We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The electric vehicle (EV) industry is dwindling between perils and possibilities. Recently, the electric vehicle (EV) market has experienced a deceleration in its previously rapid growth. China EV makers BYD, Li Auto, Nio and XPeng on Mar 1, 2024 reported that EV deliveries fell considerably in February for a second straight month.
Meanwhile, deliveries in the United States look decent evident from Tesla's (TSLA - Free Report) record Q4 delivery numbers. Tesla reported record deliveries for the fourth quarter and exceeded analysts’ estimates. The electric carmaker also met its full-year delivery target in 2023. A record 1.2 million EVs were sold in the United States in 2023, according to estimates from Kelley Blue Book.
Among the adverse developments in the United States, Ford (F - Free Report) delaying its $12 billion investment in electric vehicle production, General Motors (GM - Free Report) retracting its target to manufacture 400,000 electric vehicles by mid-2024, and Volkswagen Group's decision to scrap plans for constructing a new $2 billion EV factory in Germany deserve a mention.
The challenges faced by the automotive industry include high interest rates and increasing competition in the EV space. The space has been witnessing intense price war. But there are signs of increased activities and improvements as well. This puts focus on Global X Autonomous & Electric Vehicles ETF (DRIV - Free Report) , KraneShares Electric Vehicles & Future Mobility Index ETF (KARS - Free Report) , iShares Self-driving EV & Tech ETF (IDRV - Free Report) and First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report) .
Let’s delve deeper into it.
Inside the Pain Points
The challenges faced by the EV market in late 2023 are multifaceted, involving consumer perceptions, infrastructure development, economic factors, and policy changes.
Scarcity of Charging Network
The underdeveloped charging infrastructure, particularly in the United States, where planning is required for long trips, contrasts sharply with the abundant availability of gas stations, deterring likely EV buyers, as quoted on Forbes.
Saturation Among Early Adopters
Initial EV adopters were mainly higher-income individuals, enthusiasts, and environmentally conscious consumers. Broader adoption across other demographics is progressing slowly. Automakers need to develop more entry-level models to reach a wider demographis, the Forbe's article noted.
Global Market Challenges
Factors such as the end of China's EV subsidies, Europe's energy crisis and inflation have posed risks to EV sales momentum. China, the largest EV market, saw a drop in subsidies, affecting demand. The pandemic resurgence in China also negatively impacted EV sales and battery production. In the West, economic challenges, including the possibility of a recession in the U.S., have further complicated the situation, per S&P Global.
EVs Are Pricey
The average selling price for an EV in September 2023 was $50,683, according to Cox, down 22% from a year ago — mainly due to Tesla price cuts, as quoted on Axios. Although prices have fallen substantially due to steep competition among manufactures, but EVs still highly-priced compared with non-EVs.
High-Interest Rates
The higher initial cost of EVs, combined with higher rates amid steep Fed rate hikes in 2022 and early 2023, has dampened overall vehicle sales, including EVs. Interest rates are high in Europe too. Although rates are not higher in China, the country’s economy has been slowing.
Any Ray of Hope?
Despite afore-mentioned challenges, the global EV market continues to grow. Although, sales momentum is slowing, the long-term fate of transportation is probably electric vehicle. Several new players are coming up.
Intense Price War in China to Boost EV Sales?
Tesla unveiled new incentives, including insurance subsidies, on Mar 1, 2024, to attract consumers in the world’s largest auto market, where the U.S. electric vehicle giant is in a protracted price war against rivals such as BYD. Its biggest local rival BYD also lowered the starting price of a new version of its Song Pro hybrid SUV by 15.4%.
Notably, Tesla remains the undisputed winner of EV sales in the U.S., taking 55% of the EV market in 2023. That’s down from 65% in 2022, per Cox. Tesla seeks to regain its lost market share by rolling out incentives globally.
Activities Ramping Up in China
Li Auto, a fast-growing startup rival to BYD and Tesla in China, also launched the Mega minivan, its first purely battery-electric vehicle. Li expects the Mega to drive a delivery rebound in March, per investors.com. XPeng said it will ramp up deliveries of the new X9 minivan, its most expensive model, as production capacity increases and supply issues subside.
Technological and Supply Chain Developments
The industry is expected to see increased in-house development of electrified propulsion components by OEMs. Efforts to diversify away from reliance on permanent magnet usage due to geopolitical concerns are also underway. Additionally, the EV market may witness more OEM-supplier partnerships and joint ventures aimed at controlling critical propulsion value chains and addressing supply chain constraints, per SP Global.
Battery Materials and Charging Infrastructure
The prices of battery materials like lithium, cobalt, and nickel, which recorded drops in 2023, are expected to stabilize, which in turn would improve vehicle margins or make EVs more affordable for consumers. The global count of installed EV chargers, which has been rapidly increasing.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Pain or Gain Ahead of Electric Vehicle ETFs?
The electric vehicle (EV) industry is dwindling between perils and possibilities. Recently, the electric vehicle (EV) market has experienced a deceleration in its previously rapid growth. China EV makers BYD, Li Auto, Nio and XPeng on Mar 1, 2024 reported that EV deliveries fell considerably in February for a second straight month.
Meanwhile, deliveries in the United States look decent evident from Tesla's (TSLA - Free Report) record Q4 delivery numbers. Tesla reported record deliveries for the fourth quarter and exceeded analysts’ estimates. The electric carmaker also met its full-year delivery target in 2023. A record 1.2 million EVs were sold in the United States in 2023, according to estimates from Kelley Blue Book.
Among the adverse developments in the United States, Ford (F - Free Report) delaying its $12 billion investment in electric vehicle production, General Motors (GM - Free Report) retracting its target to manufacture 400,000 electric vehicles by mid-2024, and Volkswagen Group's decision to scrap plans for constructing a new $2 billion EV factory in Germany deserve a mention.
The challenges faced by the automotive industry include high interest rates and increasing competition in the EV space. The space has been witnessing intense price war. But there are signs of increased activities and improvements as well. This puts focus on Global X Autonomous & Electric Vehicles ETF (DRIV - Free Report) , KraneShares Electric Vehicles & Future Mobility Index ETF (KARS - Free Report) , iShares Self-driving EV & Tech ETF (IDRV - Free Report) and First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report) .
Let’s delve deeper into it.
Inside the Pain Points
The challenges faced by the EV market in late 2023 are multifaceted, involving consumer perceptions, infrastructure development, economic factors, and policy changes.
Scarcity of Charging Network
The underdeveloped charging infrastructure, particularly in the United States, where planning is required for long trips, contrasts sharply with the abundant availability of gas stations, deterring likely EV buyers, as quoted on Forbes.
Saturation Among Early Adopters
Initial EV adopters were mainly higher-income individuals, enthusiasts, and environmentally conscious consumers. Broader adoption across other demographics is progressing slowly. Automakers need to develop more entry-level models to reach a wider demographis, the Forbe's article noted.
Global Market Challenges
Factors such as the end of China's EV subsidies, Europe's energy crisis and inflation have posed risks to EV sales momentum. China, the largest EV market, saw a drop in subsidies, affecting demand. The pandemic resurgence in China also negatively impacted EV sales and battery production. In the West, economic challenges, including the possibility of a recession in the U.S., have further complicated the situation, per S&P Global.
EVs Are Pricey
The average selling price for an EV in September 2023 was $50,683, according to Cox, down 22% from a year ago — mainly due to Tesla price cuts, as quoted on Axios. Although prices have fallen substantially due to steep competition among manufactures, but EVs still highly-priced compared with non-EVs.
High-Interest Rates
The higher initial cost of EVs, combined with higher rates amid steep Fed rate hikes in 2022 and early 2023, has dampened overall vehicle sales, including EVs. Interest rates are high in Europe too. Although rates are not higher in China, the country’s economy has been slowing.
Any Ray of Hope?
Despite afore-mentioned challenges, the global EV market continues to grow. Although, sales momentum is slowing, the long-term fate of transportation is probably electric vehicle. Several new players are coming up.
Intense Price War in China to Boost EV Sales?
Tesla unveiled new incentives, including insurance subsidies, on Mar 1, 2024, to attract consumers in the world’s largest auto market, where the U.S. electric vehicle giant is in a protracted price war against rivals such as BYD. Its biggest local rival BYD also lowered the starting price of a new version of its Song Pro hybrid SUV by 15.4%.
Notably, Tesla remains the undisputed winner of EV sales in the U.S., taking 55% of the EV market in 2023. That’s down from 65% in 2022, per Cox. Tesla seeks to regain its lost market share by rolling out incentives globally.
Activities Ramping Up in China
Li Auto, a fast-growing startup rival to BYD and Tesla in China, also launched the Mega minivan, its first purely battery-electric vehicle. Li expects the Mega to drive a delivery rebound in March, per investors.com. XPeng said it will ramp up deliveries of the new X9 minivan, its most expensive model, as production capacity increases and supply issues subside.
Technological and Supply Chain Developments
The industry is expected to see increased in-house development of electrified propulsion components by OEMs. Efforts to diversify away from reliance on permanent magnet usage due to geopolitical concerns are also underway. Additionally, the EV market may witness more OEM-supplier partnerships and joint ventures aimed at controlling critical propulsion value chains and addressing supply chain constraints, per SP Global.
Battery Materials and Charging Infrastructure
The prices of battery materials like lithium, cobalt, and nickel, which recorded drops in 2023, are expected to stabilize, which in turn would improve vehicle margins or make EVs more affordable for consumers. The global count of installed EV chargers, which has been rapidly increasing.