Auto Industry Boosts EV Production, But Lacks Eager Buyers

The auto industry is producing more electric vehicles (EVs) to challenge Tesla, but there's a significant problem: not enough buyers.

The growing mismatch between EV supply and demand indicates that even though consumers are showing more interest in EVs, they're still hesitant about purchasing one due to price or charging concerns.

Automakers are making big bets on electrification, but they're waiting for buyers to come. According to Jonathan Gregory, senior manager of economic and industry insights at Cox Automotive, it's a "Field of Dreams" moment for automakers who have built the cars.

More than 90 new EV models are expected to hit the U.S. market through 2026, according to AutoForecast Solutions. Many will struggle to reach profitable sales volumes, analysts said.

(Which is precisely why I believe all EV startups are doomed. Only deep pocket legacy makers will be able to successfully pull off this transition to electrification. States that granted incentive packages to EV startups will have egg on their faces.)

Cox Automotive experts highlighted the swelling EV inventories during a recent midyear industry review for journalists and industry stakeholders.

EV sales account for about 6.5 percent of the U.S. auto market so far this year and are expected to surpass 1 million units for the first time in 2023, according to Cox forecasts

A Cox survey found that 51 percent of consumers are now considering either a new or used EV, up from 38 percent in 2021.

Tesla’s rapid expansion, plus new EVs from other brands, are fueling the interest — 33 new models are arriving this year, and more than 50 new or updated models are coming in 2024, according to Cox estimates.

However, sales aren't keeping up with that increased output. The nationwide supply of EVs in stock has swelled nearly 350% this year, to more than 92,000 units. That's a 92-day supply — roughly three months' worth of EVs and nearly twice the industry average.

For comparison, dealers have a relatively low 54 days' worth of gasoline-powered vehicles in inventory as they rebound from pandemic-related supply chain interruptions. In normal times, there's usually a 70-day supply.

Notably, Cox's inventory data doesn't include Tesla, which sells direct to consumers.

Some brands are seeing higher EV inventories than others. Genesis sold only 18 of its nearly $82,000 Electrified G80 sedans in the 30 days leading up to June 29.

According to Cox research, some brands have higher EV inventories than others. For example, Genesis, the Korean luxury brand, sold only 18 of its nearly $82,000 Electrified G80 sedans in the 30 days leading up to June 29 and had 210 in stock nationwide — a 350-day supply.

Other luxury models like Audi's Q4 e-tron and Q8 e-tron and the GMC Hummer EV SUV also have bloated inventories well above 100 days. Imported models like the Kia EV6, Hyundai Ioniq 5 and Nissan Ariya are also stacking up — likely because they're not eligible for tax credits either.

Tesla's price-cutting strategy could be taking a toll too: The once-hot Ford Mustang Mach-E now has a 117-day supply. Ford says that's the result of ramped-up production in anticipation of stronger third-quarter sales.

Industry experts and analysts emphasize that the EV market is still in its early stages. Many consumers are actively assessing whether EVs align with their requirements, while major automakers are still in the process of scaling up production.

"There's a natural speed of market growth here that many are fighting against, and there's a lot of confusion in the market with too many brands," Vitaly Golomb, an investment banker who focuses on electric vehicles, told Reuters. "The strong will survive here and the rest will struggle."

Hybrid vehicles have much lower inventory levels, supporting Toyota's argument that consumers want a stepping stone to fully electric cars. There's a relatively tight 44-day supply of hybrids industrywide according to Cox.

There are 9 more stories in this week's edition of The Rising Tide. Dude, you got to subscribe at Substack to get full content. https://barberd.substack.com/

CNBC's Annual Rankings: Business Competitiveness and State Performance Revealed: I don't give much creedence to the various business rankings of states, except for the one done by CNBC and that of the nonpartisan Tax Foundation. Here's why.

North Carolina Claims Top Spot for Business in CNBC's Annual Competitiveness Study: The state has amassed a trophy case full of economic development wins, ranging from a $130 million investment by Bosch to a $458 million biomanufacturing facility by cellular therapeutics company ProKidney.

Time Off is Good for You: Time off is good for your physical and mental health, but it’s also great for your working life and aspirations.

A Growing Number of Groups Are Refusing to Hold Events in Florida: At least five groups have canceled planned events in Orange County, where Orlando is located, or announced plans to hold them elsewhere, according to?Forbes Magazine.

Red-Blue Divide in Federal Spending Revealed: There’s a clean partisan divide. Nine of the 10 states that sent the most to the federal government, per person, voted for President Biden in 2020. Nine of the 10 states that sent the least voted for former president Donald Trump.

Appraisal Gap Challenges Rural Entrepreneurs and Community Development: Low valuations and a lack of recent comparable sales affect both commercial and residential appraisals, with spillover effects for local businesses.

Education Department Forgives $39 Billion in Student Debt: The Biden administration announced on Friday that it will automatically forgive the student debt of 804,000 borrowers, amounting to a total of $39 billion.

Toxic Lead-Contaminated Cables Litter U.S. Telecom Networks: A Wall Street Journal investigation reveals that AT&T, Verizon and other telecom giants have left behind a sprawling network of cables covered in toxic lead that stretches across the U.S., under the water, in the soil and on poles overhead.

China's Homegrown Car Brands Surge Ahead: China's homegrown passenger-car brands are consistently outselling Western rivals, reflecting the growing influence of the country's electric-vehicle makers and the success of Beijing's industrial policy.

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