The Six Months That Short-Circuited the Electric-Vehicle Revolution

Automakers went all in on battery power, but buyers have proven more hesitant

By Mike Colias, Nora Eckert & Sean McLain of The WSJ. Excerpts:

"Ford is cutting the plant’s [for the F-150 Lightning electric truck] output by half, and workers are relocating to other facilities, mostly those making gas-powered pickups and SUVs."

"As recently as a year ago, automakers were struggling to meet the hot demand for electric vehicles. In a span of months, though, the dynamic flipped, leaving them hitting the brakes on what for many had been an all-out push toward an electric transformation. 

A confluence of factors had led many auto executives to see the potential for a dramatic societal shift to electric cars: government regulations, corporate climate goals, the rise of Chinese EV makers, and

Tesla

’s stock valuation, which, at roughly $600 billion, still towers over the legacy car companies.

But the push overlooked an important constituency: the consumer.

Last summer, dealers began warning of unsold electric vehicles clogging their lots. Ford,

General Motors

, Volkswagen and others shifted from frenetic spending on EVs to delaying or downsizing some projects. Dealers who had been begging automakers to ship more EVs faster are now turning them down."

"Ford . . . lost a staggering $4.7 billion last year on its battery-powered car business and projects an even bigger loss this year, in the range of $5 billion to $5.5 billion."

"industry CEOs are still confident that EVs will eventually take off, albeit at a slower pace than initially envisioned. But for now, the massive miscalculation has left the industry in a bind, facing a potential glut of EVs and half-empty factories"

"U.S. EV sales for the first half of 2023 rose 50% from a year earlier, down from a 71% increase in the first half of 2022.

The wave of early EV adopters willing to splurge had receded, and the next round of potential customers was proving more hesitant. They had more questions about how far a car could go on a single charge, and the life expectancy of batteries. They worried about charging times, repair costs, and not having enough places to plug in"

"Interest rates were rising, pushing up monthly payments on EVs, which already were selling, on average, for about $14,000 more per vehicle than gas-engine models"

"GM was having trouble processing battery cells, a bottleneck that was preventing it from getting EVs to showrooms. Manufacturing delays left buyers waiting for delivery of models such as the Cadillac SUV and Hummer pickup truck."

"In a single month last fall, the average interest rate on an electric-car purchase jumped from 4.9% to 7%, making monthly payments even less affordable for some shoppers"

"Suddenly, once-long waiting lists for EVs shrank and buyers dropped reservations.

Over a 10-day span in October, the tone of automakers in Detroit and beyond turned gloomier. GM said it would delay by one year a $4 billion overhaul of a suburban Detroit factory to build new electric pickup trucks, citing “evolving EV demand.”"

"A week later, on GM’s quarterly call, Barra described the transition to EVs as “bumpy,” and said the company wouldn’t meet a self-imposed goal of producing 400,000 EVs over a two-year period through mid-2024. 

Two days later, Ford said it would defer $12 billion in electric-vehicle investments and focus on increasing hybrid production, citing the need to better match demand.

By late last year, it was becoming clear that sales of hybrids—once dismissed by some automakers as an unnecessary half-measure—were taking off and would outsell EVs in 2023. 

“People are finally seeing reality,” said

Toyota Motor

 Chairman Akio Toyoda. For years, Toyota and other EV-cautious carmakers had been touting hybrids as a consumer-friendly way to reduce carbon emissions. 

In November, thousands of U.S. dealers signed a letter urging Biden to ease proposed regulations that would push the industry to sell more battery-powered cars. “Last year, there was a lot of hope and hype about EVs,” the dealers wrote. “But that enthusiasm has stalled.”"