The financial reporting season for the third quarter of 2023 brought particularly unpleasant “surprises” both for investors and for customers of companies that produce electric cars (EA), eager to expose their progressiveness and burning desire to fight climate change, but only with generous subsidies from the state.
With the reduction of these subsidies or even their complete elimination, the demand disappeared, often as if by magic.
The publication Business Insider recently wrote that “executives in the auto industry are starting to tell the truth”, that “electric cars don’t work”. The acceptance of reality comes after many months in which dealers sent them more and more signals about the sharp drop in demand.
Mary Barra, the executive director of the GM company, announced, during the presentation of the latest quarterly results, that she is abandoning the production target for electric cars in the second half of this year, of 100 thousand units, as well as the target of 400 thousand units for the first half of next year, as Bloomberg writes.
With dealers having to take serious price cuts to sell the AE, Mercedes-Benz’s CFO said that “we’re in a pretty brutal space” and “it’s hard to imagine that the current situation is sustainable for all”, as Harald Wilhelm pointed out.
The online publication The Verge recently wrote that Ford is delaying an investment of 12 billion dollars to build a new factory and a battery production unit in the state of Kentucky.
The decision comes against the background of the massive losses recorded at the level of the AE division, of about 3.1 billion dollars in the first nine months of the current year. Losses of around 4 billion dollars are estimated for the whole year.
A recent news from the Electrek.co website shows a massive drop in AE orders received by Volkswagen for Europe. The decline of about 50%, up to 150,000 units, was announced by the financial director of the company, after the publication of the financial report for the first nine months of the current year, which shows an increase of about 45% in deliveries of AE.
The deterioration of the prospects for the companies producing AE is also reflected by a Bloomberg index that includes the shares of the companies in the sector at a global level. From the maximum recorded in November 2021, the BBEV index (Bloomberg Electric Vehicles Price Return Index) decreased by over 52%, up to around 2,700 points, while the decline since the beginning of the current year was around 16% (see the graph).
A “collateral” victim of the new trend on the AE market is the Hertz company, which announced a few years ago, after emerging from insolvency, that it would build a massive fleet of Tesla cars.
Recently, Hertz’s shares reached multi-year lows, in the conditions of the significant decrease in the net result, determined mainly by the high repair costs for the AEs in the fleet, according to a news from Bloomberg.
Costs to repair electric cars were higher than expected, roughly double what the company pays to repair gasoline cars, Hertz chief executive Stephen Scherr said.
Beyond the very high prices, the attractiveness of electric cars seems to be strongly tempered by the reality of high maintenance costs, which “stubbornly” defy the promises presented to customers.
Nikhil Naikal, CEO of Kinetic, a company specializing in the repair of electric and autonomous cars, presented to CNBC some of the reasons why these cars may need more maintenance than classic cars, even though they have fewer moving parts.
With significantly more mass than cars with classic engines, the AE accelerates and moves significantly faster. In these conditions, the suspensions are affected more, as are the steering or brakes. In addition, there is also a need for more frequent tire changes.
Optimists can say that the current negative dynamic on the EV market is temporary, and the causes will be eliminated with the introduction of new technologies to increase autonomy and reduce battery charging time.
Unfortunately, increasing autonomy and reducing battery charging time cannot change a fundamental aspect: the ability of electrical networks to cope with additional demand, given that, theoretically, they will transport mostly electricity produced from variable sources, such as solar power plants or wind turbines.
Even a hypothetical success in reaching the objective of complete electrification only from renewable sources, would still be a failure, because a particularly fragile system would be built, marked by an extraordinary dependence on sources that do not ensure the permanent supply of electricity.
For now, these “details” are not enough to convince the authorities in the United States and Europe to reassess their “climate” goals, and the next step will probably be a generalized bailout for the manufacturers of electric cars and “renewable” energy, according to to some estimates presented by the Wall Street Journal, because “even if the AE manufacturers will manage to release cars at reduced prices, there is no guarantee that they will be bought by customers”.
Bill Ford, the executive chairman of the Ford company, recently said in an interview with the New York Times that electric cars risk becoming “collateral victims in a much wider culture war”.
“Certain conservative-leaning states argue that mandating electric cars is similar to mandating vaccines, which are forced by the federal government even if we don’t want them,” Henry Ford’s great-grandson pointed out.
The WSJ columnist supports this opinion and states that “progressives are imposing on us the green transition and their supposed superior cultural values, although the general public does not share them”.
In addition, “if government mandates backfire on automakers, then taxpayers will be forced to pay for the repair of this industry as well,” as the WSJ points out.
But how big could this burden imposed on taxpayers be, against the background of an explosive international context, which will “guarantee” ever higher prices, both for basic products and for energy, but also for the raw materials absolutely necessary to achieve the climate objectives ?
And what will happen when the limits of patience will be reached and the “hunger games” will begin?
2023-11-02 22:00:00
#road #electric #cars
