier. However, after this strong increase, EV sales are likely to return to earth with a thud and may not recover for a long time. Ford CEO Jim Farley expects EV sales to drop to 5% of the US market, while General Motors CFO Paul Jacobson anticipates "EV demand will fall off quite a bit."
Regulatory Environment and Market Demand
The federal regulations that were rolled back under the Trump administration had imposed heavy penalties on car manufacturers that failed to meet emission targets. The removal of these regulations and the tax credit has led to a decrease in demand for EVs. Car manufacturers are now focusing on hybrid vehicles instead of all-electric cars, as they believe there is still a market for internal combustion engines. According to Ives, "There’s still an aggressive push for EVs, but ICE is no longer a four-letter word. They’re going back to their roots."
EVs Remain Attractive for Competitive Reasons
Car manufacturers find EVs attractive for competitive reasons, as they take less time to produce than gasoline-powered cars with their complicated engines and gearboxes. This makes EVs potentially more profitable for car manufacturers. The demand for EVs could increase again if production costs, particularly for batteries, continue to decrease. Many car manufacturers are announcing plans for less costly battery technologies, which could make EVs more competitive in the market.
Future Plans and Investments
As part of its EV investment plan, Ford will soon sell an EV collection for $30,000, making it one of the most affordable options available. In comparison, the Ford F-150 Lightning Pickup has a starting price of around $55,000. The new production line for this more affordable EV collection is expected to be operational by 2027. According to Doug Field, Ford’s Chief EV Digital and Design Officer, "We’re inspired by the Model T – the universal car that changed the world. We believe that today marks a turning point for the Ford Motor Company and the auto industry."
