Electric Vehicles: GM Slows Down the Pace

Americans must be an ungrateful, foolish and selfish people, or so some, I suspect, would like us to believe. Despite generous tax incentives, a “boiling” planet, and the technological wonders of our new electric vehicles (EVs), they do not seem to be buying EVs at the pace that has been expected of them.

The Wall Street Journal:

General Motors is abandoning a self-imposed target to build 400,000 electric vehicles by mid-2024, the latest sign that automakers are concerned about the viability of the market for battery-powered cars.

The Detroit automaker walked back the goal while reporting a healthy third-quarter profit, despite the hit from the continuing United Auto Workers strike. . . .

The move on EVs is a surprise one for a company that has bet its future on the technology, anticipating that it will eventually phase out sales of gasoline-powered vehicles next decade. It comes as rivals, including

Tesla and Ford Motor have also raised red flags about consumer demand for EVs and buyers’ willingness to pay a premium for them over traditional models.

In July, Ford Motor pushed back its EV-output target by one year. In recent months, amid higher interest rates that are making the already-pricey cars more expensive for many buyers, EV sales growth has slowed and unsold models are piling up on dealership lots.

GM planned to have produced 400,000 EVs over a roughly two-year stretch by the middle of next year but has abandoned that goal. Chief Financial Officer Paul Jacobson on Tuesday cited a slowdown in the market for battery-powered cars.

Last week, GM said it would delay the opening of an EV truck factory in suburban Detroit by a year. Company executives said the automaker stands by its goal of producing one million EVs in North America by the end of 2025 and is trying to build in more flexibility in its manufacturing operations to adjust for fluctuations in demand.

The reality, of course, is that the rushed and coercive transition to EVs in Western markets will do little or nothing for the climate. Worse, it has meant that this technology is being introduced before it is ready for the mass market, given consumer concerns about range, charging times, pricing and, for those lacking parking garages or their own driveways, impracticality:

The question now is whether these pullbacks signal that the car companies wagered too heavily on EVs or are simply confronting hiccups in their transformation toward an electric-dominated future that Tesla pioneered. GM Chief Executive Mary Barra on Tuesday said she believed it was the latter.

But the “electric-dominated future that Tesla pioneered” was rather different from the one that the EU, the U.K., and, somewhat more indirectly, the U.S. are trying to enforce. Tesla has certainly benefited from government assistance, but up to now its model has been based on attracting sufficient customers in a market in which EVs had to prove their worth against all comers. That’s a model that generally works better than anything that central planners can come up with. As a result, Tesla has delivered cars that work well for upscale consumers who can afford them and typically have other (conventional) cars to turn to if necessary. It’s a measure of the importance that Tesla attaches to attracting the consumer that the company saw the need to set up a good charging network equipped with (relatively) fast chargers, something that must have boosted demand for its cars.

By contrast, the core assumption underlying the strategy of GM and other large manufacturers has been that they would be satisfying the demand created by governments’ “forcing” consumers to buy EVs. That element of compulsion has clearly reduced the companies’ incentive to think through what consumers want.

Making matters worse, the planned pace at which the transition is meant to be enforced has meant that the rollout of EVs is proceeding before they (and the supporting infrastructure) are ready for mass-market acceptance. Consumers are not idiots (which is why governments have turned to coercion), and so, although EV sales are growing rapidly, car buyers are proving more reluctant to switch to them than many automakers had assumed.

And why have these automakers been taken by surprise? Because they were responding to the demands of the state, not the wishes of the consumer. We’ll have to see what happens after 2035, when buying new internal-combustion-engine cars will, by law or, indirectly, regulation, become more or less impossible. However the period between now and 2035 may prove to be extremely uncomfortable for many of those automakers now switching to EV production. If they cannot sell enough EVs to hit the interim targets put in place by governments or regulators, they will take a double financial hit. One from the state, the other from lower-than-expected demand. And all this will be happening as automakers invest billions into EV production and, increasingly, turn away from manufacturing profitable conventional cars. Shifting the focus of a business away from a product that consumers want and towards a product that many of them do not is an unusual recipe for success.

Auto bailouts will, I suspect, be coming taxpayers’ way.