New "headache" for the automotive industry - Electric vehicles unsold
The US EV market is growing, but not fast enough to prevent unsold EVs from piling up in dealerships
The U.S. electric vehicle market has been growing, but not fast enough over the past quarter to prevent unsold EVs piling up at some automakers' dealerships or allow Tesla to avoid further price cuts.
According to Reuters, rising inventories and falling prices could only mark a short-term pause in EV market growth. But they could also be a sign that growing US EV sales above the current 7% of the market will prove more costly and difficult than expected, despite government subsidies.
As the British agency explains, North American automakers have spent billions of dollars on EV-related investments, and it depends on how the next few quarters develop. If production of EVs continues to outstrip demand, automakers will have to choose between cutting prices and margins or slowing assembly lines.
More than 90 new EV models are expected to hit the US market by 2026, according to AutoForecast Solutions. Many of them will struggle to reach profitable sales volumes, analysts say.
Dealers of major automakers such as General Motors, Ford, Hyundai and Toyota keep unsold EVs in their dealerships for more than 90 days, according to a report by Cox Automotive.
U.S. dealerships have more than 92.000 EVs in inventory, more than triple the number from a year ago, according to Cox data. Overall, new vehicle inventories are up 74% over last year.
A market in the formative phase
Industry executives and analysts cautioned that the U.S. EV market is still in a formative phase, with many consumers still evaluating whether EVs fit their needs and major automakers ramping up production.
"There is a natural speed of market growth here that many are fighting, and there is a lot of confusion in the market [as there are] too many brands," said Vitaly Golomb, an investment banker who focuses on electric vehicles. “The strong will survive here. The rest will fight."
Tesla is using its lead in EV production costs to accelerate demand with price cuts. Last week, it managed to record better than expected global deliveries. But the Texas-based EV company is offering a number of discounts and incentives to stimulate demand. Tesla's price cuts and competitor backlash pushed average EV sales prices for the second quarter to $53.438. This is down 19,5% from the peak of $66.390 in June 2022.
Automakers face tough choices, as well as regulatory pressure from Washington. The Biden administration has proposed strict emissions rules, which essentially means that 2/3 of their sales will have to be electric vehicles by 2032.
“The price declines show that we are in a kind of balance between demand, supply and price. If sales are not satisfactory, [companies] will cut prices,” said Mark Wakefield, co-head of the automotive practice at consultancy AlixPartners. "Tesla in particular has the room to do that," he added.