Global sales of electric vehicles (EVs) are still rising, but growth is slowing.
While automakers and suppliers are betting big on future demand for EVs, a near-term global slowdown is causing pain in the industry.
According to BloombergNEF, sales of all-electric vehicles plus plug-in hybrids that can also be powered by gasoline or diesel more than doubled in 2021 and grew 62% in 2022.
But the figure was 31% last year, when 15% of all vehicles sold were plug-ins. BNEF forecasts that the annual increase will slow again to 21% this year.
Tesla CEO Elon Musk warned late last month of a sharp slowdown in sales growth this year. With margins falling amid price cuts, shareholders erased $80bn from its stock valuation the following day.
General Motors has cut EV production targets due to the slowing demand, but the automaker is “encouraged” by forecasts that EV sales in the US are set to rise at least 10% this year from about 7% in 2023.
In Germany, sales are set to drop 14% this year in response to the government yanking subsidies in December, the first decline since 2016, according to a lobbying group.
Several carmakers have signalled that as China’s economy continues to struggle, the country is no longer the reliable source of growth that it was in years past.
China’s shipments of NEVs (new energy vehicles) — fully electric and plug-in hybrids — to dealers in January dropped 37% from December to 700,000 units, according to preliminary data released by China’s Passenger Car Association.
The greater issue is demand in Europe and the US.
For the first wave of EVs, carmakers were able to rely on tech enthusiasts and government subsidies for company-car purchases to boost volumes.
But for the next phase, they face more cost-conscious drivers, many of whom are sceptical of the technology and balk at buying vehicles that are more expensive than equivalent fuel-burning cars.
On average, all-electric vehicles are 30% and 27% pricier in Europe and the US, respectively, according to a Bloomberg report.
The subsidies and tax breaks that helped drive sales are drying up in Europe, and the current incentives in the US are contingent on a local-production threshold, limiting buyers’ choices.
Consumers have also been put off by an increase in borrowing costs as central banks have moved to rein in inflation.
Some consumers are still anxious about charging infrastructure and battery range. The rapid evolution of EV batteries can serve as an argument to postpone a purchase until the technology is better.
South Korea’s EV sales slipped last year for the first time since 2017 — dipping 0.1% to 157,823 units — according to data from the Korea Automobile Manufacturers Association.
While high prices and rising interest rates helped cool demand, two of the biggest factors standing in the way of drivers ditching their gasoline cars for an EV are safety concerns and a lack of fast chargers, according to a survey conducted by the Korea Transportation Safety Authority.
Several carmakers, led by Tesla, have cut prices repeatedly over the past year to win customers. Many have also reduced output and staffing to maintain profits.
Manufacturers are also racing to introduce several cheaper models.
In the US, where only one electric model sells for less than $40,000, GM is starting to build an electric Chevrolet Equinox starting at $35,000.
Carmakers are also investing heavily in battery technology to win over wary potential buyers.
With road transportation accounting for about 15% of greenhouse gas emissions, transitioning to cleaner vehicles is a linchpin in national efforts to meet climate-change mitigation targets.
A slowing uptake of EVs could compromise government goals for containing the worst effects of global warming.