Is This Series Of Problems Going To Lead To US Automakers Going Bust? – CleanTechnica

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I wrote an article a few days ago about Ford’s soaring EV sales, and how that growth is, in a somewhat bewildering way, following statements from Ford CEO Jim Farley at the end of 2023 and beginning of 2024 that EV sales are not as good as they’d hoped. Ford EV sales are up 72% in 2024 compared to the first half of 2023. Nonetheless, sales are apparently not as high as Ford had hoped. Does the EV sales reality line up with Farley’s statements about sales not being as high as they’d expected? There were some good responses to the article, including some that stimulated this followup article.

First of all, one basic argument is that even though Ford EV sales are up on a percentage basis, they are still not very large in volume and are not close to covering the vast investments in EV production capacity that Ford has made. As the argument goes, unable to recoup those investments anytime soon with current and newly projected sales volumes, Ford has to scale back its EV forecasts and optimism. Consumer demand, as Farley said, is just not close to what Ford prepared for.

A secondary argument is that Ford hasn’t seen more EV sales growth (say, 200%) because it has not tried hard enough to highlight the advantages of its electric vehicles over its non-electric vehicles. Going even further, the argument from some is that Ford isn’t promoting its EVs persuasively enough because it really wants to sell more ICE vehicles than electric vehicles. So, putting in a halfhearted attempt, it can claim again that most consumers just don’t want EVs.

I want to discuss these matters from two angles, or two different types of concerns: 1) the consumer inertia angle, and 2) the automaker inertia angle.

However, first, some industry trends are worth noting. The world is electrifying — much quicker than in the US. Even now in some developing countries, sales of fossil-powered vehicles are shifting to sales of electricity-powered vehicles faster than they are here. As EV market share rises in China, Europe, and other places, automakers that are getting more and more of those sales are benefiting from growing economies of scale and thus lower and lower costs. Of course, as EV producers increasingly benefit from those things, EVs get more competitive and gas/diesel-powered cars get less competitive. The longer US automakers take to get to those breakthrough economies of scale and offer breakthrough electric cars, trucks, and SUVs, the further they will fall behind the global competition. In short, if US automakers get less and less competitive in the emerging EV market of the future, they risk shrinking or even going bankrupt.

Here’s a key comment from one of our readers, Mark H, summarizing this in his own way:

Here is the thing. In China and Europe, the customer jumps at the EV when the price is made equal through subsidy or otherwise. China’s EV sales were 47% last month. Norway through subsidy has been over 90% and they are an oil rich nation.

The difference in the US? I have to agree with you that there is a demand issue in that a 100 million consumers are saying no. Not all consumers mind you, but a large portion that typically buy Ford or GM. There is still plenty of growth year over year in the EV sector, but there is plenty EVangelizing against it here more than anywhere else.

Here is my sincere question. When America falls behind the world on this technology due to a third of the country locking arms to say no, will this third own any responsibly in the demise of our auto industry? Because the better mouse always wins. Last time it was Detroit’s fault. This time it is a particular set of consumers. Just don’t cry foul when BYD, Nio, and JAC replace them.

Okay, now let’s jump to into those core concerns noted above (consumer inertia and automaker inertia).

One concern is that no matter what Ford itself does, consumers will be slow to adopt electric vehicles. If that’s the case for cultural inertia reasons or perhaps even some practical reasons, it doesn’t matter what Ford does, it can’t accelerate its transition. This could also be related to what dealerships do, and Ford can’t control dealerships. If dealerships are not keen to sell EVs (most notably because they require less maintenance and service, leading to less revenue and profits, or perhaps even because of cultural inertia at the dealerships), then it doesn’t matter what Ford’s (or GM’s, or Toyota’s) sales target is; it can’t make people buy EVs. The problem is: if automakers elsewhere are scaling up EV production and sales, and driving down costs per car, then the further along we go, the less competitive Ford (or GM or Toyota) gets, and the higher the chance it eventually goes bankrupt or needs a bailout — because once a lot more consumers are ready for EVs, Ford won’t have the most competitive ones.

Now let’s say it’s not actually because of consumer inertia or dealerships, and that the real problem is that Ford/GM/Toyota/Honda/etc. is not trying hard enough to sell EVs. In particular, say that the legacy automaker is not effectively highlighting how much nicer EVs are to drive, how much more convenient they are to charge at home versus going to gas stations, and how much cheaper they are to charge at home versus gassing up a traditional car, truck, or SUV. Perhaps the automaker is not marketing this well because it doesn’t really want a fast transition to EVs, or perhaps it’s just inept. Again, though, that’s going to lead to lower sales, a slower ramp-up to high production volumes, and delayed benefits from mass-market economies of scale. So, we end up at the same point. These legacy automakers would then trail dozens of automakers in China and Europe that are bringing EV costs down faster and expanding the competitive edge their EVs have over the formers’ EVs. Then, the further along the EV adoption curve we get, the less competitive these automakers become and the more likely they are to run into financial problems and bankruptcy or bailouts.

If we just focus on that first group of concerns, it’s hard to recommend to legacy automakers in the US how they should be behaving. However, the one thing they could do is try to market EVs better. And in the second case, it’s mostly about putting in more effort to actually market EVs well.

In both cases, though, the solution is not to just lower EV sales targets, sit back, and accept slower EV sales growth than the market as a whole is seeing. The solution is not to say, “Consumers just don’t want EVs.” Automakers like Ford need to find a way to sell more EVs and maintain aggressive EV sales targets. Otherwise, they are going to get their lunch eaten globally, and eventually they’re probably also going to get their lunch eaten in the USA. We shall see.