The American automotive giant, Ford, is facing significant losses in its electric vehicle (EV) business. According to reports, the company has lost Rs 83 lakh ($100,000) for every EV built in the first quarter of the year. This loss is mainly being caused due to the substantial discounts that the company is offering on its EVs in order to sell them. As per reports, the total forecasted loss is of $5.5 billion for the EV unit in 2024. This loss is equivalent to the expected profit from Ford’s ICE vehicle division.
Ford cutting back on battery orders
Reportedly, the company, in order to mitigate these losses, will now be scaling back its EV efforts. The only saving grace that the company is looking at is its new entry-level EV priced at around $25,000. Additionally, the company is also reducing orders from high-voltage battery suppliers, including SK On, LG Energy Solution, and CATL.
Additionally, Ford has also scaled down its plans for a lithium iron phosphate (LFP) battery cell plant in Michigan. It is reducing its investment from $3.5 billion to around $2.2 billion. Overall, Ford aims to cut spending by $12 billion on battery-powered vehicles.
Falling demand for electric vehicles
This decision of cutting back on battery orders comes as a response to lower-than-expected demand for EVs in the United States. To deal with this low demand, the company has also delayed the launch of its all-electric pickup, “Project T3”.
Other major automakers also suffering
The enthusiasm for electric vehicles is fading across the globe. Along with Ford, other automakers like General Motors, Mercedes-Benz, Volkswagen, Jaguar Land Rover, and Aston Martin are scaling back their EV plans. Even Tesla, dominating U.S. EV sales with an estimated 55% share in 2023, anticipates slower growth, according to CEO Elon Musk.
Indian carmakers are also skeptical of EVs
In addition to international automakers, carmakers in India are also skeptical about an all-electric future. Some automakers like Tata and Mahindra have ramped up their electric vehicle efforts, but many others are still behind. This slowed down demand of EVs has also been noted in India.
In the month of April 2024, EV sales of many automakers were down. As per the reports, Tata Motors sold a total of 4,893 units of EVs which is 2,222 units lower than that of sales in March of this year. Additionally, Mahindra EV sales also dropped by 8.8 percent on a monthly basis.
Hybrids seem to be the new hype
Along with Ford, a ton of other manufacturers are now shifting their focus towards hybrid vehicles. It has been reported that Ford is ramping up production and sales of hybrids. Similarly, GM is also planning to introduce plug-in hybrid electric cars.
In India as well, it has been reported that automakers like Hyundai, Kia, Toyota, and potentially Volkswagen, are also planning to double down on strong hybrids. Recently, Kia India also revealed its interest in launching strong hybrids in the country.
It has been revealed by the brand that in the near future, it could introduce a lineup of strong hybrid petrol cars. With these new hybrids, the company is aiming to replace conventional diesel vehicles in the Indian market.
Additionally, Kia’s sister brand Hyundai is also planning to launch strong hybrid versions of its popular models. Recently, Euisun Chung, the executive chairman of Hyundai Motor Group, addressed employees in India.
He outlined the pivotal role hybrids will play in the company’s future portfolio alongside electric vehicles. As per the reports, popular models such as Creta, Verna, Venue, and Tucson will be the first ones to get strong hybrid powertrains. These strong hybrid variants will be replacing the diesel variants of these cars.
Indian government planning to reduce GST on strong hybrids
Recently, Union Minister of Road Transport and Highways, Nitin Gadkari, has also shared his thoughts on strong hybrids. He has stated that currently, the strong hybrid vehicles are taxed unfairly in India. So, in order to help the promotion of strong hybrids in India, he has proposed to the finance minister of India to reduce the GST on strong hybrids from 48 percent to 12 percent.
If this reduction in GST on strong hybrids is implemented, it would significantly reduce the pricing of these cars in India. We shared the calculations on how it could reduce the price of the top-spec Toyota Innova Hycross from Rs 35.5 lakh to Rs 30. You can read more about it here.
Why is EV demand petering off?
If you are one of those people who are wondering why the demand for electric vehicles is decreasing in India and worldwide, we would like to present you with the following reasons.
Market Saturation of Early Adopters
The initial surge in electric vehicle (EV) adoption was largely driven by tech enthusiasts and environmentally conscious consumers. However, as this demographic segment has largely been tapped into, the pool of early adopters willing to purchase EVs has plateaued. This has now resulted in a slowdown in overall EV demand.
Practicality Concerns for Highway Driving
Despite advancements in EV technology, practical concerns regarding long-distance travel on highways are still prevalent among potential buyers. Range anxiety and limited charging infrastructure along highways are a few of the reasons.
Additionally, longer charging times are also deterring many consumers from opting for EVs as their primary mode of transportation. This is more particularly a problem with frequent intercity travelers.
Underdeveloped Charging Infrastructure
In countries like our India, the expansion of charging infrastructure for EVs is very slow. The lack of widespread and accessible charging stations, especially in rural and suburban areas, hampers the convenience and feasibility of owning an EV for a significant portion of the population.
Resale Value concerns
For Indian car buyers, resale value plays a huge role. So, as EV technology evolves rapidly, consumers fear that their vehicles may depreciate rapidly. This then leads to a hesitancy in investing in these vehicles.
High Battery Costs
Despite incremental reductions in battery costs over the years, the upfront expense of purchasing an EV remains relatively high compared to traditional internal combustion engine vehicles.
Additionally, the prospect of replacing expensive batteries after a certain lifespan is a steering factor for a lot of buyers. Indian buyers who are cost-conscious consumers are unable to embrace EVs.
Urban-Centric Utility
EVs are predominantly suited for urban commuting due to their short-range capabilities. They are also suitable for urban buyers because of the ease of charging in residential areas. However, people living in rural areas do not have access to such amenities, and hence EVs are not being adopted by people living in rural areas.
Costly Fast Charging Solutions
While fast chargers offer expedited charging times, their installation and usage come at a premium. This expense, according to a lot of people, diminishes the cost-saving advantage of EVs, particularly when compared to the relatively inexpensive option of charging at home.
Escalating Home Charging Costs
Another reason behind the slowing EV demand is the cost of home charging EVs. This cost has surged substantially, narrowing the price gap between EVs and conventional petrol vehicles. This increase in charging expenses is taking away from the key incentive for EV adoption. It also makes them less economically appealing to consumers.
Rising Electricity Prices
This one is one of the biggest problems in the adoption of EVs. With the inflation rates increasing, the hikes in electricity prices have also made people question the financial viability of EV ownership. Electricity costs are going up every year and at one point, it will not make much sense to buy an electric vehicle.
Environmental Realities
Despite the perception of EVs as environmentally friendly alternatives to ICE vehicles, there is a high amount of skepticism regarding their true ecological impact. There are concerns over the environmental cost of battery production and resource extraction.
In addition, the energy-intensive manufacturing processes contribute to more environmental damage than ICE vehicles. If you want to read more about the studies done on the pollution aspect of EVs, you can click here.
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