Automakers Struggle to Find Customers as Electric Vehicle Supply Outpaces Demand
After years of struggling to source enough batteries and parts, automakers are now faced with a new problem: a surplus of electric vehicles waiting for buyers. Despite a 48% increase in sales of electric vehicles in the second quarter compared to last year, the number of vehicles being produced far exceeds the rate of sales. As a result, over 90,000 battery-powered cars and trucks are currently sitting unsold on dealer lots, marking a fourfold increase from a year ago.
The inventory buildup is a cause for concern for automakers, with enough vehicles to last 103 days at the current rate of sales, compared to the industry average of 50 days. Jonathan Gregory, a senior manager at market research firm Cox Automotive, notes that automakers have “built E.V. inventory, but now they wait for buyers to come.”
In response to this challenging landscape, automakers are resorting to price cuts and incentives to entice customers. Ford Motor recently reduced prices on its F-150 Lightning electric pickup truck by up to $10,000 and is offering discounted interest rates on certain loans for Lightning purchases. Tesla, the dominant seller of electric cars, has also undergone several rounds of price cuts, prompting Ford to lower prices on its Mustang Mach-E electric sport utility vehicle.
While consumer interest in electric vehicles is high, price remains a significant barrier for many potential buyers. Consumers are waiting for electric cars to be priced on par with comparable gasoline models, a trend that could be accelerated by recent price reductions. Additionally, concerns about limited driving range and the availability of charging stations deter some from making the switch to electric vehicles.
High-priced luxury electric models are struggling the most to find buyers. Luxury automakers such as Tesla, Mercedes-Benz, BMW, Porsche, and Lucid Motors have flooded the market with options that range from $75,000 to $160,000. Rick Ricart, president of Ricart Automotive, points out that the initial hype around electric vehicles has waned as consumers realized the premium price tag associated with these models.
Another factor impacting electric vehicle sales is the expiration of the federal tax credit under President Biden’s climate change law. Only electric vehicles assembled in North America or with a certain percentage of battery materials from the region qualify for the $7,500 tax credit. Sedans must sell for $55,000 or less, while SUVs, pickup trucks, and vans must sell for $80,000 or less to be eligible.
Ford’s Lightning trucks currently meet the requirements for the tax credit, and the company aims to sell more of them in the coming months. Notably, Tesla has started producing its long-awaited Cybertruck pickup, and General Motors is expected to begin delivering an electric version of the Chevrolet Silverado truck soon.
Ford’s decision to lower prices on its F-150 Lightning caused concern among investors, resulting in a 6% drop in the company’s stock price. However, customers can now purchase the Pro model for $49,995, a reduction of $9,979, and many Lightning models will cost less than $80,000, making them eligible for the federal tax credit.
Automakers are hopeful that by reducing prices and improving accessibility, they can stimulate demand and overcome the current supply-demand imbalance in the electric vehicle market.