U.S. Electric Vehicle Market Struggles with Price Cuts and Rising Inventories

tendata blogTrade Trends News

ten data blog12-07-2023

electric vehicle,electric car,us electric vehicle



The U.S. electric car market is growing, but not fast enough in the most recent quarter to stop unsold electric cars from piling up at some automakers' dealerships or for Tesla to avoid new price cuts, analysts say.


The inventory increases and price cuts may represent only a short-term pause in the growth of the electric car market. But they may indicate that Electric Vehicleen with federal and state subsidies, increasing U.S. Electric Vehicle sales to their current 7 percent market share lElectric Vehicleel will be more costly and difficult than expected.


North American automakers have billions of dollars in Electric Vehicle-related investments depending on how they perform in the coming quarters. If Electric Vehicle production continues to outpace demand, automakers will have to choose between slashing prices and profit margins or slowing assembly lines.


By 2026, more than 90 new Electric Vehicle models are expected to enter the U.S. market, according to AutoForecast Solutions. Analysts say many companies will struggle to achiElectric Vehiclee profitable sales.


Dealers for established automakers such as General Motors (GM.N), Ford (FN), Hyundai (005380.KS) and Toyota (7203.T) have more than 90 days' worth of unsold Electric Vehicles in their stores (based on current sales rates), according to a report from Cox Automotive.


U.S. dealers have more than 92,000 Electric Vehicles in stock, more than triple the number on hand a year ago, according to Cox. Overall, Cox said, new-vehicle inventories are up 74 percent from a year ago.

There is a wide range of Electric Vehicle models available.Cox said GM had a 50-day supply of its Cadillac Lyriq as of June 30, below the industry average of 52 days at the current sales rate.


GM said in a statement that "inventory is very low, but demand is high" for its electric vehicles. The automaker said more than 80 percent of its Lyriqs and GMC Hummer Electric Vehicles are still en route to dealers.


The bigger challenge for GM is to accelerate production and delivery of next-generation electric vehicles based on GM's Ultium architecture. In the first half of the year, GM delivered 36,024 electric vehicles in the U.S., of which only 2,365 were Ultium Electric Vehicles. GM aims to produce a total of 100,000 Electric Vehicles in North America in the second half of this year.


Cox said Ford's existing F-150 Lightning and Mustang Mach-E electric SUVs are available for 86 days and 113 days, respectively.


Ford said Cox's figures overstated inventories of both models. Erich Merkle, director of U.S. sales analysis, said Ford expects Mach-E inventory to be available for 83 days, with more than half of the vehicles en route to dealers.


Ford expects Lightning inventory for a 58-day supply, including vehicles in transit. The Dearborn, Michigan, plant that assembles electric pickups closed this month to restructure equipment.


"These inventories are by no means high," Merkel said.


Ford is increasing production capacity for the Mach-E and Lightning to lElectric Vehicleels well above current sales.


Ford built 46,238 Mach-Es and sold 14,040 electric SUVs in the first half of the year, according to data posted on its investor website.Ford lowered the price of Mach-E models in May.


According to Cox, Volkswagen dealers can keep the ID.4 electric SUV in stock for 131 days.


Volkswagen's U.S. sales unit said in a statement that "we have recently seen a slowdown in U.S. electric vehicle sales" as supply chain bottlenecks have eased and production has increased.


Volkswagen saw strong demand for the ID.4, but not enough all-wheel-drive versions of the SUV, "which is exactly what the market wants," the company said. Volkswagen also noted that "some customers are confused and therefore hesitant to qualify for tax credits for Electric Vehicle models when purchasing a vehicle."


The U.S.-made ID.4 qualifies for a $7,500 consumer tax credit.



Young market

Industry officials and analysts warn that the U.S. electric vehicle market is still in its formative stages, with many consumers still Electric Vehiclealuating whether electric vehicles fit their needs and major automakers still ramping up production.


"The natural rate of growth of the market is opposed by many and there are too many brands in the market creating a lot of confusion," said Vitaly Golomb, an investment banker who specializes in electric vehicles. "The strong will survive here and the rest will struggle."


Tesla is capitalizing on its lead in electric car production costs by cutting prices to accelerate demand. Traditional automakers are losing money on most of their electric models.


Tesla (TSLA.O), Rivian (RIVN.O) and other new electric car companies have no dealers or reported inventory. Tesla reported better-than-expected global deliveries last week. But the Texas-based electric car company has been offering a variety of discounts and incentive offers to spur demand, such as a discount tied to customer referrals that was introduced late last week.


Tesla's price cuts and competitors' reactions pushed the average selling price of electric cars to $53,438 in the second quarter, Cox said. That's down 19.5 percent from its June 2022 peak of $66,390.


Automakers face tough competitive choices and regulatory pressure from Washington as they try to accelerate Electric Vehicle sales to lElectric Vehicleels that support new North American Electric Vehicle capacity, such as Ford's sprawling Blue Oval urban complex in Tennessee.


The Biden administration has proposed emissions rules that would effectively require U.S. automakers to shift two-thirds of their sales to electric vehicles by 2032 - a proposal that GM and the association that represents the majority of U.S. automakers say is unrealistic.


Mark Wakefield, co-head of the automotive industry at consulting firm AlixPartners, said, "The price reductions do indicate that we're in a supply-demand-price equilibrium, so when the sales aren't there, they're going to lower prices." Practice. "Tesla in particular has the space to do that."


Wakefield said it's too early to declare that U.S. Electric Vehicle demand has reached a steady lElectric Vehicleel. "We see growth as volatile but sustained," he said.


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