Why major car manufacturers are slowing production of electric vehicles

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• Geoff Bennett:

  Last year was a record year for electric vehicles in the U.S., more than 1.2 million sold. That was 50 percent higher than in 2022.

  And yet there are signs that demand for E.V.s appears to be slowing and may not be quite as intense as either automakers or the Biden administration has expected.

  To help us understand where things are, we're joined now by Jessica Caldwell of Edmunds.com.

  So, it feels, Jessica, like the general perception of electric vehicles, in some ways fueled by media reports, is that the demand is slowing, the market is slowing heading into this new year. Is that narrative true?

• Jessica Caldwell, Automotive Journalist, Edmunds:

  It is true.

  The thing is that E.V.s are still growing in sales. You look at E.V. sales, they are on the upward trajectory. It's just maybe not as steep as we thought two years ago, because I think it was easy to get swept up in a new technology. It was very exciting. Sales were accelerating.

  And it just doesn't work that way in the long run with the new technology. The more vehicles you sell, the harder people will become to convert. You start losing some of those early adopters that wanted to get in early and more of the mass market starts to buy the vehicle. And those people are a bit pickier with their money and ask a lot more questions and have a lot more concerns.

  So, it's not a surprise that it's slowing. I just think it's good to remember that they're still growing, just maybe not as fast as we thought.

• Geoff Bennett:

  Well, during an earnings call today, GM CEO Mary Barra said the pace of sales has slowed. And that follows recent announcements, as you well know, by GM and Ford, who said they're going to cut back some of the production of new electric vehicles and delay some investments.

  Why? What accounts for that? Help us understand the market dynamics.

• Jessica Caldwell:

  Right.

  I mean, I think when you look at E.V.s, they are more expensive. We're in an era right now where prices are high for these vehicles. Interest rates are high. When we look back at the past decade, interest rates have been low, and that fueled more expensive vehicle purchases. And that's not the case now.

  We're looking at interest rates at 7 percent, not 4 percent or 5 percent. And that definitely adds cost to it. And I think we're having people that are just getting a bit skeptical about infrastructure, about some of the charging networks. And as you look around, you may not think, oh, it's as easy to own an E.V. as maybe you had thought.

  So, I think some of the more practical concerns are what's slowing these vehicles down in terms of sales. But we do know that that is the goal, the long-term goal. But we're bound to hit road bumps. And I think that's what we're seeing right now.

• Geoff Bennett:

  There was this other indicator last month where Hertz announced they were going to sell about a third of their global electric vehicle fleet and use some of the proceeds to buy gas-powered cars.

  What's the deal with that? Is that about demand or are there other factors like upkeep costs?

• Jessica Caldwell:

  Yes, I mean, I think that was an interesting deal, because I think, when you think about short-term ownership or short-term rental for an E.V., it's a bit challenging, because you're asking people to have a completely different relationship with their vehicles.

  So, if you're not going to have this car forever or it is brand-new to you, you may not know where to charge it. You may not be set up to do charging all the time where you live, because it's like, if this is a temporary thing, you're not going to necessarily invest the money.

  So I think that could be some of the issues too. And I know they complained a lot about repair causes, particularly to batteries. And I think a part of it again is going to a new technology. Not everyone is feeling comfortable perhaps fixing batteries. And maybe we're hearing that the vehicles are just being scrapped instead, which feels very wasteful.

  But it's like you're also hearing that batteries are causing fires. And I could see if you are a repair shop, maybe you just don't want to take that risk.

• Geoff Bennett:

  In the meantime, the Biden administration announced they're going to invest 325 million more dollars in programs that would advance E.V. technology. They'd repair some chargers and they would cut battery costs overall.

  How far will that go toward making E.V.s more affordable and more accessible?

• Jessica Caldwell:

  There needs to be a lot of investment in this. And it's a lot of investment in different areas. It's not even about batteries becoming more efficient and spending all of that money to get that going.

  It is also about infrastructure. It is about better charging. It is about fixing current infrastructure. So, as we move towards this, it's definitely not simple, easy, straightforward. There needs to be automakers, the government, everyone working in concert to get this whole thing moving along, because it's not just one party.

  And asking people to commit to buying a new vehicle that is an E.V. when not everything is necessarily functioning at 100 percent is going to be a challenge. And that's always what we're hearing from consumers. They're worried about range. They're worried about their battery. They're worried about infrastructure and charging. And that freedom just to go wherever you want to go may be limited.

  And I think that's what scares people, even if it's not something that they even do once a year. It's the idea. And I think that's very American of us. That idea that you just can go somewhere is preventing you from buying this vehicle. And it happens all the time.

• Geoff Bennett:

  Jessica Caldwell is head of insights for Edmunds.com. Thanks so much for your time.

• Jessica Caldwell:

  Thank you.

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