From the London Times today
Electric car glut could tip manufacturers into crisisWith the prospect of millions of vehicles going unsold, the global auto industry faces a rude awakening similar to the dotcom bubble, analyst warnsRobert Lea, Industrial EditorMonday April 22 2024, 12.01am, The TimesChinaTechnologyTransportElectric cars and transportCompaniesBYD electric cars waiting for export at Suzhou port in China’s eastern Jiangsu provinceBYD electric cars waiting for export at Suzhou port in China’s eastern Jiangsu provinceAFP VIA GETTY IMAGESShareThe vast global overproduction of electric cars at a time of stalling consumer demand is likely to result in millions of zero-emission vehicles being left unsold over the next two years and hasten price wars, according to private industry research.This is likely to benefit consumers but could send parts of the industry into crisis, experts say. Regulators and legislators, meanwhile, are likely to come under renewed pressure to rein back their ambitions to reduce carbon emissions, which has fuelled the electric car production boom.Proprietary industry data seen by The Times shows that this time last year the global automotive industry expected to make more than 15 million battery electric cars in 2024. However, slowing consumer demand has led to that projection being cut by two million to a little over 13 million. Yet that remains about 50 per cent ahead of forecast consumer demand, which is predicting global electric car sales of about 9.3 million for 2024.Oversupply of battery electric cars is set to worsen over the next couple years, according to analysis of the data.Slowing demand in China, where electric car sales are projected to fall 10 per cent, has already prompted carmakers to slash prices, with Tesla and its main rival BYD cutting prices for their most popular models by 20 per cent. New AutoMotive, a transport research group, has previously forecast 10 per cent discounts this year in the UK on some electric models.ADVERTISEMENTThe latest internal carmaker projections and supply chain order books indicate that the global industry is cutting expected production rates for electric cars to 18 million for 2025. That remains a long way ahead of demand projections, with sales of electric cars in 2025 estimated to remain at below 10 million.In 2026 electric car demand is expected to pick up to about 11 million, still only half the 22 million electric cars that automotive manufacturers have indicated they expect to be making in that year.If the projections are accurate, it means that in 2024, 2025 and 2026, the global industry will be making in excess of 20 million more electric cars than the market can absorb. While that could be good news for motorists priced out of the electric car market, the impact on manufacturers could be disastrous.One automotive analyst using the data who requested not be named, said: “The industry is going to get a very rude awakening. They are pumping billions of dollars into production facilities that just aren’t going to be required, at least in the near to medium term. It’s a misallocation of capital similar to the dotcom bubble.”BYD unveiled its most expensive car in Shenzhen in January, the Yangwang U9 fully electric supercarBYD unveiled its most expensive car in Shenzhen in January, the Yangwang U9 fully electric supercarQILAI SHEN/BLOOMBERG VIA GETTY IMAGESWith overproduction in China, it is forecast that manufacturers there will switch their attention to western markets. “While this might be good in the short term for consumers outside China as prices fall,” the analyst said, “longer term we could see the automotive industry in the West driven into the ground by the flood of vehicles from Chinese manufacturers who can produce electric cars in far greater numbers and more cheaply.”ADVERTISEMENT“Politicians [in the West] may find themselves having to act to protect their domestic car manufacturers and their supply chains.”Weakened consumer spending power, inflated electric car prices and fears about range anxiety and poor public recharging infrastructure are all blamed for dampened take-up and the impact of the widening supply and demand mismatch is already working its way into the system.Last week Tesla said it was going to lay off 14,000 people or 10 per cent of its workforce.In Germany the end of government incentives to buy electric cars has prompted a crash in sales of 30 per cent. Sales in Norway, the world-leader for electric car registrations, have halved.Notwithstanding Chinese competition, European car manufacturers are in a bind: they face stiff regulatory demands to produce more zero-emission cars. If they drop production in line with lower demand then they face large penalties and fines. Industry estimates suggest that Volkswagen, whose brands include Audi, Skoda and Seat, could already be
facing annual fines in excess of €4 billion for missed CO₂ targets.
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