With all the EV news being slung at us on the daily, we thought it might be nice to wrangle all that chatter into one place so we can take a look at the bigger picture that all these pieces of the puzzle are adding up to.
Hurdles and Hardships
If you’ve been paying attention at all, you’ll have noticed that EVs have been facing major headwinds in recent months.
While there was initially great enthusiasm about the potential of EVs to effectively reduce carbon emissions compared to gasoline-driven cars, several challenges have arisen that have forced manufacturers, governments, and stakeholders to slow their roll. The enthusiasm that once charged the EV market is now tempered by caution, as the industry grapples with several issues:
Pulling Back the EV Push
The automotive sector and governmental bodies worldwide are recalibrating their approach to EV adoption. Pressure is mounting to reevaluate the timelines for electrifying transportation systems comprehensively. This rethink is driven by the complex challenges of such a monumental shift:
Auto manufacturers need the time not only to build EVs and cut their costs but to establish charging station infrastructure. Statistics from the Department of Energy say that there are just over 160,000 charging stations across the US, with only 88 percent of them being public use stations.
Auto makers are also tweaking their lofty EV goals following a slowdown in EV adoption, including Renault, Ford, Chevy, Mercedes, Aston Martin…actually, it might be faster to list the ones who haven’t backtracked.
The Market Responds
The dip in demand has resulted in a massive dip in EV car prices.
Used EV cars have fallen 31.8% since last year (compared to the average used car price which is only down 3.6%).
Seven electric models lead the used car market in price drops: Chevrolet Bolt, Nissan Leaf, Kia Niro, Hyundai Kona, Tesla Model X, Tesla Model 3, Tesla Model S.
“Used car shoppers are seeing a bit of a break in vehicle costs, but we’re still well above the pre-pandemic average used car price point of roughly $20,000, with no indication we’re going back to those levels any time soon,” said Karl Brauer, iSeeCars Executive Analyst. “A dramatic drop in used electric vehicle values, largely driven by Elon Musk’s aggressive price cuts on new Teslas, reflects how much influence Tesla continues to have on the EV market.”
The Ripple Effect
The EV industry's ebbs and flows have a profound impact on the battery metals sector.
A significant shift as producers of lithium and nickel, essential components in lithium-ion batteries, are pausing projects and shutting down mines in a bid to conserve cash. This move comes in the wake of a dramatic decrease in commodity prices, with lithium prices dropping by up to 90% since last year, and nickel prices seeing a reduction by about half.
Mining companies like Albemarle Corp. and Glencore are feeling the pinch, with significant operations on hold or seeking buyers. This strategic pause reflects a broader trend of caution in the face of fluctuating demand and prices. The repercussions for the supply chain are significant, potentially hindering future production capabilities if demand surges unexpectedly.
The downturn has also impacted investment products linked to the battery metal sector. The Global X Lithium & Battery Tech ETF, which offers exposure to global lithium companies, has declined by 37% in the past year, with a more than 50% drop since its peak in 2021. Similarly, the Sprott Nickel Miners ETF has experienced a 45% decrease since July 2023.
Zooming Out
Though recent months do show a decline, the needle is still moving towards a more electric future.
This next chart shows BEV and PHEV sales as a percent of total vehicle sales. Analysts are looking at these types of charts very closely to get a better picture of how this trend will evolve.
The line pointed out by the red arrow is the EV dip that all the commotion has been about lately. But, the bigger picture shows that EVs (and PHEVs for that matter) are still on the rise and have overall gained a tremendous amount of traction in the past four years alone.
Only time will tell, but EVs will most likely remain on climb despite these short-term road bumps.
According to Jessica Caldwell, Automotive Journalist at Edmunds: “The thing is that EVs are still growing in sales. You look at EV sales, they are on the upward trajectory. It's just maybe not as steep as we thought two years ago, because I think it was easy to get swept up in a new technology. It was very exciting. Sales were accelerating.
And it just doesn't work that way in the long run with the new technology. The more vehicles you sell, the harder people will become to convert. You start losing some of those early adopters that wanted to get in early and more of the mass market starts to buy the vehicle. And those people are a bit pickier with their money and ask a lot more questions and have a lot more concerns.
So, it's not a surprise that it's slowing. I just think it's good to remember that they're still growing, just maybe not as fast as we thought.”