How did automakers get the EV timing wrong?
“Americans were never prepared to embrace electric vehicles at the rate predicted by many industry and government ‘experts,'” iSeeCars executive analyst Karl Brauer told Yahoo Finance. “It was obvious getting from 3% to 7% EV share was much easier than getting from 7% to 10%. And getting EV share to 20%, 30%, or more percent? That was clearly a long ways off.”
Said CarGurus director of industry insights Kevin Roberts: “The hoped-for EV adoption curve always felt accelerated by an understandable mix of government desire to reduce emissions, along with automakers looking to match Tesla’s margins and stock price success.” He added, “Decisions were made to attempt to go straight to EVs, and bypass a transitional generation of hybrid powertrains that would’ve allowed for more time to develop consumer comfort in the segment and build up charging infrastructure.”
For companies like Ford and GM, refocusing on gas-powered and hybrid powertrains seems like a logical move. And the prospect of producing cars that are already cash-flow positive — and leveraging Chinese partners for EVs — was sweet music to Wall Street.
“Based on our analysis, the automakers best positioned to capitalize on the growing popularity of hybrids include Asian original equipment manufacturers … such as Toyota (TM), Honda (HMC), and Hyundai (HYMTF), as well as U.S. automaker Ford,” CFRA’s Garrett Nelson wrote in a research piece in April.
“Ford had considerable success with the sale of traditional hybrid versions of two pickup truck models: the Maverick (52,361 units) and the F-150 (50,103 units) in 2023. Also worth mentioning is Stellantis, whose Jeep Wrangler 4xe and Grand Cherokee 4xe were the two bestselling plug-in hybrid models in the U.S. last year,” Nelson added.
Conversely, Nelson said automakers who made larger bets on pure battery EVs, such as GM, are less favorably positioned.
Trouble down the road?
The question remains: Will companies like Ford, GM, Stellantis, and others who have pulled back investments eventually lose EV market share — and will companies who have kept innovating and spending emerge as the big winners in the eventual EV transformation?
Chinese EV makers are going full force into new vehicles with cutting-edge tech and self-driving features. For example, take the success of newer tech brands like Xiaomi and established EV makers like BYD.
“The Chinese already have every advantage when it comes to EVs, from controlling the global lithium supply to aligning their government and manufacturing sectors to reduce production costs,” iSeeCars’ Brauer added.
“[American automakers] are not ready,” said Stella Li, BYD Americas CEO, about US automakers and their EV game plans in an interview with NBC News in April. “We are ready. We are ready for technology, and we are more ready on supply chain.”
In response to the China EV threat, the US and EU announced tariffs against Chinese EV makers, with the US quadrupling levies to 100%, and EU rates going as high as 38.1%. But tariffs and other trade restrictions are not usually a long-term answer, with the failed restrictions on Japanese automakers in the ‘80s a prime example.
Perhaps the old adage, “if you can’t beat them, join them,” might be how automakers like GM, Ford, and Stellantis handle their EV pivots.
“We believe that Western auto firms (including Tesla) have come to a unanimous and simultaneous realization: China has won the contest for EV supremacy,” Morgan Stanley’s Adam Jonas wrote in a note to clients last month. Jonas predicts the industry will enter a new phase of lower spending, higher protectionism through tariffs, and likely cooperation with China with regards to producing and developing EVs.
However, tastes in automobiles in the US versus the rest of the world may play in favor of legacy automakers — the Big Three plus Toyota, VW, and others — who have been making cars tailored for Americans for some time.
Said CarGurus’ Roberts, “The US market might prove to be unique enough in its vehicle taste” like SUVs and pickups, “while most of the low-cost Chinese EVs tend to be much smaller vehicles, which US consumers tend to shun.”
In other words, for American automakers, there may be a path to success.
