NZ EV market sounding the alarm.
EV dealers are dumping stock and concerned that they will not be able to sell vehicles already on their way to NZ. Govt. Policy will be blamed but the issue is deeper.
The local issue:
This month the NZ EV (Electric Vehicle) industry players joined together to make submissions to the Government regarding plans to introduce road user charges for electric vehicles.
They claim that they are reacting to the proposed changes to road user pricing by dumping stock at discounted prices and have concerns that incoming stock may not be able to be sold, leading to cancelling of future stock orders.
Their concern is that on top of the recent removal of the clean car discount (ref. Ute Tax), the addition of road user charges for EV’s will make them less attractive to potential buyers.
The proposed road user charges are the same as diesel vehicles under 3.5T at $76 / 1000km.
The global issue:
While the local industry in NZ points the finger at removal of subsidies the global situation points to much deeper issues.
News headlines show that the global EV industry is struggling and faces reduced sales in 2024. Manufacturers are reporting substantial losses from their EV business divisions and walking back commitments for all EV fleets in the future.
(Reuters) - A global slowdown in electric-vehicle demand is rippling through the industry, costing jobs and leading to changes in strategic plans, layoffs and production cuts, suggesting pain in the near term could slow the transition away from gasoline-powered combustion engines.
On Thursday, German luxury carmaker Mercedes (MBGn.DE), opens new tab toned down expectations on EV demand and said it will update its gasoline-powered engine vehicle lineup well into the next decade
Mercedes delayed its goal to go all-electric by 2030. Instead, it now says it will retain combustion engines in at least half of its vehicles until then. Previously, it had hedged by saying consumer demand would dictate how soon it went all-electric.
"High interest rates, moderate oil prices, and range anxiety all have conspired against EV demand. The enthusiasm of early adopters of EVs wasn’t representative of the longer-term and broader demand for these vehicles," said Brian Jacobsen, chief economist at Annex Wealth Management, which does not own shares in any EV makers.
"We expected a reduction in demand and enthusiasm for the vehicles so we didn't find the valuations compelling," he added.
The situation was previously flagged by Ford (F.N), opens new tab, General Motors (GM.N), opens new tab and market leader Tesla (TSLA.O), opens new tab, where CEO Elon Musk's warning in January of the market leader's slowing pace of growth slashed $80 billion in market value in one day
Ford has sustained huge losses in its EV business seeing its share price tumble.
(Reuters) - Ford's increasing concern about cooling EV demand follows a decision by rival General Motors (GM.N), opens new tab earlier this week to postpone a $4 billion electric truck plant in Michigan.
Lawler reiterated that Ford will delay some of its planned multibillion-dollar investment in new EV and battery production capacity, citing "tremendous downward pressure" on prices.
Ford lost an estimated $36,000 on each of the 36,000 electric vehicles it delivered to dealers in the quarter (Q3 2023) - even more than its estimated $32,350 loss per EV in the second quarter.
Ford said its EV unit posted a loss in earnings before interest and taxes of $1.3 billion, bringing its nine-month EBIT loss to $3.1 billion. The company had forecast a full-year pretax loss of $4.5 billion for the Ford Model e unit.
The system level issue:
As with all energetic problems we have to take the widest boundary and system level analysis as possible.
An EV is a heavily front end loaded energetic problem. There is a tremendous amount of energy embedded in the vehicle via the manufacturing process, it is basically twice that of the equivalent internal combustion engine vehicle.
As such, and like renewable energy systems, EV’s pricing reflects that they are highly resource intensive to produce. High resource intensity means production costs are directly linked to energy prices and costs of capital (interest rates).
Ironically EV’s need cheap oil and cheap coal to be manufactured at a price point that makes them affordable to the masses. It takes a lot of diesel to mine the raw materials and a lot of coal to manufacture electrical and battery componentry in China.
However, cheap energy costs would also mean internal combustion engines vehicles are cheaper to manufacture and run, meaning that the price differential never really closes.
The average person looking for a car also needs cheap interest rates to be able to afford to purchase an EV, which will always be more expensive due to their higher embedded energy.
In New Zealand our stay at home with teddy bears in the window while we bake sour dough and then print copious amounts of money approach of 2021 has put paid to the idea of low interest rates in the future.
We also have to consider these issues in addition to a lack of infrastructure to support EV’s, range anxiety, increasing electrical grid fragility, electricity price rises, and what Kiwi’s actually use their cars for, which is basically everything.
Local legislative amendments will be blamed for the stalling of EV expansion into the NZ car market, but these changes are really of zero significance in the wider boundary analysis.
PS:
I recently dropped my diesel vehicle off for a service and was given a new Toyota bZ4X as a loan car. I have to say that it was amazing. Very quiet, phenomenal acceleration, super smooth, all the things you would expect of an EV. But completely impractical for much other than a second town car, which is what most EV’s in NZ inevitably are.
Kiwi’s want our cars to do everything from the short distance school drop off to long distance 3 ton towing and everything in between which is why as a nation we love our 4x4 utes & SUV’s.