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Profits fell short of expectations as multinational automakers slow down their electric vehicle transition.

2023-12-15

 

Profits fell short of expectations as multinational automakers slow down their electric vehicle transition.

 

Although the global market share of new energy vehicles continues to rise, driven by pure electric cars, recently several European and American automakers have shown signs of slowing down their electric vehicle expansion plans—including Ford, General Motors, Volkswagen, and Tesla. Meanwhile, even Toyota, the Japanese automaker that has consistently emphasized increasing its investment in electric vehicles, has been notably slow in translating those commitments into concrete actions.

 

 

So, why have multinational automakers—those who recently proclaimed they’d "halt production of fuel vehicles and go all-in on new energy"—suddenly changed their stance, abandoning their ambitious electrification goals? Perhaps it all stems from challenges such as slowing market demand, intense price wars, and profits falling short of expectations. These factors represent the most fundamental reasons behind automakers’ shift from their previously aggressive expansion strategies to a more cautious approach. Recently, Tesla, General Motors, and Ford have all slowed down their plans to expand electric vehicle factories—citing rising financing costs, sluggish economic growth, and weakening auto demand as key contributors. Tesla’s Elon Musk has emphasized that higher interest rates are expected to dampen electric vehicle sales. Meanwhile, according to reports, Ford announced in its Q3 2023 earnings report that it would delay approximately $12 billion worth of investments aimed at scaling up new EV and battery production—including putting on hold the construction of a second battery plant it was set to build jointly with South Korean manufacturer SK On in Kentucky.
Ford Motor Company stated that consumers in the North American market are becoming more cautious, reluctant to pay a premium for electric vehicles compared to those with internal combustion engines or hybrid systems. This trend is putting pressure on EV companies' pricing strategies and profitability. Additionally, while both Ford and the broader automotive industry are seeing rapid growth in electric vehicle production, the pace of this expansion hasn't yet met Ford's expectations. Meanwhile, Ford executives emphasized that the company will not cut back on its planned investments in future electric models; however, the timeline for ramping up EV manufacturing capacity—and the progress of related investments—will now be slower than previously anticipated. As a result, as early as July of this year, Ford postponed the target date for achieving its annual production capacity of 600,000 electric vehicles from 2023 to 2024.
General Motors is also slowing down its electric vehicle expansion plans, announcing it will postpone its plan to open a second electric truck factory in Michigan—despite the company previously signaling its commitment to boosting EV production. This decision comes as GM looks to preserve more capital amid a slowdown in electric vehicle sales growth. Meanwhile, the automaker has pushed back the timeline for expanding its electric truck manufacturing capacity until the end of 2025. GM’s delayed move to ramp up production has raised questions about the company’s earlier announced EV targets. Recall that GM had set an ambitious goal of cumulatively producing 400,000 electric vehicles in North America between mid-2022 and 2024. In addition, GM’s collaboration with Honda to develop an affordable electric vehicle priced below $30,000 has been forced to halt. Both companies cited weaker-than-expected market demand, rising raw material costs, and an increasingly volatile market environment as key reasons for scrapping their joint initiative to create an entry-level EV.

 

 

As early as April 2022, Honda and General Motors announced a deepened collaboration, under which the two companies will develop a series of affordable electric vehicle models based on GM’s next-generation Ultium battery technology. The first batch of these models is slated for launch in North America by 2027, with estimates suggesting their prices will remain below $30,000—aiming to challenge Tesla’s dominant position in the electric vehicle market in terms of sales volume. Beyond U.S.-based automakers, even Japanese automaker Toyota has shown limited enthusiasm for fully embracing the electric vehicle transition. Toyota has emphasized that there isn’t a single “one-size-fits-all” solution when it comes to reducing carbon emissions; instead, the company is doubling down on investments across multiple fronts—including not just pure electric vehicles but also other innovative technologies. As a result, Toyota’s electrification strategy extends far beyond a sole focus on battery-powered cars—it leverages the company’s extensive portfolio of diversified technological approaches and ongoing innovations to deliver a wide range of mobility solutions tailored to meet the varied needs of consumers.
In 2023, Toyota adopted a multi-strategic approach in the electrification space. In May, Toyota established a dedicated organization called BEV Factory, specifically focused on researching electric vehicles. By June, Toyota unveiled its cutting-edge all-solid-state battery technology along with several other groundbreaking innovations. Then, in October, Toyota partnered with Japan's energy giant Idemitsu Kosan to jointly develop all-solid-state batteries. Notably, although Toyota currently lags behind in the pure-electric vehicle segment, its bold investment in solid-state battery technology could help the company regain its leadership position. Moreover, Toyota’s confidence in sustaining robust growth in both production and sales likely serves as its strongest rationale for challenging the conventional trajectory of electric-vehicle development. Meanwhile, German automakers are also feeling the strain amid this ongoing transition to electrification. Recently, Volkswagen decided against expanding its existing Wolfsburg-Wallmerode plant in Germany, opting instead to relocate the planned "Trinity" automotive project—originally slated for that site—to its Zwickau facility, also located in Germany.
Regarding this, Volkswagen executives stated that, due to lower-than-expected demand for electric vehicles in Europe, Volkswagen will temporarily refrain from making a decision on the location of its fourth battery plant. Earlier, the automaker had issued a warning, noting that Volkswagen's order volume for electric vehicles in Europe has dropped from 300,000 units in the past to just 150,000 units—falling short of initial expectations. Meanwhile, Stellantis Group, the parent company of brands like Citroën and Peugeot, announced it has acquired a 20% stake in Leapmotor for €1.5 billion. In addition, Stellantis and Leapmotor have jointly established a new joint venture named "Leapmotor International," with Stellantis holding a 51% stake and Leapmotor retaining 49%. Beyond Greater China, this joint venture will hold exclusive rights to export and sell Leapmotor products into all other global markets, as well as the exclusive authority to manufacture Leapmotor vehicles locally. Through this strategic partnership, Stellantis continues its transformation in a more diversified manner.
Faced with automakers delaying their electric vehicle deployment plans, their battery suppliers have also followed suit by lowering their earnings forecasts. According to foreign media reports, South Korea’s leading power battery giant, LG Energy Solution, announced during its earnings call that the company’s revenue in 2024 is expected to slow down, with growth falling short of the previously projected 30% rate. Additionally, LG Energy Solution noted that as Chinese automakers gradually roll out more affordable electric vehicles in Europe, the recovery in demand from European manufacturers may be delayed. Japanese company Panasonic, another key supplier—particularly for Tesla’s premium EVs—has also revised downward its operating profit outlook, cutting its 2023 forecast by 15%. The company also warned that demand for Tesla’s electric vehicles in the North American market is cooling off. The primary reasons behind this slowdown in electrification efforts among multiple multinational automakers include the decelerating global growth in EV sales, rising inventory levels, and an overall cooling of market sentiment—factors that have directly prompted these companies to shift from an aggressive stance on electric vehicles toward a more cautious, balanced approach.

 

 

According to reports, U.S. electric vehicle sales in the third quarter reached 313,100 units, representing a year-on-year increase of 49.8%. In contrast, during the same periods in 2021 and 2022, U.S. electric vehicle sales had grown by approximately 75% compared to the previous year. As of November 2023, total sales of pure electric vehicles stood at 1.008 million units, up 50.7% from the previous year. Meanwhile, the growth rate of electric vehicles in the U.S. market has begun to slow down, while inventory levels are also on the rise. In October 2023, the average days-to-sell for electric vehicles in the U.S. was 57 days—nearly 1.5 times higher than it was a year earlier—resulting in a clearly less-than-optimistic outlook. Overall, as of November this year, electric vehicles accounted for 7.5% of total U.S. auto sales. However, this figure remains significantly below the target of having electric vehicles make up half of all new car sales by 2030.
In fact, U.S. auto dealers had previously warned of a slowdown in demand for electric vehicles, noting that many buyers are not yet ready to make the transition to EVs—especially those living in vast, rural areas, who worry that the current electric range isn’t sufficient to take them where they want to go. Additionally, issues such as charging station availability, convenience, and overall driving range remain significant concerns, and America’s current infrastructure simply can’t fully support these needs. As a result, local automakers have also begun recognizing the seriousness of the situation. Currently, several car manufacturers are reassessing their EV strategies. Recently, Ford announced it would delay the construction of a battery plant and scale back its $12 billion in electric-vehicle-related investments, while also downsizing another battery facility. As of November this year, Ford’s Mustang Mach-E has sold just under 36,000 units—barely a 3.5% increase compared to the same period last year. Due to mounting inventory challenges, production of this model has been cut back over the past two months.
In addition to the U.S. market, the growth rate of Europe's electric vehicle market is also slowing down. According to reports, European EV sales reached 2.602 million units in 2022, representing a year-on-year increase of just 14.5%. In September of this year, Europe saw EV sales of 288,000 units, up 15% from the same period last year—but this growth rate is relatively modest compared to previous years. In a recently released report, UBS noted that due to persistently high interest rates and slowing economic growth in Europe, they have lowered their forecast for 2024 EV sales growth in the region from the earlier estimate of 25% to 15%. The report also bluntly stated: "The sales outlook for pure-electric vehicles in Europe remains exceptionally challenging." As a result, Volkswagen Group has decided to postpone the construction of its fourth battery plant in Eastern Europe. At the third-quarter earnings conference, Volkswagen Group Chief Financial Officer Arno Antlitz revealed that the company’s EV order backlog in Europe has plummeted from 300,000 units in the same period last year to just 150,000—nearly halved.

 

 

As demand in the European and American electric vehicle markets slows down, many automakers are opting to offer lower-priced EVs in an effort to reinvigorate consumer interest. Additionally, German automakers have joined the wave of aggressive price cuts to gain a competitive edge—German brands, which previously carried no discounts at all, are now seeing reductions of around 7%. Meanwhile, the growth in EV sales has begun to decelerate, with signs emerging of an oversupply in the market; in fact, the average selling price of electric vehicles in the U.S. dropped significantly year-on-year during the third quarter. This decline in market demand is being viewed as a critical indicator, suggesting that the European and American EV markets may have already entered what’s known as a "plateau period." Of course, another key factor behind the slowdown in European EV demand is the still-developing and inadequate charging infrastructure, which continues to pose a major hurdle to the broader adoption of electric vehicles across the continent.
Reports indicate that nearly half of the 1,600 charging stations deployed by Repsol, Spain's largest industrial company, are currently inactive due to a lack of power connections—a trend that is widespread across the European Union. An EU Commission spokesperson stated: "The time required to connect electric vehicle charging points to the grid can indeed be seen as an obstacle hindering the rapid adoption of EVs, and this issue urgently needs to be addressed." Currently, factors such as the absence of subsidies for premium models, rising consumer price sensitivity, the higher upfront cost of electric vehicles compared to their gasoline counterparts, and the still-imperfect charging infrastructure are cited as key reasons behind the slowdown in growth. Meanwhile, businesses are adopting a more cautious approach when forecasting the future electric vehicle market, ready to adjust their strategies dynamically based on evolving market conditions. Nevertheless, developing electric vehicles remains a long-term priority for most automakers—but their expansion plans may face delays until market demand becomes clearer.
Against the backdrop of slowing growth in electric vehicle sales, the new-energy vehicle market has clearly become a red ocean, and the "price war" has emerged as the defining keyword of the industry this year. To seize market share, many automakers have been forced to sacrifice profits and join the price battle, pushing the concept of "involution" to its extreme. Particularly in the Chinese market, where numerous players are vying for dominance in the EV sector, involution has reached an exceptionally fierce level—evidenced by the fact that Chinese brands occupy 15 of the top 20 spots on the global electric vehicle sales rankings for the first three quarters. Thus, aside from the cooling demand in the market, the ongoing price war has also become a major obstacle hindering multinational automakers from rapidly expanding their electric vehicle footprints. As Ford executives pointed out, consumers remain reluctant to pay the premium associated with EVs compared to conventional gasoline and hybrid vehicles, which is directly impeding the growth of Ford's electric vehicle business.

 

 

Additionally, although Ford's electric vehicle sales grew 44% year-on-year in the third quarter, and its revenue increased by 26% compared to the same period last year, the company’s Model E electric vehicle business unit reported a net loss of $1.33 billion—more than double the loss incurred during the same period last year. Analysts pointed out that Ford lost approximately $37,000 for every electric vehicle sold in the third quarter, further validating the common perception among most automakers that "each electric car sold results in a loss." Globally, among new-energy vehicle companies, only Tesla and BYD have managed to achieve stable profitability so far. Meanwhile, Li Auto also turned profitable for the first time in the fourth quarter of 2022, while other NEV manufacturers continue to operate at a loss. So, why is it so challenging for electric vehicle companies to become profitable? First, the production costs of new-energy vehicles remain relatively high, particularly due to ongoing challenges in battery technology—a field where many automakers have already invested heavily in research and development.
Compared to traditional fuel-powered vehicles, new-energy vehicles rely on core technologies such as batteries and electric motors, which require substantial investment in research and development. Yet even with these advancements, batteries still face challenges like limited driving range and lengthy charging times—issues that contribute to the higher manufacturing costs of new-energy cars. However, investing doesn’t always yield immediate returns. Many automakers have launched new-energy electric vehicles, yet their sales have failed to break through significant barriers, making it difficult to achieve economies of scale and, consequently, profitability. Moreover, in the past two to three years, rising raw material costs have placed considerable pressure on automakers. For instance, the sharp increase in prices for key battery materials has essentially eroded the profit margins previously gained from higher vehicle pricing at the consumer level. On top of this, the new-energy vehicle market is fiercely competitive, with numerous brands rapidly entering the space. This has led to a fragmented market share, further hindering the ability to achieve meaningful scale. At the same time, companies must continue pouring substantial resources into R&D and marketing efforts to stay ahead. Additionally, building out the necessary charging infrastructure presents another major hurdle. Deploying enough charging stations demands not only significant financial investments but also considerable time and effort. As a result, today’s new-energy vehicle manufacturers are facing immense challenges in achieving sustainable profitability.
More importantly, the electric vehicle market has already turned into a red ocean. The price war that kicked off earlier this year has further exacerbated the profitability challenges faced by many automakers in the EV sector. Ford’s EV division, for instance, has seen its losses deepen precisely because it followed Tesla’s lead in slashing prices. The price battle has left numerous automakers “bruised,” and even Tesla—ironically enough, the very company that sparked the price war—isn’t immune to its effects. During Tesla’s third-quarter earnings call, the company’s gross margin plunged to 17.9%, significantly lower than last year’s 25.1% and marking its lowest level in four years. Meanwhile, net profit attributable to ordinary shareholders plummeted by 44% year-on-year, landing at $1.853 billion. Perhaps unable to withstand the relentless decline in profitability, Tesla has recently raised prices on several of its models in the Chinese market over the past month, underscoring the mounting cost and profit pressures it faces. Meanwhile, German luxury carmaker Mercedes-Benz has also admitted that its profits have been hit hard by the “brutal” price competition in the EV segment. Sharp price cuts across its product lineup, coupled with ongoing supply-chain disruptions, have led to a double-digit drop in both revenue and profit for Mercedes-Benz in the third quarter. Meanwhile, despite the fact that some traditional automakers are producing pure-electric vehicles at higher costs, they’re being forced by competitive pressures to set prices lower than those of their gasoline-powered counterparts. This makes it increasingly difficult for automakers to ensure long-term sustainability under the current market conditions. Beyond multinational automakers, Chinese brands are also grappling with significant challenges amid this fierce price war. Looking at the financial reports from various new EV startups over the first three quarters of this year, we see that, aside from Li Auto, companies like NIO, XPeng, Leapmotor, and Seres—all newcomers to the EV space—are collectively reporting losses, with these losses even showing signs of expanding in scale. In short, the price war is having a profound impact on the automotive industry. After all, when car prices drop dramatically, profit margins per vehicle naturally shrink. To maintain overall profitability, automakers are now forced to rely on boosting sales volumes to offset the thinning margins. But if this “volume-for-price” strategy fails to deliver results, automakers could easily find themselves caught in a vicious cycle of excessive discounting—and ultimately, spiraling into deeper losses.

 

 

From the perspective of a product lifecycle, aside from R&D and manufacturing, the operational phase of a vehicle also incurs significant expenses—especially for the new automotive forces that place greater emphasis on operations, as they are already bearing even higher costs. Consequently, price reductions have, to some extent, intensified their financial burdens and widened funding gaps. This challenge is equally relevant for multinational automakers. In summary, while the new energy vehicle market still faces several hurdles—particularly in overseas markets—this has prompted some multinational automakers to slow down their pace of NEV development. However, this does not mean they’re stepping back entirely. In addition to pursuing independent research and development, many are now adopting collaborative approaches, such as Volkswagen partnering with XPeng, or Stellantis joining forces with Leapmotor. In essence, these companies are simply shifting gears—continuing their transformation through alternative pathways rather than abandoning it altogether.

Translated from Sina Auto

 

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Profits fell short of expectations as multinational automakers slow down their electric vehicle transition.

2023-12-15

 

Profits fell short of expectations as multinational automakers slow down their electric vehicle transition.

 

Although the global market share of new energy vehicles continues to rise, driven by pure electric cars, recently several European and American automakers have shown signs of slowing down their electric vehicle expansion plans—including Ford, General Motors, Volkswagen, and Tesla. Meanwhile, even Toyota, the Japanese automaker that has consistently emphasized increasing its investment in electric vehicles, has been notably slow in translating those commitments into concrete actions.

 

 

So, why have multinational automakers—those who recently proclaimed they’d "halt production of fuel vehicles and go all-in on new energy"—suddenly changed their stance, abandoning their ambitious electrification goals? Perhaps it all stems from challenges such as slowing market demand, intense price wars, and profits falling short of expectations. These factors represent the most fundamental reasons behind automakers’ shift from their previously aggressive expansion strategies to a more cautious approach. Recently, Tesla, General Motors, and Ford have all slowed down their plans to expand electric vehicle factories—citing rising financing costs, sluggish economic growth, and weakening auto demand as key contributors. Tesla’s Elon Musk has emphasized that higher interest rates are expected to dampen electric vehicle sales. Meanwhile, according to reports, Ford announced in its Q3 2023 earnings report that it would delay approximately $12 billion worth of investments aimed at scaling up new EV and battery production—including putting on hold the construction of a second battery plant it was set to build jointly with South Korean manufacturer SK On in Kentucky.
Ford Motor Company stated that consumers in the North American market are becoming more cautious, reluctant to pay a premium for electric vehicles compared to those with internal combustion engines or hybrid systems. This trend is putting pressure on EV companies' pricing strategies and profitability. Additionally, while both Ford and the broader automotive industry are seeing rapid growth in electric vehicle production, the pace of this expansion hasn't yet met Ford's expectations. Meanwhile, Ford executives emphasized that the company will not cut back on its planned investments in future electric models; however, the timeline for ramping up EV manufacturing capacity—and the progress of related investments—will now be slower than previously anticipated. As a result, as early as July of this year, Ford postponed the target date for achieving its annual production capacity of 600,000 electric vehicles from 2023 to 2024.
General Motors is also slowing down its electric vehicle expansion plans, announcing it will postpone its plan to open a second electric truck factory in Michigan—despite the company previously signaling its commitment to boosting EV production. This decision comes as GM looks to preserve more capital amid a slowdown in electric vehicle sales growth. Meanwhile, the automaker has pushed back the timeline for expanding its electric truck manufacturing capacity until the end of 2025. GM’s delayed move to ramp up production has raised questions about the company’s earlier announced EV targets. Recall that GM had set an ambitious goal of cumulatively producing 400,000 electric vehicles in North America between mid-2022 and 2024. In addition, GM’s collaboration with Honda to develop an affordable electric vehicle priced below $30,000 has been forced to halt. Both companies cited weaker-than-expected market demand, rising raw material costs, and an increasingly volatile market environment as key reasons for scrapping their joint initiative to create an entry-level EV.

 

 

As early as April 2022, Honda and General Motors announced a deepened collaboration, under which the two companies will develop a series of affordable electric vehicle models based on GM’s next-generation Ultium battery technology. The first batch of these models is slated for launch in North America by 2027, with estimates suggesting their prices will remain below $30,000—aiming to challenge Tesla’s dominant position in the electric vehicle market in terms of sales volume. Beyond U.S.-based automakers, even Japanese automaker Toyota has shown limited enthusiasm for fully embracing the electric vehicle transition. Toyota has emphasized that there isn’t a single “one-size-fits-all” solution when it comes to reducing carbon emissions; instead, the company is doubling down on investments across multiple fronts—including not just pure electric vehicles but also other innovative technologies. As a result, Toyota’s electrification strategy extends far beyond a sole focus on battery-powered cars—it leverages the company’s extensive portfolio of diversified technological approaches and ongoing innovations to deliver a wide range of mobility solutions tailored to meet the varied needs of consumers.
In 2023, Toyota adopted a multi-strategic approach in the electrification space. In May, Toyota established a dedicated organization called BEV Factory, specifically focused on researching electric vehicles. By June, Toyota unveiled its cutting-edge all-solid-state battery technology along with several other groundbreaking innovations. Then, in October, Toyota partnered with Japan's energy giant Idemitsu Kosan to jointly develop all-solid-state batteries. Notably, although Toyota currently lags behind in the pure-electric vehicle segment, its bold investment in solid-state battery technology could help the company regain its leadership position. Moreover, Toyota’s confidence in sustaining robust growth in both production and sales likely serves as its strongest rationale for challenging the conventional trajectory of electric-vehicle development. Meanwhile, German automakers are also feeling the strain amid this ongoing transition to electrification. Recently, Volkswagen decided against expanding its existing Wolfsburg-Wallmerode plant in Germany, opting instead to relocate the planned "Trinity" automotive project—originally slated for that site—to its Zwickau facility, also located in Germany.
Regarding this, Volkswagen executives stated that, due to lower-than-expected demand for electric vehicles in Europe, Volkswagen will temporarily refrain from making a decision on the location of its fourth battery plant. Earlier, the automaker had issued a warning, noting that Volkswagen's order volume for electric vehicles in Europe has dropped from 300,000 units in the past to just 150,000 units—falling short of initial expectations. Meanwhile, Stellantis Group, the parent company of brands like Citroën and Peugeot, announced it has acquired a 20% stake in Leapmotor for €1.5 billion. In addition, Stellantis and Leapmotor have jointly established a new joint venture named "Leapmotor International," with Stellantis holding a 51% stake and Leapmotor retaining 49%. Beyond Greater China, this joint venture will hold exclusive rights to export and sell Leapmotor products into all other global markets, as well as the exclusive authority to manufacture Leapmotor vehicles locally. Through this strategic partnership, Stellantis continues its transformation in a more diversified manner.
Faced with automakers delaying their electric vehicle deployment plans, their battery suppliers have also followed suit by lowering their earnings forecasts. According to foreign media reports, South Korea’s leading power battery giant, LG Energy Solution, announced during its earnings call that the company’s revenue in 2024 is expected to slow down, with growth falling short of the previously projected 30% rate. Additionally, LG Energy Solution noted that as Chinese automakers gradually roll out more affordable electric vehicles in Europe, the recovery in demand from European manufacturers may be delayed. Japanese company Panasonic, another key supplier—particularly for Tesla’s premium EVs—has also revised downward its operating profit outlook, cutting its 2023 forecast by 15%. The company also warned that demand for Tesla’s electric vehicles in the North American market is cooling off. The primary reasons behind this slowdown in electrification efforts among multiple multinational automakers include the decelerating global growth in EV sales, rising inventory levels, and an overall cooling of market sentiment—factors that have directly prompted these companies to shift from an aggressive stance on electric vehicles toward a more cautious, balanced approach.

 

 

According to reports, U.S. electric vehicle sales in the third quarter reached 313,100 units, representing a year-on-year increase of 49.8%. In contrast, during the same periods in 2021 and 2022, U.S. electric vehicle sales had grown by approximately 75% compared to the previous year. As of November 2023, total sales of pure electric vehicles stood at 1.008 million units, up 50.7% from the previous year. Meanwhile, the growth rate of electric vehicles in the U.S. market has begun to slow down, while inventory levels are also on the rise. In October 2023, the average days-to-sell for electric vehicles in the U.S. was 57 days—nearly 1.5 times higher than it was a year earlier—resulting in a clearly less-than-optimistic outlook. Overall, as of November this year, electric vehicles accounted for 7.5% of total U.S. auto sales. However, this figure remains significantly below the target of having electric vehicles make up half of all new car sales by 2030.
In fact, U.S. auto dealers had previously warned of a slowdown in demand for electric vehicles, noting that many buyers are not yet ready to make the transition to EVs—especially those living in vast, rural areas, who worry that the current electric range isn’t sufficient to take them where they want to go. Additionally, issues such as charging station availability, convenience, and overall driving range remain significant concerns, and America’s current infrastructure simply can’t fully support these needs. As a result, local automakers have also begun recognizing the seriousness of the situation. Currently, several car manufacturers are reassessing their EV strategies. Recently, Ford announced it would delay the construction of a battery plant and scale back its $12 billion in electric-vehicle-related investments, while also downsizing another battery facility. As of November this year, Ford’s Mustang Mach-E has sold just under 36,000 units—barely a 3.5% increase compared to the same period last year. Due to mounting inventory challenges, production of this model has been cut back over the past two months.
In addition to the U.S. market, the growth rate of Europe's electric vehicle market is also slowing down. According to reports, European EV sales reached 2.602 million units in 2022, representing a year-on-year increase of just 14.5%. In September of this year, Europe saw EV sales of 288,000 units, up 15% from the same period last year—but this growth rate is relatively modest compared to previous years. In a recently released report, UBS noted that due to persistently high interest rates and slowing economic growth in Europe, they have lowered their forecast for 2024 EV sales growth in the region from the earlier estimate of 25% to 15%. The report also bluntly stated: "The sales outlook for pure-electric vehicles in Europe remains exceptionally challenging." As a result, Volkswagen Group has decided to postpone the construction of its fourth battery plant in Eastern Europe. At the third-quarter earnings conference, Volkswagen Group Chief Financial Officer Arno Antlitz revealed that the company’s EV order backlog in Europe has plummeted from 300,000 units in the same period last year to just 150,000—nearly halved.

 

 

As demand in the European and American electric vehicle markets slows down, many automakers are opting to offer lower-priced EVs in an effort to reinvigorate consumer interest. Additionally, German automakers have joined the wave of aggressive price cuts to gain a competitive edge—German brands, which previously carried no discounts at all, are now seeing reductions of around 7%. Meanwhile, the growth in EV sales has begun to decelerate, with signs emerging of an oversupply in the market; in fact, the average selling price of electric vehicles in the U.S. dropped significantly year-on-year during the third quarter. This decline in market demand is being viewed as a critical indicator, suggesting that the European and American EV markets may have already entered what’s known as a "plateau period." Of course, another key factor behind the slowdown in European EV demand is the still-developing and inadequate charging infrastructure, which continues to pose a major hurdle to the broader adoption of electric vehicles across the continent.
Reports indicate that nearly half of the 1,600 charging stations deployed by Repsol, Spain's largest industrial company, are currently inactive due to a lack of power connections—a trend that is widespread across the European Union. An EU Commission spokesperson stated: "The time required to connect electric vehicle charging points to the grid can indeed be seen as an obstacle hindering the rapid adoption of EVs, and this issue urgently needs to be addressed." Currently, factors such as the absence of subsidies for premium models, rising consumer price sensitivity, the higher upfront cost of electric vehicles compared to their gasoline counterparts, and the still-imperfect charging infrastructure are cited as key reasons behind the slowdown in growth. Meanwhile, businesses are adopting a more cautious approach when forecasting the future electric vehicle market, ready to adjust their strategies dynamically based on evolving market conditions. Nevertheless, developing electric vehicles remains a long-term priority for most automakers—but their expansion plans may face delays until market demand becomes clearer.
Against the backdrop of slowing growth in electric vehicle sales, the new-energy vehicle market has clearly become a red ocean, and the "price war" has emerged as the defining keyword of the industry this year. To seize market share, many automakers have been forced to sacrifice profits and join the price battle, pushing the concept of "involution" to its extreme. Particularly in the Chinese market, where numerous players are vying for dominance in the EV sector, involution has reached an exceptionally fierce level—evidenced by the fact that Chinese brands occupy 15 of the top 20 spots on the global electric vehicle sales rankings for the first three quarters. Thus, aside from the cooling demand in the market, the ongoing price war has also become a major obstacle hindering multinational automakers from rapidly expanding their electric vehicle footprints. As Ford executives pointed out, consumers remain reluctant to pay the premium associated with EVs compared to conventional gasoline and hybrid vehicles, which is directly impeding the growth of Ford's electric vehicle business.

 

 

Additionally, although Ford's electric vehicle sales grew 44% year-on-year in the third quarter, and its revenue increased by 26% compared to the same period last year, the company’s Model E electric vehicle business unit reported a net loss of $1.33 billion—more than double the loss incurred during the same period last year. Analysts pointed out that Ford lost approximately $37,000 for every electric vehicle sold in the third quarter, further validating the common perception among most automakers that "each electric car sold results in a loss." Globally, among new-energy vehicle companies, only Tesla and BYD have managed to achieve stable profitability so far. Meanwhile, Li Auto also turned profitable for the first time in the fourth quarter of 2022, while other NEV manufacturers continue to operate at a loss. So, why is it so challenging for electric vehicle companies to become profitable? First, the production costs of new-energy vehicles remain relatively high, particularly due to ongoing challenges in battery technology—a field where many automakers have already invested heavily in research and development.
Compared to traditional fuel-powered vehicles, new-energy vehicles rely on core technologies such as batteries and electric motors, which require substantial investment in research and development. Yet even with these advancements, batteries still face challenges like limited driving range and lengthy charging times—issues that contribute to the higher manufacturing costs of new-energy cars. However, investing doesn’t always yield immediate returns. Many automakers have launched new-energy electric vehicles, yet their sales have failed to break through significant barriers, making it difficult to achieve economies of scale and, consequently, profitability. Moreover, in the past two to three years, rising raw material costs have placed considerable pressure on automakers. For instance, the sharp increase in prices for key battery materials has essentially eroded the profit margins previously gained from higher vehicle pricing at the consumer level. On top of this, the new-energy vehicle market is fiercely competitive, with numerous brands rapidly entering the space. This has led to a fragmented market share, further hindering the ability to achieve meaningful scale. At the same time, companies must continue pouring substantial resources into R&D and marketing efforts to stay ahead. Additionally, building out the necessary charging infrastructure presents another major hurdle. Deploying enough charging stations demands not only significant financial investments but also considerable time and effort. As a result, today’s new-energy vehicle manufacturers are facing immense challenges in achieving sustainable profitability.
More importantly, the electric vehicle market has already turned into a red ocean. The price war that kicked off earlier this year has further exacerbated the profitability challenges faced by many automakers in the EV sector. Ford’s EV division, for instance, has seen its losses deepen precisely because it followed Tesla’s lead in slashing prices. The price battle has left numerous automakers “bruised,” and even Tesla—ironically enough, the very company that sparked the price war—isn’t immune to its effects. During Tesla’s third-quarter earnings call, the company’s gross margin plunged to 17.9%, significantly lower than last year’s 25.1% and marking its lowest level in four years. Meanwhile, net profit attributable to ordinary shareholders plummeted by 44% year-on-year, landing at $1.853 billion. Perhaps unable to withstand the relentless decline in profitability, Tesla has recently raised prices on several of its models in the Chinese market over the past month, underscoring the mounting cost and profit pressures it faces. Meanwhile, German luxury carmaker Mercedes-Benz has also admitted that its profits have been hit hard by the “brutal” price competition in the EV segment. Sharp price cuts across its product lineup, coupled with ongoing supply-chain disruptions, have led to a double-digit drop in both revenue and profit for Mercedes-Benz in the third quarter. Meanwhile, despite the fact that some traditional automakers are producing pure-electric vehicles at higher costs, they’re being forced by competitive pressures to set prices lower than those of their gasoline-powered counterparts. This makes it increasingly difficult for automakers to ensure long-term sustainability under the current market conditions. Beyond multinational automakers, Chinese brands are also grappling with significant challenges amid this fierce price war. Looking at the financial reports from various new EV startups over the first three quarters of this year, we see that, aside from Li Auto, companies like NIO, XPeng, Leapmotor, and Seres—all newcomers to the EV space—are collectively reporting losses, with these losses even showing signs of expanding in scale. In short, the price war is having a profound impact on the automotive industry. After all, when car prices drop dramatically, profit margins per vehicle naturally shrink. To maintain overall profitability, automakers are now forced to rely on boosting sales volumes to offset the thinning margins. But if this “volume-for-price” strategy fails to deliver results, automakers could easily find themselves caught in a vicious cycle of excessive discounting—and ultimately, spiraling into deeper losses.

 

 

From the perspective of a product lifecycle, aside from R&D and manufacturing, the operational phase of a vehicle also incurs significant expenses—especially for the new automotive forces that place greater emphasis on operations, as they are already bearing even higher costs. Consequently, price reductions have, to some extent, intensified their financial burdens and widened funding gaps. This challenge is equally relevant for multinational automakers. In summary, while the new energy vehicle market still faces several hurdles—particularly in overseas markets—this has prompted some multinational automakers to slow down their pace of NEV development. However, this does not mean they’re stepping back entirely. In addition to pursuing independent research and development, many are now adopting collaborative approaches, such as Volkswagen partnering with XPeng, or Stellantis joining forces with Leapmotor. In essence, these companies are simply shifting gears—continuing their transformation through alternative pathways rather than abandoning it altogether.

Translated from Sina Auto

 

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