Electric Vehicle Market Slows Down, Prompts Major Automakers To Shift Strategy

The once-booming electric vehicle (EV) market is now showing signs of a slowdown, prompting a shift in strategy among major automakers. The industry is now focusing on consumer choice, offering a mix of gas-powered, hybrid, and fully electric vehicles.

What Happened: The EV market, which was once the center of attention, is now experiencing a significant slowdown. Major automakers such as Ford Motor F, General Motors GM, Mercedes-Benz Group MBGAF, Volkswagen VWAGY, Jaguar Land Rover, and Aston Martin are either scaling back or delaying their EV plans, reported CNBC.

Even Tesla Inc TSLA, the leading EV manufacturer in the U.S., is preparing for a potentially slower growth rate. This shift in strategy is a response to the market’s slower-than-expected adoption of EVs, despite the record 1.2 million EV sales in the U.S. last year.

"What we saw in '21 and '22 was a temporary market spike where the demand for EVs really took off," said Marin Gjaja, chief operating officer for Ford's EV unit.

"It's still growing but not nearly at the rate we thought it might have in '21, '22." He added,

"Some of that was to protect ourselves against going too far in one direction, because the market right now, as we've seen, is very uncertain."

VW of America CEO Pablo Di Si stated that he believes a balanced approach is the most effective. He mentioned that discussions are underway to introduce hybrid vehicles to the U.S. market. While the automaker currently offers hybrid vehicles in Europe, none are available in the United States.

"The market was never going to make a smooth transition to EVs, and we expected a slowdown in this shift as early adopters were satisfied," said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. "Moving on to less tech-savvy buyers will slow the EV market share growth over the next few years."

The industry is now focusing on offering a variety of vehicles, including gas-powered, hybrid, and fully electric models, to cater to a broader range of consumer preferences. This approach is seen as a more realistic path to an all-electric future, albeit at a slower pace than initially anticipated.

"Toyota is almost completely absent from the [battery electric vehicle] market yet will gain more U.S. market share than any other car company this year. Let that sink in," Morgan Stanley analyst Adam Jonas wrote, according to the report.  

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Why It Matters: The EV market’s slowdown is not only affecting automakers’ strategies but also their financial performance. For instance, Fisker Inc FSR shares plunged after the company issued a going-concern warning and announced a 15% workforce reduction amid worse-than-expected losses and over $1 billion in debt.

On the other hand, despite the increasing negativity surrounding Tesla, Wedbush’s Dan Ives believes “now is not the time to throw in the towel” on the EV maker. He added that Tesla’s AI technology, aided by Full Self-Driving (FSD), could drive the EV maker’s market capitalization to over $1 trillion.

Meanwhile, the EV market in Asia is thriving, with China leading in global EV adoption and charging infrastructure. The country boasts an impressive 2.5 million public EV chargers, roughly one for every seven Chinese EVs.

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