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Wednesday, May 22, 2024

Electric vehicle production set to surge in 2023 despite low sales

The automobile industry is pouring more than $1 trillion into a revolutionary shift from combustion engines to electric vehicles guided by software.

The past year was sobering for investors who poured money into Tesla Inc (TSLA.O) and rival electric vehicle startups that hoped to emulate Tesla CEO Elon Musk’s success.

As interest rates rose and financial markets gyrated, shares in many EV startups deflated. Rivian Automotive Inc (RIVN.O), which had a higher market value than Ford Motor Co (F.N) shortly after it went public in 2021, lost more than 70% of its value over the past year.

Other EV startups fared worse. Electric van maker Arrival warned it could run out of cash in less than a year. Lucid Group Inc (LCID.O), backed by Saudi Arabia’s sovereign wealth fund, struggled to build its sleek Air luxury EVs. Chinese Tesla challenger Xpeng Inc’s (9868.HK) shares lost more than 80% of their value.

Read more: Xiaomi to launch electric vehicle

Now comes the hard part: Persuading more mainstream consumers to come along for the ride.

WHY IT MATTERS

The automobile industry is pouring more than $1 trillion into a revolutionary shift from combustion engines to electric vehicles guided by software. From Detroit to Shanghai, automakers and government policymakers have embraced the promise of electric vehicles to provide cleaner, safer transportation. European countries and California have set 2035 as the deadline for ending sales of new combustion passenger vehicles.

Tesla Inc’s (TSLA.O) surge to become the world’s most valuable automaker – achieving a $1 trillion valuation last year – humbled established automakers such as Toyota Motor Corp (7203.T) and Volkswagen AG (VOWG_p.DE) that once were reluctant to go electric.

Starting next year, a wave of new electric vehicles from pickup trucks to middle-market SUVs and sedans will hit the world’s major markets.

Industry executives and forecasters do not agree on how rapidly electric vehicles could take over half the global vehicle market, let alone all of it.

Read more: Made in Pakistan electric vehicle unveiled

In China, the world’s largest single automotive market, battery electric vehicles have captured about 21% of the market. In Europe, EVs account for about 12% of total passenger vehicle sales. But in the United States, EV market share is only about 6%.

Among the barriers to EV adoption, industry executives and analysts said, were a dearth of public fast-charging infrastructure, and the rising cost of EV batteries, driven by shortages of key materials and uncertainty over government subsidies that have buoyed EV purchases in major markets including the United States, China and Europe.