This news out of Germany raises the question, can EV supply outstrip demand?
The workforce was informed of this on Monday, the works council said. According to the statement, while production of combustion models, such as the Passat, will continue unchanged, the three-week plant vacation for employees in the E-segment is also to be extended by one week. In addition, around 300 of the 1,500 temporary workers currently employed in Emden are not to be kept on from August.
According to the works council, the reason for the production cuts is flagging sales of e-vehicles. “We are noticing customer reticence quite vehemently in the electric world,” Wulff said. Uncertainty among customers is high, he said. Demand is nearly 30% below the originally planned production figures, he said.
While it may be that people just don’t like the VW products, he seemed to indicate it was more than that:
"We are noticing customer reticence quite vehemently in the electric world”
That seems to be the case with Ford.
Ford Motor plans to lay off at least 1,000 salaried employees and contract workers in North America, people familiar with the matter said, the automaker’s latest effort to defray the heavy cost of investing in electric cars…
This latest reduction of Ford’s white-collar workforce includes employees in its electric-vehicle and software side of the business, the company spokesman confirmed…
For traditional automakers, boosting profit margins on the internal-combustion side of the business has become a crucial focus, because the profitability of EVs is expected to be skimpy for several years as companies scale up output and work to reduce battery costs , analysts say. Farley said last month that the cost of making an EV might not be equal to that of internal-combustion vehicles until after 2030.
Ford has said it expects to lose $3 billion in operating profit on its EVs business this year.
I wonder how much the IRA is responsible for this. Only the ID4 gets a tax credit (and it was just added in April) so it is fair to assume that the rest of their models, including all the Audi models, are selling a lot less than they might otherwise.
It’s possible, but most US consumers still have no clue about the differences between NACS and CCS. All they know is that the media is repeatedly hammering on “charging issues”, “broken chargers”, “slow charging”, “expensive installs”, etc. The hilarious and ironic thing is when the WSJ publishes such an article and uses a photo of a Tesla attached to the article. Meanwhile, right now Tesla is pretty much the only brand without most of those issues.
It could be both things - that EV demand growth is slowing, and that Tesla’s new European factory is eating into market share.
There are early indications that EV growth in the European market is starting to taper off. YTD 2023 has seen about 868K sales through the end of April, compared to about 724K through the same time in 2022. That’s a decent amount of growth, but it’s “only” about 19% - a far cry from the “S curve” levels of growth that VW might have been hoping for. And it’s no faster than the broader car market - EV share has stayed flat YTD between 2022 and 2023, a sharp reversal from the past several years.
Meanwhile, Tesla’s market share in Europe has increased substantially over that time frame - rising from 8.4% to 12.2%. Part of that is due to Tesla unwinding the supply waves, but a big part of it certainly due to Tesla taking market share from other competitors. Tesla Berlin has now reached the 5K per week production level for Model Y’s, most of which production is heading to European markets - that’s helped unwind the waves and position them more strongly to capture parts of the market:
The redundancies are being carried out at the car giant’s plant in Zwickau, where a further 2,000 temporary workers are also at risk of losing their jobs.
Volkswagen’s Zwickau factory only produces electric vehicles, which have fallen in popularity due to high inflation and faltering government support…
Volkswagen, which was contacted for comment, previously cut electric car production at another of its biggest factories after waning interest led to lower sales than expected. In June, it also stopped work on electric models for six weeks at its plant in Emden, northwest Germany, and planned to lay off 300 of the 1,500 workers involved in making them…
Manfred Wulff, head of the Emden plant, said: “We are experiencing strong customer reluctance in the electric vehicle sector.”
And, from anyone non-Tesla, I can see why. But especially for VW, who was mandated, as punishment for cheating on emissions standards TWICE, to build an EV charging network. They did it half-arsed and as a result have created a reputation (self-inflicted and well deserved) that electric vehicle charging is unreliable and slow.
As much as I utterly despise Musk the person, he realized that nobody was going to create a charging network for him. And that charging network needed to be reliable, fast, and in the right locations.
Double-whammy now with so many adopting the NACS standard. We are also seeing an Osbourne effect. Why buy today’s Mach-E or Lyric if in a year you get a NACS connector on the car instead? Honestly, it’s making me pause and I won’t buy an EV with a CCS connector on it now. And no, I won’t buy a Tesla either.
And Tesla keeps cutting prices. Is that because of staggering improvements in operational efficiency, or to try and maintain market position in the face of stronger competition. Of course, the narrative in the industry today is that prices only go up, even if costs go down, because maximizing ATP and GP is the only objective. (Musk must be a Commie for not gouging his customers like other automakers do. )
It was all dependent on the EV market being limited to a relatively small area, so they could build it out over time. This is still true today. It will remain true until the battery cost drops enough to enable an adequate charge in cold weather. Until then, EVs will be primarily a warm-weather vehicle.
I think it’s both things. Tesla has significantly increased its market share in Europe, a lot of which was at the expense of VW. And the Chinese are coming to drink their milkshakes, I think even despite the recent protectionist moves.
But EV adoption in Europe is already starting to show signs of slowing, in a way that won’t show up in a Q2-Q2 comparison (Q2 2022 was a really low quarter for all vehicle sales, as manufacturers reached “peak” struggles with supply chain inventory problems). That’s is not what folks counting on an “S-curve” rate of conversion might have expected. The Scandinavian countries are major bright spots, of course.
However, here’s the first half EV market share (EV and BEV) for Europe over the last four years:
Year
EV
BEV
2023
22%
15%
2022
20%
12%
2021
16%
8%
2020
8%
4%
My understanding is that you shouldn’t see the growth rate falling so sharply so early in an S-curve. It might be a short-term phenomenon - EV adoption can be very sensitive to changes in subsidy and other government policies. But if consumers are indeed starting to slow down in making that switch, and VW actually would have to take marketshare from Tesla and the Chinese autos rather than just getting a chunk of a very quickly expanding market, then that might be a much more difficult environment for them.
I think such conclusions are premature for Europe because of heterogeneity with respect to supply, charging stations, etc. European nations are at vastly different points along the BEV adoption S-curve so the mean could vary quite a bit over short time periods.
In addition, the popularity of the Model Y makes it possible that a slowing in EV adoption could be due more to limitations in the supply of the Model Y rather than less demand for EVs.
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