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Price Reductions And Increased Inventory Are Causing Problems For The US EV Industry

Price Reductions And Increased Inventory Are Causing Problems For The US EV Industry
According to experts and industry data, the U.S. electric car market is expanding, but not quickly enough to prevent unsold EVs from piling up at some automakers' dealerships or to allow Tesla to escape new price cuts during the most recent quarter.
Price reductions and increasing inventory might only cause a temporary slowdown in the expansion of the EV market. However, they might indicate that, even with federal and state subsidies, increasing U.S. EV sales over the present 7% market share level will be more expensive and challenging than anticipated.
Depending on how the upcoming quarters turn out, automakers in North America will invest billions of dollars in EV-related projects.
Automakers will have to decide between reducing pricing and profit margins or pausing assembly lines if EV production continues to surpass demand.
According to AutoForecast Solutions, more than 90 new EV vehicles are anticipated to enter the market in the United States by 2026. According to analysts, many will struggle to reach profitable sales volumes.
According to a survey from Cox Automotive, dealers for well-known automakers including General Motors, Ford, Hyundai, and Toyota have more than 90 days' worth of unsold EVs at their locations at the current sales rate.
According to Cox data, U.S. dealers have more than 92,000 EVs in stock, more than three times the amount on their lots a year ago. According to Cox, new vehicle inventories are overall up 74% from a year ago.
The selection of EV cars is extremely diverse. At current sales rates, GM had 50 days' supply of Cadillac Lyriqs available as of June 30, which was less than the industry average of 52 days.
GM stated that there is "very low inventory - and high demand" for its EVs in a statement. According to the company, more than 80% of the Lyriq and GMC Hummer EVs produced are still on their way to dealers.
The major obstacle for GM has been speeding up the manufacture and delivery of its next-generation electric vehicles, which are based on the Ultium architecture.
Only 2,365 of the 36,024 EVs that GM supplied in the US during the first half of this year were Ultium EVs. During the second part of this year, GM plans to assemble 100,000 electrified vehicles in North America.
According to Cox, Ford has enough F-150 Lightnings and Mustang Mach-E electric SUVs on hand to last 86 and 113 days, respectively.
Ford said that Cox's estimates overestimate the availability of both models. According to Ford's chief of U.S. sales analysis, Erich Merkle, there are 83 days' worth of Mach-E stocks on hand, with more than half of the manufactured cars on their way to dealerships.
Ford estimates that the supply of Lightning vehicles, including those in transit, is 58 days. This month, the electric pickups' assembly plant in Dearborn, Michigan, will be closed for retooling.
"By no means are those inventories high," Merkle said.
Ford is raising production of the Mach-E and Lightning to levels that are significantly higher than current sales.
According to information on its investor website, Ford produced 46,238 Mach-Es during the first half of this year and sold 14,040 of the electric SUVs. In May, Ford reduced the cost of Mach-E versions.
According to Cox statistics, Volkswagen dealers have enough ID.4 electric SUVs in stock to last 131 days.
Volkswagen's U.S. sales division issued a statement stating that "we have seen some softening in EV sales in the U.S. recently" as a result of supply chain bottlenecks being resolved, which allowed for increased manufacturing.
The ID.4 is in high demand, but according to VW, the market need more all-wheel-drive versions of the SUV, which are scarce.
VW also mentioned "the effects of some customer confusion and, therefore, hesitation to buy vehicles over the tax credit eligibility of EV models."
The $7,500 consumer tax credit is available for the American-made ID.4.
Industry leaders and analysts warned that the U.S. EV market is still in its infancy, with many buyers still debating whether EVs meet their needs and significant automakers still ramping 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," said Vitaly Golomb, an investment banker who focuses on electric vehicles. "The strong will survive here and the rest will struggle."
Tesla is leveraging its advantage in EV production costs to spur demand through price reductions. On the majority of their electric cars, established automakers are losing money.
Other recent EV startups like Rivian and Tesla do not have dealers or disclose inventory. Last week, Tesla reported higher-than-anticipated global deliveries. But to increase demand, the Texas-based EV company has been promoting a range of savings and incentives, including discounts linked to customer referrals that were introduced late last week.
Average selling prices for EVs for the second quarter rose to $53,438 as a result of price reductions by Tesla and responses from rivals, according to Cox. From the peak of $66,390 in June 2022, that has decreased by 19.5%.
As they attempt to accelerate EV sales to levels that can sustain new North American EV manufacturing capacity, like as Ford's massive Blue Oval City plant in Tennessee, automakers must make difficult strategic decisions while also contending with regulatory pressure from Washington.
The Biden administration has put forth emissions regulations that virtually mandate U.S. manufacturers change their sales to two-thirds EVs by 2032. GM and the group that speaks for the majority of American automakers have criticised the proposal as unfeasible.
"Price cuts do show that we're in sort of an equilibrium of demand and supply and price so when sales aren't there, they're going to be dropping price," said Mark Wakefield, co-head of consultancy AlixPartners' automotive practice. "Tesla in particular has the room to do that."
Wakefield argued that it is too soon to proclaim a plateau in U.S. EV demand. He stated, "We see it as lumpy growth, but continuous growth.

Christopher J. Mitchell

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