By James A. Ziegler, CSP, HSG, Ziegler SuperSystems, Inc.
EV Sales Crashing Hard - The Big Lie
Who would have thought? Well, me for one, and perhaps another 10,000 industry experts. As an industry insider, I regularly speak to more than 100 dealer principals monthly through various channels, and the message I hear from coast to coast is clear. EV sales have stalled hard. And many dealers are struggling with unsold EV inventory.
EV Challenges & Dealer Frustration
The story is similar even in states where EVs are expected to perform better. Of course, my California and West Coast dealers are doing better, as are some of the dealerships in New York and some isolated pockets, but the story is the same in most parts of the country. I've talked to many dealers with Ford Lightnings that they can't sell. And when you speak to a Mercedes dealer, they're pulling out their hair trying to sell those pricey puppies. I think there's probably a high percentage of consumers who bought an EV in the last few years that already want to trade them out for ICE vehicles. However, I don't have stats; it's just a feeling from my conversations with dealers, GMs, etc. The problem might be that the resale and trade-in value may extend the upside-down period because, remember, we've been selling them with $10,000 - $30,000 above MSRP over the last few years.
The Impact of Inventory Shortages
The good news for dealerships is that manufacturers didn't make millions of new cars that would have been sold during this time because of the pandemic and inventory shortages. That means millions of fresh late-model trade-ins will never appear because they were never made. In other words, used car values will stay high because they never made those cars to begin with. Late-model trade-ins are scarce.
The pent-up demand everyone keeps talking about is a real thing. S&P Global Mobility just announced the average age of vehicles has surpassed 12.5 years old, setting another record for the sixth straight year in a row. They're not buying for several reasons, affordability being at the top of the list. My thinking is twofold; first, you'd better beef up your service department, and second, they're holding out for gasoline-powered cars and trucks. For most people, EVs aren't affordable, and they don't trust EVs.
The 'Big Lie' and Dealer Sentiments
Despite the push for EVs as the future, some dealers are skeptical. According to a Cox Automotive report, less than a third of surveyed dealers believe EVs will largely replace gasoline vehicles over time. This "Big Lie," as I call it, is the belief that EVs will dominate the market, but dealer sentiment suggests otherwise.
Remember this: there are a lot of people invested in the outcome. They've pushed all their chips to the center of the table, and now they have to go with the hand they bet on. Many people have gone 'All in' on selling the 'Big Lie.'
No matter what anyone tells you about BEV Sales being the future, what I'm saying is probably not in your lifetime.
According to the Cox report, EV production is outpacing sales. I think their number is optimistically high, but the report said 7% of car sales are EVs. The most telling number was dealers are sitting on a 92-day supply of new and used EVs on their lots or transit. New EVs accounted for a 52-day supply. That balances my intuition, saying people aren't rushing to buy them new or used.
The Big Lie Echoes
Volkswagen announced they're cutting EV car production at one of their largest manufacturing facilities because "strong customer reluctance has led to far lower sales than expected." So, as a result, they shuttered the plant for six weeks in Emden, Germany, laying off 300 of the 1,500 employed at the EV facility.
"Strong customer reluctance" says it all. Customers have voted with their checkbooks, saying a loud 'No' to every manufacturer, brand name, and model of BEV cars and trucks. Even Tesla has had to cut prices and back off considerably. The proverbial bloom is off of the rose. Customer reluctance is too kind; they should have said "Customer Rejection."
I recently came across an interview with Bill Ford from three years ago. In the interview, he enthusiastically said they had closed the order bank on Ford Lightning EV Trucks because of overwhelming demand. I suspect that's not the case right now. I've spoken to dealers with Lightning trucks stacking up on their lots and would trade them to other dealers for gasoline-powered F150s if they could.
This past June, Ford announced they were laying off at least 1,000 contract and salaried workers, including engineers. Jim Farley said there were not enough people in its workforce with the skills to shift to electric vehicles and digital services. Also, remember, they cut 3,000 jobs just last August, a year ago. The article headlines about the impending Ford layoffs jump out boldly. For example, one read: "Ford is set to lay off at least 1,000 workers - mostly engineers - in its second major round of job cuts as costs pile up as a result of investing in electric cars."
General Motors and Stellantis are offering employee buyouts, in other words: a Gentle Kiss Good-Bye.
All of the manufacturers, import and domestic, participate to some degree in 'The Big Lie.' Maybe Toyota and Hyundai are a little less so, but still, they are all participating to a degree. Of course, that's my opinion; others may see it differently.
Here's why I think the transition to EVs is going to crash hard and why I think they already know it:
The Real Costs of EVs
First of all, estimates are all over the place, but sources say that industry-wide, manufacturers are losing an average of $8,000 to $12,000 per EV sold. The numbers are all over the place. However, one number can be nailed down, and if the math is correct, Ford is losing $66,000 per e-vehicle sold. I was reading a breakdown of those numbers in investment sites 'The Street' and 'Motley Fool,' and with Ford losing $3 billion on E-Sales, it's a fairly easy computation for them. Mostly the Lightning Truck and the Mach-E Mustang.
Side note opinion: Is that Mach-E Mustang not the ugliest thing you've ever seen? And they had the nerve to call it a Mustang. Ewwww!
It appears Ford has thrown the most money at it, taking the biggest losses, and more heavily invested in preserving The Big Lie. Anyway, it doesn't matter how much money they're losing. Whatever the real numbers are, it's substantial. Ford isn't even projecting their EV program to be profitable before 2026.
But there are deeper reasons why EVs will crash hard. But let me first say that there will always be EV sales. Somebody will buy them, and it may level out to 10% in your lifetime. Some people will buy EVs, and many who bought them have already bailed out of them.
Challenges & Concerns
Researchers agree that the public is concerned about the range on a single charge and affordability. And then there's also the availability of charging stations, retrofitting their homes to charge their EVs, and the cost of repairs.
They are all valid concerns, and The Big Lie can't sweep those things under the rug. The public has a right to be scared to buy an EV unless all of these problems are solved.
There are a few other concerns that haven't quite made it into the mainstream news as of yet.
First, let's talk insurability of a new EV car or truck. To date, almost every Tesla involved in an accident is declared a 'total wreck' by the insurance companies. A Tesla is so complex and loaded with so much technology with many sensors, cameras, computers, and custom body parts, so even with light damage, the insurance companies find it more reasonable to write it off as a total wreck than to repair it. And the Tesla battery pack is totally not repairable.
Certain states are already adjusting Tesla insurance rates, and I project that will eventually apply to all EVs with advanced technologies.
Manufacturers have increasingly incorporated more and more technology into cars and trucks, not just EVs, like self-driving features, accident avoidance, and voice-activated accessories.
You might be driving down the road in your new self-driving Denali while clapping to the beat of "We Will Rock You" by Queen, but if you have a wreck, that'll be expensive if all that tech is damaged. This advanced technology will raise insurance rates on everything, but more so on EVs, especially since replacing a damaged battery pack is $10,000 to $28,000 or more, depending on what model we're talking about.
Battery Life & Range Issues
And while we're talking about the battery packs, those will need to be replaced every 10 years or so. So that's something that will create an issue with consumers shortly. Remember, those little buggers are delicate, so damaging one, even running over a curb, could be a $20,000 accident. But what about the life of the battery? Every time you charge a battery, the battery holds less charge. Of course, that reduces your range (The Big Lie again). We know that. Now, let's assume you have an EV on your used car lot that is five years old with 25,000 miles on it. Okay, that's low mileage, but it could be that your battery has only its half-life left, and the range is half what was originally promised. Uh-oh, that consumer will have to replace that battery before the end of the loan, and the range will be to the grocery store and back home. I'm just theorizing based on what's commonly published, but am I wrong?
But just how far will your new EV go on a single charge? Unsurprisingly, Car and Driver reports that EVs they've tested all fell short of manufacturers' claims. (The Big Lie again) Not only that but also the disparity between the driving range and electric consumption was wider on Battery Electric Vehicles than the same measurement on gas consumption and range on Internal Combustion Engine Vehicles that manufacturers claimed. Let me interpret that: the Lie was bigger on BEV than ICE vehicles' range and mileage. So, they don't get the range claimed nor the economy of how much electricity they use.
BUT WAIT! THERE'S MORE … Okay So, let's assume that they don't get the range they claim, none of them. If it says you'll get 500 miles on a single charge, you might only get that if you don't turn on the air conditioner or try to haul a payload in your EV truck. If you use your accessories, does the range diminish if you haul a load? Does your range significantly lessen? AND battery range decreases with age as the batteries don't hold the full change as they age.
Infrastructure and Environmental Impact
Not to beat the environmental issues any harder, but the infrastructure of the entire USA is not adequate. I laugh when I read that California has legislated the transition to EVs. Last year, there was a New York Times article headline that read: "Amid heat wave, California asks electric vehicle owners to limit charging." That's right, they couldn't handle the surge and requested EV owners to either reduce or not charge their cars and turn up the temperature on their air conditioners. Texas recently had a similar situation with brownouts and requests to conserve. According to educated estimates, it would be 30 years before this country could have an infrastructure capable of handling the massive transition to EVs they are projecting.
So, with every dealer, every car make... it's the same old story. The Big Lie continues as shouted by the 'Special Interests' insiders and the uninformed. And it's not just the price; it's the whole EV story. Of course, the environmental mob continues to repeat the Lie without regard to the reality or the true environmental impact of BEV vs ICE.
So, although most of this is my opinion, I think EVs will crash hard, and direct sales by the manufacturers will fail. There will be newer and better technologies we haven't even dreamed of yet. In the meantime, the manufacturers' move to go direct has failed. EVs will level out at less than 10% of the market, and ICE cars and trucks will be with us for a long time after the manufacturers abandon these silly ideas. And then, the new executives will apologize to the dealers for what the others did to them, and they'll all roast smores over the campfire, laugh, and sing together.
Again, this is the way I see it, of course, I might be wrong.
James A. Ziegler, CSP, HSG, of Ziegler SuperSystems, Inc., for 45
years, has been a recognized industry leader, writer, magazine columnist,
professional speaker, and super performer following a record-setting sales
career as F&I manager/director, and GSM with some of the top automobile
dealerships in the country. Jim has worked with more than 15,000 dealerships
nationwide, and over 125,000 dealers, managers, and factory executives have
attended his automobile dealer management trainings.