EV sales have slowed. Do massive subsidies still make sense?
Enormous investments in EV technology shook the automotive industry in both Canada and the U.S. this week. Honda promised to spend $15 billion in Ontario on Thursday morning. Toyota unveiled new investments in Indiana that afternoon, bringing its total spending on EVs in that state to $8 billion US.
“In Canada, our target is that 100 per cent of all light duty cars and passenger truck sales be zero emission by 2035,” said Prime Minister Justin Trudeau at the Honda announcement in Alliston, Ont. “As a great Canadian once said, that is where the puck is going and that is where we’re going to be.”
But the surge in investment comes as the underlying EV industry remains at a crossroads. Growth forecasts have plateaued, charging infrastructure has not kept pace and electric vehicle prices have pushed the cars out of reach of many consumers.
For evidence of that look no further than Tesla.
Prime Minister Justin Trudeau praised Honda’s $15-billion EV investment as an example of ‘Canada building the kinds of solutions the world needs’ before taking aim at his rivals, and suggested the announcement would not have happened under a Conservative government.
The EV giant’s quarterly earnings this week showed a 9 per cent drop in first-quarter revenue. That’s the biggest decline Tesla has reported since 2012 and came as a surprise to even pessimistic analysts.
In an earnings call on Tuesday, Tesla’s mercurial CEO Elon Musk said companies that are scaling back on EV production are getting it wrong.
EVs will eventually dominate the market, Elon Musk says
“The EV adoption rate globally is under pressure and a lot of other manufacturers are pulling back on EVs and pursuing plug-in hybrids instead. We believe this is not the right strategy and electric vehicles will ultimately dominate the market,” he said.
Musk helped stem stock losses with a promise that the company will begin production of a new, affordable EV model sooner than expected.
Tesla had initially said it would start production on its long awaited $25,000 US model near the end of next year. Musk now says the company plans to start production in “early 2025, if not late this year.”
But the rough patch of news has not been limited to Tesla.
Ford now says its electric vehicle unit lost $1.3 billion US in the first quarter alone. The company only sold 10,000 vehicles in that period. In other words, Ford lost about $132,000 US for every EV it sold in the first three months of the year.
The company had already announced it would make less than half the electric pickup trucks it had promised.
That came on the heels of an announcement from General Motors that it would cut production of its EVs, citing slowing demand.
In its own earnings…
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