• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 2 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 9 hours Could Someone Give Me Insights on the Future of Renewable Energy?
  • 8 hours How Far Have We Really Gotten With Alternative Energy
  • 9 hours "What’s In Store For Europe In 2023?" By the CIA (aka RFE/RL as a ruse to deceive readers)
  • 3 days Bankruptcy in the Industry
  • 3 days The United States produced more crude oil than any nation, at any time.
How Iraq Continues To Trick Washington

How Iraq Continues To Trick Washington

The U.S. government has multiple…

OPEC+ Can Stop An Oil Rally To $100

OPEC+ Can Stop An Oil Rally To $100

The OPEC+ group could influence…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Carmakers' EV Enthusiasm Fizzles Out

  • Carmakers in the United States have been eager to help advance the EV agenda in the past half a decade or so.
  • Last year, the Detroit majors warned they could suffer fines of over $10 billion if they fail to comply with the new, stricter fuel efficiency standards.
  • EV sales last year hit a record, but towards the end of the year, demand began to wane, triggering a price war among carmakers.
EV charger

Carmakers in the United States have been eager to help advance the EV agenda in the past half a decade or so. Ford, GM, and all the European and Japanese majors have poured billions into a whole new lineup of all-electric vehicles in anticipation of mass adoption. Now, they're hitting the brakes.

In July last year, the Environmental Protection Agency proposed new, tighter fuel efficiency standards aimed at encouraging greater EV adoption. The proposal was to lift fuel efficiency requirements from 49 miles per gallon to 58 miles per gallon on a fleet-average basis. The deadline for hitting the new target was set for 2032.

At the time, the car manufacturing industry did not have a lot to say. Then, as the implications of the new regulation began to sink in, they wrote a letter to the administration complaining that they faced billions in fines if they failed to hit the targets proposed by the EPA.

This was the first sign not all was going well between car manufacturers and the Biden administration despite their unanimity on the need to switch from petrol and diesel cars to electric vehicles. The reason it was not going well at the time was the EPA's plan to revise the way it measured the fuel economy of EVs.

The revision, the regulator said, would encourage carmakers to make more fuel-efficient ICE cars instead of using their EV cars as a license to keep making highly emitting ICE cars. Related: TC Energy Books Record Earnings amid High Natural Gas Demand

As the EPA put it at the time, "Encouraging adoption of EVs can reduce petroleum consumption but giving too much credit for that adoption can lead to increased net petroleum use because it enables lower fuel economy among conventional vehicles, which represent by far the majority of vehicles sold."

The debate quieted down towards the end of the year but moved to the fore once again at the beginning of this year, as carmakers began reporting 2023 results—and revealed their EV ventures have been invariably loss-making. That revelation comes amid reports about record high EV sales across the United States last year and upbeat forecasts for an even stronger year in 2024.

Last year, the Detroit majors warned they could suffer fines of over $10 billion if they fail to comply with the new, stricter fuel efficiency standards. They also said the compliance costs would surge from about $550 per vehicle now to over $2,100 if the new requirements are passed. Now, they have come out and said, albeit indirectly, they cannot boost their EV sales as fast as the federal government wants them to.

Last year, sales of EVs represented 8% of the total. The purpose of the new fuel efficiency standard is to mandate such an increase in these sales that by 2032, EVs represent 67% of total car sales. The companies making those EVs are now saying this is pretty much impossible.

This is because despite the generous subsidies that the federal government as well as state governments have allocated for EVs, drawbacks inherent in the current EV technology make them a hard sell—and the subsidies won't be around forever.

EV sales last year hit a record, but towards the end of the year, demand began to wane, triggering a price war among carmakers. That war has failed to prompt a strong rebound in sales growth, however, at least for the time being. Issues like insufficient charger infrastructure and insurance continue to plague the industry. And the Chinese are coming.

European carmakers sounded the alarm late last year, complaining that unless governments do something to protect them, low-cost Chinese EVs might destroy them. But low-cost Chinese EVs are coming to North America, too, as suggested by a report in the Wall Street Journal that said EV major BYD was looking at building a factory in Mexico.

So, not only are U.S. and international carmakers being pressured into speeding up their switch to an all-EV lineup—a very costly switch—but they are now facing competition from much cheaper Chinese EVs. Of course, the last problem could be dealt with by imposing protectionist tariffs, which are trendy these days but the other problems would be tougher to solve. And the U.S. has a no-tariff trade deal with Mexico.

Charger infrastructure needs to expand really fast to stimulate demand for EVs—but there is not enough private capital willing to risk it, given that the risk-takers would have to wait quite a while to see any returns unless people are literally mandated to buy EVs.

ADVERTISEMENT

The cars themselves really need to become cheaper, on a no-subsidy basis. For years, EV commentators have been saying that cost parity with Ice cars was just around the corner, and yet even today, it remains around the corner—except in China.

Big Auto, which so recently celebrated the push to an all-electric future, is having second thoughts, and they are not pleasant thoughts. And Biden needs to make them happy again because there are a lot of voters employed by Big Auto.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • Mike Lewicki on February 17 2024 said:
    1. cost far too much
    2. not reliable
    3. job killer
    4. car dealerships struggle to add higher priced inventory, so less consumer choice

    many more


    Good luck.
  • fredric longabard on February 18 2024 said:
    Pushing on a string, the only thing this administration is good at.
  • George Doolittle on February 18 2024 said:
    There's no waning demand for pure play BEV in the USA in the least. Ford Mach-E sales could very much explode higher this Year 2024 as will be happening to both the all electric F150 and Rivian R1T. Plus electrification of scooters, e-bikes, 4 wheelers and motorcycles have barely begun in the USA but most certainly are well underway. The explosion higher in the Lyft stock price last week is a powerful cue that battery electric driven transportation is only just now entering upon into daily use as integral to the US economy where people no longer even buy cars or trucks in the first instance...unless of course they are pure play BEV. so far hybrid drive systems have kept pace would be true to say...but not pure play ICE platforms. Corn prices have plunged this past year as well a sure sign that ethanol will remain on sale for 2024.

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News