Automakers Pledge to Go All-In on EVs, But the Numbers Aren't Adding Up
While EVs like the Kia EV6 took a well-earned victory lap in 2022, ICE cars sputtered to the finish of a snail-paced sales year. But all the electric champagne-spraying didn’t clarify the existential question facing every legacy automaker: To be all EV, or not to be?
Companies from GM, Ford, and Volkswagen to Mercedes and Volvo swear they’re going all-EV by roughly 2030 to 2035, determined to get ahead before they get left behind. But even as an EV optimist, I can't see all of these manufacturers keeping their promises. There will still be a market for gas-burning cars those short years away, and I don't think all these executives are ready to leave that money on the table.
Companies from GM, Ford, and Volkswagen to Mercedes and Volvo swear they’re going all-EV by roughly 2030 to 2035, determined to get ahead before they get left behind. But even as an EV optimist, I can't see all of these manufacturers keeping their promises. New evidence suggests will be a strong market for gas-burning cars those few short years away, and I don't think everyone is ready to leave that money on the table.
Companies from GM, Ford, and Volkswagen to Mercedes and Volvo swear they’re going all-EV by roughly 2030 to 2035, determined to get ahead before they get left behind. But even as an EV optimist, I don't see how every automaker making this kind of promise can keep it. There are real perils for any executive board pledging to dump all of their gas-burning cars, and on a deadline earlier than they might have you think.
Seeing EVs flexing real market muscle, even as ICE sales go limp, seems to underline the wisdom of a not-a-moment-too-soon transition. Another perspective argues for a more-cautious approach akin to BMW’s, which envisions a 50/50 global split between EV and ICE production in 2030. Even that glass-half-full ambition has left BMW fielding criticism for not moving quickly enough — if not as much criticism as Toyota. Who’s right, and who’s wrong? The answer will go a long way to determine winners and losers when 2030 rolls around.
On the surface, EVs hold all the momentum, and nearly all the investment cards. Electric-car sales soared 65 percent last year to nearly 810,000 units by Kelley Blue Book estimates, even as overall industry sales dipped 8 percent. The battery brigade has now seized 5.8 percent of the new-car market, up from 3.2 percent in 2021. In 2011, Americans bought barely 17,000 electric cars. They’ll almost surely buy more than 1 million this year, not even counting a potential boost from Tesla’s Cybertruck, which Elon Musk swears will start production in late 2023. In America alone, Atlas Public Policy has tallied $128 billion in announced investments in EV and battery factories and recycling. If you can’t see some writing on the wall by now, it’s time for some remedial automotive ed. For the car kids doodling in the back of the class, perhaps an imaginative rendering of an all-electric Corvette, presaged by the 655-horsepower Corvette E-Ray hybrid.
Even as Muskian misadventure helped Tesla burn up $700 billion in shareholder value, the company’s U.S. sales soared 48 percent to about 522,000 units, based on KBB estimates. (Tesla doesn’t break out sales in individual markets.) That compared with 351,000 sales for Mercedes, making Tesla the first American brand to win the luxury sales race in nearly 25 years. Tesla also continued to lose market share, the inevitable outcome of a maturing market. The Model Y led the way with about 250,000 sales, topping the 187,000 sales of all Audi models combined. But emerging rivals kept chipping into Tesla’s share, including the Ford Mustang Mach-E with 39,458 sales, the Chevy Bolt and Bolt EUV with a combined 38,120, the VW ID.4 with 20,511; and the Rivian R1T with 17,426. Ford moved 15,617 F-150 Lightnings, and is adding a third shift at its Dearborn Truck Plant to boost capacity to 150,000 annual units by this fall.
Impressive stuff. But in the industry as in life, two things can be true simultaneously. Yes, EVs are poised to eventually dominate the automotive landscape. Bloomberg NEF expects as many as 250 million electric cars to girdle the globe by 2031. Yet the suddenly breakneck pace of EV adoption has made proponents assume the roller-coaster climb must continue apace, with no temporary plateaus, confounding dips, or hitting a wall entirely. That’s assuming way too much, in the face of challenges from unpredictable demand and EV un-affordability to scarce charging and potential battery shortages.
In the interest of disclosure, I’ve been consistently bullish on EVs, but bearish (read: realistic) about adoption curves. In my view, too many EV advocates refuse to acknowledge the elephants in the showroom. They underestimate the scale of the challenge in weaning a global fleet off fossil fuels, a transition that will be measured in decades, not years. They wave away the fact that a significant percentage of Americans and global citizens remain ambivalent or uninformed about EVs, or don’t see enough upside to switching. Some people view EVs as a threat, or even an environmental bait-and-switch. Other car shoppers would buy an EV tomorrow, but feel shut out by a lack of charging options; or the sticker shock of EVs that transacted for $65,000 on average in November, still about $16,000 more than the typical new car overall. Some relief may be on the way, between Tesla’s headline-making, rival-baiting price cuts and new models that should hover around $30,000 well-equipped after federal tax breaks, including the Chevrolet Equinox and Blazer EVs.
Some analysts with seasoned perspectives are actually downgrading forecasts of EV adoption. Adam Jonas at Morgan Stanley cut his forecast of U.S. EV penetration from 32 percent to 26 percent by 2030, and from 13 percent to 11 percent in 2025. Jonas still expects global penetration to reach a healthy 11.8 percent next year, with electric popularity in China and Europe continuing to outpace the U.S. An annual KPMG survey of more than 900 global auto executives showed even these EV optimists coming back to reality due to rampant economic concerns: They downgraded their forecast of U.S. EV sales in 2030 to 35 percent of the market, a steep drop from 60 percent last year.
Whether the bulls or bears are correct on how many Americans choose an EV by 2030, the upshot is the same. Hell, let’s say all the stars align for EVs, and they soar to 40 percent of the market in 2030. Even that would leave six of every 10 shoppers parking a shiny new ICE model in their driveway. That math can’t be encouraging for automakers pledging to ditch ICE like a bad tobacco habit — and nearly cold turkey. For automakers, that’s a whole lot of business to walk away from. The year 2030 may seem hazy and distant, but it’s actually one traditional product cycle away, right around the corner in terms of product development and factory planning. Don’t forget amortizing existing ICE car or engine factories. For Detroit and European makes especially, there are union jobs and leadership to consider, some strongly supported by governments that must balance environmental goals with employment demands. (Obviously, EV investment will also be a wellspring of good-paying jobs).
Based on all the above, I’m convinced some automakers pledging allegiance to the plug will be forced to backtrack, and cover their tracks with spin and selective memories. By the time 2030 or 2035 comes along, and automaking CEOs have come and gone, their successors can say, “My predecessor was an idiot. Now, here’s my brilliant strategy.”
In some ways, it’s hard to blame automakers for taking lessons from Tesla and start-ups, seeing companies rewarded as much for promises as for actual accomplishments. Defenders of EV pledges may argue these are ambitious soft targets, designed to spur action and underscore the urgency of addressing climate change. The counterargument is that unrealistic targets only raise false hopes and engender the kind of skepticism that now surrounds self-driving cars. Mercedes’ has been smart enough to insert fine print, promising to go all-EV by 2030 “where market conditions allow,” a loophole big enough for an army of diesel G-Wagens to plow through.
For a shot of homegrown reality, consider Cadillac, which aims for an all-electric lineup in North America by 2030. This is the Cadillac that struggled to deliver 122 Lyriqs to waiting customers in the waning months of 2023, due to production snafus. Starting this minute, Cadillac has barely one product cycle to convince 100 percent of North American prospects or repeat buyers to go electric — or steal enough customers from other brands to make up the difference. Or, Cadillac must be willing to live with even fewer sales than it manages today (a scary thought); while staying in the black via higher profit margins on EVs as today’s Escalades, a tall order.
A word about all that: Not so long ago, a horror show like 2022, strangled by supply chains to the tune of roughly 13.8 million new-car sales, might have bankrupted one or another Detroit automaker. Instead, with the average new car transacting for a record $49,507 in December, according to KBB, many automakers are marinating in record profits. The domestic industry alone, including suppliers, may easily top $40 billion in full-year earnings. My favorite year-end stat illustrates how any of this is possible: The average monthly new-car payment hit a record $777 in December, up more than 30 percent since March 2020. I hope automakers sent a nice holiday card to each of its 13.8 million buyers. Point being, the industry has begun to realize a long-held dream of making more money while building fewer cars; or for Detroit, loaded $70,000 pickups. But excepting Tesla, that model doesn’t yet address how that legacy model translates to big profits from EVs, with their onerous fixed costs for batteries.
So, back to 2030: Are legacy brands really willing to slice off profitable hunks of ICE business, to be devoured by rivals willing to let gasoline flow a while longer? Volvo is among brands that say “yes.” In recent months, I visited Stockholm for the debut of the Volvo EX90, a linchpin of Volvo’s bid to go purely electric by 2030. A trip to Munich followed, for the the deepest of dives into BMW’s electric plans.
BMW has committed to a “Net Zero” plan to become entirely carbon-neutral by 2050. Yet BMW executives flatly reject an all-EV strategy for now.
“There will be flexibility within the entire BMW range,” said Martin Schuster, BMW Group vice-president for high-voltage batteries.
The first of BMW’s “Neue Klasse” EVs arrive in 2025, with Tesla-style large-format batteries and a half-dozen global battery factories to supply them. I watched BMW transforming its century-old Munich plant into an “iFactory” that can build cars with every powertrain — ICE, PHEV, EV, hydrogen fuel cell — on a single production line. Munich plans to crank out 100,000 BMW i4s here this year, half the plant’s 200,000-car annual capacity. That aligns neatly with BMW’s vision of where it’s customers will be in 2030, when it forecasts reaching 50-percent EV production.
If buyers clamor for more or fewer EVs, BMW can adjust on-the-fly. New iFactories, including BMW’s largest global operation in South Carolina, aim to take that flexibility to a granular level: Buyers will be able to change orders as little as six days before their car’s production date, with no delivery delay.
Defending its continued reliance on fossil fuels, the company argues it must serve diverse customers in roughly 120 countries: From the EU and China whose governments are helping drive EV adoption, to markets whose leaders, customers or infrastructures may demand ICE-based solutions for years or decades. Strictly within America, our geographic, political and social diversity — or outright divisions — might argue for a similar approach. More than 40 percent of EVs are still sold in California. As of fall 2022, I counted 22 states with fewer than 5,000 registered EVs, from Maine to New Mexico, plus a whole lot of southern and prairie states in between.
BMW, which made its bones on performance ICE models and engines, may be especially ill-suited to a premature switch.
In a corner of the storied Munich factory, I watch techs hand-assemble BMW M3 engines, and can’t help thinking the clock is ticking on those specialized jobs, along with many others.
As 2,000 robots hoist, weld and glue bodies together, a tour guide — himself retrained from another position — affirms BMW is looking to retrain as many ICE workers as possible for its growing electric business.
During my Volvo visit, I watch CEO Jim Rowan introduce the impressive EX90 SUV on a Stockholm stage. The Scottish-born CEO makes it clear where his company stands.
“By the end of this decade, we will be an electric car company,” Rowan said. “We are laser focused and razor sharp on meeting those ambitions.”
Rowan, executives and engineers dismissed any possibility of backsliding. In their view, EV performance, operating costs and environmental advantages are already exposing ICE as inferior and fated for obsolescence.
“At the end of the day, technology usually wins,” Rowan said.
Naturally, no automaker executive likes to dwell on the possibility of losing or alienating customers. But privately, more than one Volvo executive said the company is willing to accept some short-term drop in market share to seize the competitive high ground and position itself for long-term success. Volvo actually sees more peril in a wait-and-see approach, one executive told me.
“If you wait until it’s safe and obvious, it’s already too late.”
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