By CFACT
By Duggan Flanakin
Whatever happened to the old business adage: the customer is always right?
U.S. and European automakers abandoned this mantra to please unelected bureaucrats in Brussels, New York and Doha and the sycophants who rose to political power by promoting their prophecies of doom. They may now regret this “untired” adherence to the marching orders of the climate commandos.
The sign of doom in the automotive industry today is tons of unsold battery electric vehicles (BEVs) that customers have been saying for years they don't trust with their lives and fortunes.
Admittedly, the post-COVID inflationary spiral that has led to rising interest rates hasn't helped the auto industry, but far too many of its problems are self-inflicted. Meanwhile, the Chinese are smiling, knowing that they have four aces in their hands.
General Motors Chief Financial Officer Paul Jacobson announced a 50,000 cut in BEV production in June. The reason? “We don’t want to end up in a situation where we set a production target and then just produce blindly and end up with hundreds of thousands of vehicles in stock because the market just isn’t there yet.”
Perhaps Jacobson read the tea leaves and predicted a Trump victory that could mean the end of the $7,500 tax credit under Biden's misnamed Inflation Reduction Act. Or maybe he looked at the numbers that show that more than half of the population has no interest at all in buying a vehicle that doesn't meet their real-world needs.
Or perhaps Jacobson had realized that most of the billions of taxpayer dollars allocated to building a charging network had disappeared down a rabbit hole.
Doesn't matter. GM just announced 1,000 job cuts and promised to offer incentives similar to the likely eliminated $7,500 tax credit. This was in addition to the layoffs of 1,700 factory workers in September. GM previously reported a $1.7 billion loss on sales and production of its BEVs in the fourth quarter of 2023.
Ford, which is also desperately trying to reduce its BEV inventory, announced in September that BEV chargers and home installations would be included in the purchase price of its Model e BEVs. The downside to this bold move is that Ford lost nearly $130,000 on each of the 10,000 BEVs sold in the first quarter of 2024 and is forecasting a $5 billion loss for the Model E lineup in 2024.
Ford also furloughed 730 factory workers and halted production of its F-150 Lightning BEV pickup truck, the 2023 “Truck of the Year,” until next year “amid slowing consumer demand for electric vehicles.” But the real problem could be that BEV pickups are, as one automotive industry insider said, “the wrong product”?
Previously, Ford scrapped plans for an all-electric, three-row SUV and focused on hybrid models that use completely different technology and offer longer range and greater affordability. This is despite a two-year nationwide decline in BEV prices from $65,000 to $56,648.
And just this week, Ford announced it would cut 4,000 jobs, mostly in Germany and the UK – a 14% drop in its European workforce. Ford cited weak BEV demand, low government support for the BEV transition and competition from subsidized Chinese automakers.
Car rental giant Hertz just expanded its BEV sale, with used Tesla Model 3s now available for under $20,000. Hertz hopes to sell 30,000 BEVs as part of its exit from the BEV market, but the 89% increase in BEV depreciation costs (about $537 per vehicle per month) has impacted the bottom line. Tesla's own price cuts apparently had a domino effect on the used BEV market.
Meanwhile, the Detroit Free Press reported in October that “it's been a loud, turbulent and troubling year.” [Stellantis]the automaker that owns the Jeep, Ram, Chrysler, Dodge and Fiat brands, and the future is not entirely clear.” In 2024, the newspaper said, Stellantis has U.S. sales declining by 20% or more in consecutive quarterly reports recorded after making “mind-blowing gains” in 2023. The company has also stopped production at its Italian factories several times this year.
Elsewhere in Europe, despite equally draconian BEV regulations, automakers are panicking about the huge gap between customer choice and government regulations.
Germany's largest car insurer reported that one in three BEV owners switched back to gasoline or diesel vehicles this year, up from 14% in 2021. The decline could be due to the elimination of taxpayer-funded rebates of $4,900 to $6,500 be. Or perhaps, as a German reporter noted: “Electric cars apparently cannot convince many owners to stick with this form of drive in the long term.”
The situation in Germany is so bad that for the first time in its 87-year history, Volkswagen plans to close “at least” three of its factories, lay off tens of thousands of employees and downsize its remaining German plants.
A recent survey found that only 29% of Germans would comply with a law forcing them to buy BEVs, and only 18% would consider a BEV for their next purchase. Worse still, only 3.6% of ICE drivers switched to BEVs in Germany this year, and BEVs made up just 2.9% of all vehicles on Germany's highways.
The collapse of Germany's ruling coalition is partly due to its continued commitment to ban the sale of most internal combustion engine vehicles by 2035. Germany also suffers from high electricity costs, which are largely caused by taxes and only increase the cost of an overall package. Electric vehicle fleet. The influx of cheap Chinese BEVs only worsens Germany's plight in a country that depends on automobiles for 8% of its annual economic output and 16% of its exports.
According to the BBC, sales of BEVs in the UK are not keeping up with the overall market. While fleet BEV sales increased, sales of BEVs to individuals fell 7.7%, due (according to the Society of Motor Manufacturers and Traders) to “low growth, weak consumer confidence and high interest rates.” This led SMMT to urge the Starmer government to create incentives to encourage private buyers to opt for BEVs.
As Jaguar rebrands itself to appeal to a social fringe, British carmakers have been shocked by an appeal court ruling that car dealers have a “fiduciary duty” to inform customers about bonuses, commissions and fees they receive from lenders.
Lenders responded by banning car dealers from receiving commissions on 90% of vehicles purchased through auto loans. The decision could lead to the closure of car dealerships and force people to buy directly from the manufacturer, mostly unnoticed. But it could also lead to a significant downturn in car purchases as people become accustomed to dealers rather than bankers.
It remains to be seen how the new Trump administration will impact the BEV market. Trump repeatedly emphasizes that BEVs have a role to play while disparaging automakers now venturing into hydrogen-based fuel systems. But if subsidies go away as expected, will the BEV revolution just slow or come to a complete halt?
That may depend in large part on how automakers respond to the change in time and money.
This article originally appeared on Real Clear Energy
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