Has the global EV bubble burst? Demand dip prompts panic posturing

Electric vehicles promise to take over global roads and the rise in popularity of battery-powered personal mobility options has been nothing short of meteoric. In just a short span of less than a decade, the likes of Tesla and BYD have mounted a massive challenge to traditional carmakers that trace their origins to several decades back. But while the recent past has been great, the immediate future looks tentative. Demand for electric cars in particular is tapering and the rate of growth in sales is expected to moderate in many of the major automotive markets across the world.

The past four years have been extremely fertile for most EV manufacturers of varying repute. Models have been injected into growing markets and sales have been reaped for a bountiful harvest of record revenue. EV sales in 2021 were at 6.75 million, up by 108 per cent from the previous year. It grew by another 3.66 million units in 2022 and stood at 14.2 million in 2023. These figures include both fully-electric models as well as plug-in hybrids. But imminent danger signs began appearing by October, November and December of 2023 itself.

Soft brakes on EV push

In many of the biggest automotive and EV markets around the globe, demand for EVs have been witnessing a small but significant dip.

In China, the world's largest automotive and EV market, sales of new-energy vehicles (NEVs) were at 729,000 units in January, a sharp fall of 39 per cent from a month earlier, as per data from the China Association of Automobile Manufacturers (CAAM). Production of EVs fell by 33 per cent to 787,000. According to China Passenger Car Association (CPCA), the two main reasons for these are increasing prices of some popular models as well as declining offers from local governments on purchase of NEVs. S&P Global Commodity Insights reveal that EVs accounted for 29.9 per cent of all new car sales in the country in January, falling below 30 per cent for the first time since May of 2023.

Then there is the US, a distant second in the list of world's biggest automotive markets. The market for EVs here is growing but the concern is it isn't growing as fast as previously predicted. EVs accounted for 7.6 per cent of all new car sales here, growing from 5.9 per cent. But Bloomberg data shows that sales of such car models increased by just 1.3 per cent in the final months of last year. Industry insiders here say the ground reality is that while more Americans are buying EVs than ever before, many more were predicted to have invested into EVs still but didn't. Or have not yet, anyway. The lack of solid dealer and company discounts are being squarely blamed ."It's true, the pace of EV growth has slowed, which has created some uncertainty. We will build to demand," GM CEO Mary Barra said during an earnings call. GM has previously cut production of EVs and so has Ford.

Even in many markets of Europe, the cooling demand for EVs is evident. Germany stopped incentive program for such vehicles. This had a near immediate detrimental impact on demand. In the UK, the Society of Motor Manufacturers and Traders pointed out that EV sales are not as hot as was in recent years. Experts here say the government’s zero-emission vehicles (ZEV) mandate of having 22 per cent of all new cars sold in 2024 must be free from emissions completely, is likely to be missed.

Wait and watch

So are EVs just a fad that will fade away as apparel styles do in the fashion world? Unlikely, agree most experts. They claim EVs are a long-drawn game and not the instant hit that many others thought till now. “EVs aren't novelties anymore," points out a New York Times report on whether EV sales in the US will decline in 2024. “In 2024, though, the question is who, exactly, is left to buy? Elon Musk fanboys and other tech trendsetters have all basically bought their EVs, and now major automakers have to contend with customers who don’t really care about the cars."

Manufacturers though are keen to ensure the Green in their accounting books doesn't fade or worse still, turn into Red. From Tesla to BYD, many brands have announced price cuts in China as well as the US to possibly jumpstart thr growth trajectory on the previous high path. Even closer home in India, a country where acceptance and adoption of electric cars remains quite low, companies like Tata Motors and MG Motor India recently slashed prices on many of their fully-electric models. Will it work? It may be a wait and watch game for now.