Car industry continues to implode from EV mandates
President-elect Donald Trump’s warning of a “bloodbath” in the automotive industry may be coming to fruition as automakers implode from electric vehicle (EV) mandates.
Western governments have been imposing climate regulations that force car companies to sell less internal combustion engine (ICE) cars, which use fuel, despite plummeting consumer demand for EVs. According to recent surveys, 29% of EV owners globally and 46% of EV owners in the US say they are likely to buy an ICE vehicle for their next car purchase. An Ernst & Young survey found that 34% intend to buy an EV within the next two years, a 14% drop from 2023. At the same time, carmakers are being told to increase EV production to meet unrealistic quotas.
Volkswagen is the latest vehicle manufacturer scrambling to stay afloat. Europe’s largest carmaker saw a global 3% drop in sales in the first quarter of this year and a 4% increase in ICE vehicle sales. Now the company is considering closing factories for the first time in its 87-year history and slashing employee salaries by 10%, leading to strikes and demonstrations.
Stellantis, the Dutch car giant that owns Jeep, Chrysler, Vauxhall, Dodge, and others, has blamed EV mandates for its recent plan to close its plant in Luton, England. The company’s CEO, Chief Executive Carlos Tavares, resigned from the company on Sunday amid a 40% drop in the company’s value. Tavares has reportedly criticized the UK’s harsh EV mandate that fines carmakers £15,000 ($19,680) for every ICE car sold beyond the dwindling quota allowed by the government.
Nissan may have only a year left after failing to generate enough EV sales and not betting enough on hybrid vehicles. Last month, the company announced it would slash global production by 20% and scrap 9,000 jobs in a desperate attempt to cut costs. CEO Makoto Uchida has taken a 50% pay cut and CFO Stephen Ma is stepping down.
“We have 12 or 14 months to survive,” said a Nissan executive according to the Financial Times. “This is going to be tough. And in the end, we need Japan and the US to be generating cash.”
In October, Ford posted a $1.2 billion loss on EVs for the third quarter after halving production last year of its all-electric flagship vehicle, the F-150 Lightning pickup truck. Other car manufacturers have had to abandon EV projects and investments, including the UK’s Aston Martin. In June, California-based EV maker Fisker announced it was filing for bankruptcy due to “market headwinds.”
Toyota: ‘It’s going to distort the industry’
At a virtual roundtable discussion last month, Toyota Motor North America COO Jack Hollis criticized policies like California’s, which require 35% of cars manufactured next year to be zero-emission vehicles. Under the California Air Resources Board’s “Advanced Clean Cars II” regulations, gas-powered vehicles can only make up 65% of production. By 2030, 100% of manufactured vehicles must be zero-emission.
Like California, the Biden-Harris administration issued its own mandate this year aimed at forcing EV production. The new rules from the Environmental Protection Agency (EPA) contain tight emissions standards that require 56% of new vehicle sales to be fully electric by 2032, with an additional 13% required to be hybrids.
“I have not seen a forecast by anyone . . . government or private, anywhere that has told us that that number is achievable,” Hollis said, according to CNBC. “At this point, it looks impossible. Demand isn’t there. It’s going to limit a customer’s choice of the vehicles they want.”
“It’s going to distort the industry. It’s going to distort the business. Why? Because it’s unnatural to what the current demand in the marketplace is,” added Hollis.
Automakers are rationing gas cars
Vertu Motors, one of the UK’s largest car dealers, says it is experiencing a gas vehicle shortfall because car manufacturers are afraid to exceed the limit.
“It’s almost as if we can’t supply the cars that people want, but we’ve got plenty of the cars that maybe they don’t want,” Vertu Motors CEO Robert Forrester told The Telegraph. “They [manufacturers] are trying to avoid the fines. So they’re constraining the ability for us to supply petrol cars in order to try and keep to the government targets.”
Forrester called supporters of the EV mandate “economic buffoons, because car manufacturers are being forced to discount EVs to such an extent that they’re making losses . . . and that is not a good thing for business.”
“What the Government’s actually doing is constraining the new car market, which has a big impact on VAT receipts for them, and creates a business environment in the UK where manufacturers may question whether they want to make cars here. As Carlos Tavares has said, why should they sell cars at a loss because of UK government policy?
“The new car market is no longer a market, unfortunately. It’s a state-imposed supply chain.”
