The champagne pop of a record 1.2 million EV sales in America in 2023 couldn’t fully cover a shortage of fizz: Suddenly slowing consumer demand. Automakers walking back ambitious EV production plans. A shaky public charging infrastructure that’s keeping potential buyers on the sidelines. When Elon Musk himself sounds pessimistic about near-term prospects, you know it’s going to be a tough 2024.
The industry’s wake-up call on EV adoption has automakers shuffling the deck on power-train and battery tech—in some cases, more hybrids, fewer EVs—as well as factory plans and future vehicles. Some are also (finally) taking a serious look at downsizing America’s EVs to dramatically slash costs and compete head-on with China; akin to the way that small cars enjoyed a brief heyday during previous fuel crises, and helped Detroit automakers compete with Japan.
With lithium-ion cells still responsible for up to 40 percent of the cost of EVs, downsizing both cars and their batteries remains an obvious path to making EVs both affordable and profitable for automakers. GM has vowed to cut US $20,000 from the fixed costs of every EV it builds.
Ford has a skunkworks?
In fact, this week Ford CEO Jim Farley announced in a 2023 earnings call that a company “skunkworks” team, based in California and led by a former Tesla engineer, has been secretly developing a lower-cost EV platform that could speed Ford EVs to market and make them profitable within 12 months of launch. (Just a few weeks ago, I interviewed Farley about plans to dial back F-150 Lightning production in favor of more hybrid and plug-in hybrid trucks, but Farley didn’t clue me in on this EV development. Hmpf). Any new vehicles on this platform are unlikely to appear until 2026 at least. Yet slashing those troublesome EV costs clearly demands a platform that can scale down in size from Ford’s current half-ton electric pickups or SUVs. And while Ford has delayed $12 billion in EV investments, the platform seems a ham-and-eggs match for affordable lithium-iron phosphate (LFP) batteries that Ford still intends to deliver from its new BlueOval Battery Park in Michigan beginning in 2026 (with tech controversially licensed from China’s CATL, the world’s largest battery maker).
Daunting EV challenges lie ahead, with Elon Musk calling for more trade barriers to stem what he calls an existential threat from low-cost Chinese automakers.
“We developed a supertalented skunkworks team to create a low-cost EV platform. It was a small group, small team, some of the best EV engineers in the world, and it was separate from the Ford mothership,” Farley said.
“It was a startup,” he continued. “And they developed a flexible platform that will not only deploy to several types of vehicles, it will be a large install base for software and services that we’re now seeing at Pro.”
“Pro” refers to the Ford Pro commercial fleet vehicle, services, and telematics unit. But on the purely electric side, Ford’s Model e unit still expects to lose as much as $5.5 billion in 2024, underscoring the scale of the challenge ahead. And Farley said Ford will now focus more of its EV strategy on smaller and less-expensive models.
Why is EV adoption stalling out?
Based on any analysis, or conversations with would-be EV buyers, that shortage of truly affordable EVs, together with anxiety over charging and driving range, is exactly why EV adoption is stalling. BloombergNEF sliced its 2024 forecast for global EV production to 16.7 million in 2024, down from 17.5 million. That would represent a 20 percent gain year-over-year, but still a sharp slowdown from a previously torrid adoption pace. And 60 percent of those projected sales are in China.
Automakers appear to see the writing on the wall, now in a smaller font.
“EVs continue to grow with spectacular numbers, but what’s changing is that people buying them are not willing to pay a premium,” Farley told me in that recent interview. “Now we have to get costs under control and even—surprise, surprise—advertise.”
Buyers paid more than $60,000 for the typical EV in November, according to Edmunds, compared to $47,500 for internal-combustion models and $42,500 for conventional hybrids. Those hybrid sales even surged faster than EVs in 2023, including Honda nearly tripling its hybrid business to almost 300,000 cars. That all underscores daunting EV challenges, with Musk calling for more trade barriers to stem what he calls an existential threat from low-cost Chinese automakers. Musk himself kicked off what may become the EV price war to end all price wars, slashing an average 25 percent off most Tesla prices and forcing Ford, Hyundai, Lucid, and other rivals to follow suit.
Other automakers appear to see the writing on the wall, now in a smaller font. The forthcoming Volvo EX30 crossover SUV leverages a modest 51-kilowatt-hour battery pack to keep its base price to just $36,245 in single-motor guise. Tesla is expected to unveil a downsized compact model this year, a purported “$25,000 Tesla” priced below the Model 3 or Model Y. California-based Lucid Motors, whose record-setting Air sedan quickly soars into six-figure territory, is also developing a smaller midsize vehicle platform, as it seeks a wider audience. Lucid founder and CEO Peter Rawlinson has called for the industry to work toward ultraefficient EV models with downsized batteries to boost popularity and make the best use of resources.
EV makers thought big, some now paying the price
Anna Kolesnikova, head of data and analytics for Adamas Intelligence, the Toronto-based critical metals and minerals consulting firm, said that while hard-working pickups and plus-size SUVs continue to rule vast stretches of America and Canada, there’s a huge need for smaller, affordable EVs. That includes first-time buyers, whom Detroit automakers largely turned their backs on by eliminating virtually every small or even midsize car in their lineups.
The Chevy Bolt’s effective base price is now below $20,000.
Some automakers are already paying a price for poor choices, including putting eggs in the wrong, oversize basket. GM fatefully chose the Hummer EV as the avatar for its new Ultium NCM batteries and Ultifi software architecture. That crab-walking, 746-kilowatt (1,000-horsepower) behemoth’s massive 200-kWh pack—enough to power three or even four conventional small cars or SUVs—contributes to a 4,000-kilogram curb weight and a six-figure price tag. Throw in the pricey Cadillac Lyriq luxury SUV, and a Chevy Blazer whose sales are disastrously halted to fix faulty software, and GM sold just 14,000 Ultium-powered models in 2023. The remainder of GM’s record 75,000 EV sales, up 93 percent from 2022, all came from America’s most-affordable EV: the Chevrolet Bolt, whose modest 66-kWh battery pack helps keep its starting price to a come-hither $26,500.
Starting 1 January, tightened federal standards on domestic production and battery sourcing made the Bolt one of just seven EVs eligible for a full $7,500 consumer credit. U.S. consumers can now take those federal credits at the dealership rather than waiting to file annual taxes, a huge psychological boost for budget-conscious EV shoppers. That puts the Bolt’s effective base price below $20,000. Despite that, GM had announced plans to cancel the Bolt and Bolt EUV in December 2023, changed its mind, and will now reengineer the Bolt with Ultium batteries and software to further slash production costs and boost its competitiveness.
“We will keep the momentum going by delivering a new Bolt...and we will execute it more quickly compared to an all-new program with significantly lower engineering expense and capital investment,” GM CEO Mary Barra said during GM’s quarterly earnings conference call.
China’s oversize influence
Despite China’s vast differences from the North American market—a top-down, all-in government approach to EVs, and a market nearly bereft of full-size pickup trucks and American-size SUVs—China remains a competitive target and template in many ways. Kolesnikova said China’s advantages go well beyond being a low-cost manufacturer.
“The Chinese market is very balanced, with a full range of vehicle choices, features, and charging infrastructure. They’re selling the whole EV experience.” —Anna Kolesnikova, Adamas Intelligence
“China is basically the perfect sandbox of tech, government subsidies, scale, and enthusiastic adopters,” Kolesnikova said.
Chinese makers offer electric models not just at every size and price point, but with myriad combinations of batteries, power trains, leading-edge gadgets and connected features, she said. That compares with North American showrooms where potential buyers are faced with too many one-size-fits-all EVs: A cool electric pickup like the Ford F-150 Lightning, but one that doesn’t tow or haul efficiently enough to win over traditional truck fans. Or, EVs that offer little or no options in powertrains and battery packs.
“The Chinese market is very balanced, with a full range of vehicle choices, features, and charging infrastructure,” she said. “They’re selling the whole EV experience. And we don’t see issues there with growing sales of cars with new generations of batteries.”
China’s JAC Group, whose corporate parent is 50 percent owned by Volkswagen, just began selling the subcompact Yiwei 3, the world’s first production car with a sodium-ion battery. Often dismissed due to disadvantages such as relatively low energy density—akin to LFP cells from roughly a decade ago, Kolesnikova said—sodium-ion tech is getting a second look for its potential affordability, thermal stability, and cold-weather performance. For one thing, sodium-ion cells don’t require lithium, cobalt, copper, or nickel. That makes the chemistry potentially attractive for America, where the Inflation Reduction Act is demanding development of domestically made batteries and a materials supply chain to match.
China’s BYD Company surpassed Telsa as the world’s largest seller of EVs in 2023.
Some batteries more doldrums-proof than others
LFP cells have lately become the rock stars of battery-cathode chemistries: Adamas Intelligence showed LFP taking a record 31 percent of the mix in global passenger EVs in November. Efficiency gains such as cell-to-pack construction and sophisticated battery management could eventually make sodium-ion cells viable, too, in more passenger cars. And while solid-state batteries appear a few years from commercial viability, Kolesnikova said, it’s that type of technology that could help North America skip a step and compete head-on with China and other Asian battery makers.
“There’s a place for every chemistry here, whether it’s [high-nickel] NCM, NCMA, LFP, sodium, or eventually solid state. The ratio is the open question.”
Kolesnikova notes that Chinese automakers, including BYD—which passed Tesla as the world’s largest seller of EVs in 2023—offer models powered exclusively by smaller LFP packs. Those models, which tend to be relatively pint-sized for U.S. tastes, can nevertheless be produced and sold at prices that have even Musk losing sleep at night.
Lea Malloy, head of EV battery solutions for Cox Automotive, said millions of Americans remain wedded to bigger trucks and SUVs, regardless of what powers it. And many electric buyers demand robust range whether they really use it or not, in part due to worries over finding a charger when they’re farther from home.
“The road to adoption is never linear, but we will get there as an industry.” —Lea Malloy, Cox Automotive
“People buy the longest-range-EV, with the most kilowatt-hours, just in case,” Malloy said. “It’s about consumer education, getting a vehicle that meets 90 percent of their needs, rather than the exception to the rule.”
JAC Group, the Chinese automaker whose corporate parent is half-owned by VW, recently began selling the Yiwei 3—the world’s first production EV with a sodium-ion battery.Mark Andrews/Alamy
No matter the shape, size, or price of EVs, experts say the lack of reliable public charging remains the elephant in the room that’s flattening the adoption curve. Michael Behr leads Porsche’s Mission X project, the prototype electric hypercar that aims to become history’s fastest road-legal vehicle on Germany’s Nurburging Nordschleife circuit, the longtime benchmark for top performance. Behr said many potential EV owners will remain on the fence until charging is fast, seamless, and ubiquitous. When charging is solved, drivers should be perfectly content with downsized battery packs that reduce vehicle mass and boost all-around performance. Behr makes an analogy with high-performance motorcycles that might only manage 150 kilometers on a tank. Yet their stingy range and tiny gasoline tanks are never a factor for fans and buyers, because every rider knows there’s a 3-minute fill-up available at any gas station.
Automakers, regulators, and environmentalists face a final EV frontier: A sustainable, cradle-to-grave system of battery management, which can also drive down costs and reassure consumers concerned over battery life and used EV values. Working with nearly every automaking OEM, Cox Automotive recently opened its fourth North American EV battery service facility in Georgia, in addition to one in the Netherlands. At full capacity, the center can guide roughly 9,000 battery packs through their full life cycle, from repair and remanufacturing to ultimate recycling.
“The road to adoption is never linear, but we will get there as an industry,” Malloy said. “We have no choice.”