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’s 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 ten billion dollars on research, decided in February to end their efforts to build an electric car. The Apple car would have likely cost over $100 thousand dollars 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.
Hertz, 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 coal mining 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 fifty thousand fewer cars than they built during the first quarter which might imply that the issue is demand rather than supply.
EV component manufacturers have been reporting a slowdown in demand too. C.A.T.L, 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.
Albemarle, 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 Dowlais – who sell components for both EV’s 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 ten million EVs last year and expects to produce fourteen million this year… By next year they expect to sell twenty million cars globally, almost doubling sales in just two years. Is the slowdown 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?

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 tech. It is possible that most of the people interested in owning an EV have already 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 ten fastest depreciating cars on the market and all ten 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 thousand pounds. This guy wanted to trade it in at the Porsche dealership against a new car and was told that it was now only worth forty thousand pounds – and the dealership didn’t want to buy it as they have too many used EV’s and they don’t like having cheap used cars on the lot competing with the new ones they are 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 EV’s over the last few years after being told that they are much cheaper to run and much more reliable than petrol or diesel cars only then to be hit with depreciation like this.
Electric cars are expensive to build and currently cost 30 – 40% more than an equivalent ICE vehicle according to the FT. On top of that they are 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 their car.
While most of the auto industry believes that developing Battery Electric Vehicles is the best long-term plan for carmakers, 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 U.S. four years ago in favor of EVs, now says it’s considering bringing them back.
Akio Toyoda, the chairman of Toyota predicted in January that demand for Battery Electric Vehicles would hit a ceiling at 30 per cent of the global market, opening the way for more hybrid sales. Toyota has been slower to focus on EV’s 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 SUV’s 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 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 dollars and $7,500 dollars. 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 EV’s.
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 Kei cars which are cheap and efficient. They often cost less than $15,000 dollars 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 could, in theory, rise overnight.
The eventual rollout of subsided 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 heatwave.
China is the country that is most likely to meet its target of EV’s making up 40 percent 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 30–40% 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 EV’s, Chinese consumers are increasingly showing an interest in hybrid vehicles that burn fossil fuels as backup.
Chinese sales of EVs and plug-in hybrids rose 36 per cent last year which sounds impressive, but that is down from the 96 per cent 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 have 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 percent of the country’s new car sales are now fully electric. This might surprise some viewers given that the nations primary export is fossil fuels.
In the 1990’s 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 dollars 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 EV’s 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 sixfold by 2030 to reach Germany’s goal of having 15 million EV’s on the road.
We will have to wait to see how the withdrawal of subsidies affects this sales growth.
Governments can force EV adoption. In 2020 the UK government announced a ban on the sales of all cars with petrol and diesel engines by 2030, Last year this was walked back by Rishi Sunak 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 is 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 the 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 dollars. 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 dollars on EV charging stations, $10 billion dollars on clean transportation, and over $7 billion dollars on EV battery components, critical minerals, and materials.
If there is a change in Administration in the United States in the upcoming election, it’s likely that we will 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 Metcalfe. I’ll link to both in the video description.
Both James and Harry are EV enthusiasts. James has owned six EV’s 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 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 EV’s are so expensive to run in the UK and that while fleet buyers are still buying EV’s, 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.
[Harry Metcalfe Speaking]
Going forward the only way true way to value an electric car in the marketplace at 3 years old is 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 3 years old and the battery health was at 98% that is worth more than the ones at 74% because it's been constantly fast charged and comes from a hot climate we need that information on the dash

[Patrick Boyle Speaking]
The James May video gives an honest breakdown of the pros and cons of EV ownership from an EV enthusiast’s perspective.

[James May Speaking]
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 saves 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 mil but it recharges in 1 minute I'd be delighted with that and there are lots of chargers. Yeah um the reason we have cars you know like my outgoing Tesla which was the model S - Bloody huge thing uh that weighs slightly more than a Rolls-Royce Silver Shadow which is a car from the 60s, yes and and is a much more lavishly appointed thing uh 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, no not comp 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 yeah and it still recharges (or refills) in a matter of minutes and and anywhere and anywhere yeah um so it's it's a I I like being part of the experiment I I feel an obligation as a car Enthusiast to do my bit but I'm I'm sorry I was go I'm I'm on a bit of a rant, but I'm a bad 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 it at both I can charge it both indoors they 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 because when they're not perfect you take something else exactly yeah but that doesn't mean they are ready for widespread adoption yet

[Patrick Boyle Speaking]
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 becomes quickly obsolete the way they might with a new mobile phone.
It is worth noting that EV’s 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 have 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, I’m not crazy about all of the screens on the dashboards and 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 secondhand 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 is 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.

Thanks for tuning in to this week’s podcast, and thanks to my supporters on Patreon who make this possible. Have a great week and talk to you again soon, bye.

Patrick Boyle On Finance

What Happened to Electric Vehicle Sales?

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