Charged Up But Unplugged

It ain’t easy saving the planet with electric vehicles.

Electric vehicles were supposed to be the future of transportation, appealing to consumers for their zero emissions and freedom from gas station stops. Supported by a governmental push for lower pollution, EVs looked ready to receive the baton from the world’s internal combustion engine (ICE) fleet.

They didn’t. Consumers have lost interest and automakers are pulling back.

Lowest-cost Chinese EV makers may be the only ones that survive medium-term market dynamics, supporting Beijing’s plan to dominate the EV industry over the long term, when it’s still expected to eclipse the ICE fleet.

Ford (F $10 -14% YTD) announced on August 21 that it was canceling production of its previously planned all-electric three-row SUV, among other changes to its electric strategy, in response to two pressures:

• China taking over the world’s EV market, and

• Washington attempting to offset this by subsidizing American EV efforts.

Ford wrote in its press release:

“The electric vehicle market is rapidly evolving as Chinese competitors leverage advantaged cost structures including vertical integration, low-cost engineering, multi-energy advanced battery technology and digital experiences to expand their global market share.”

For more on this, see my April 1 installment:

To benefit from largesse in the Biden administration’s Inflation Reduction Act, Ford will bring battery production for its Mustang Mach-E from Poland to the US for tax breaks. Apparently, the company doubts the IRA will be repealed by future administrations, a notion seconded by financial analysts, including Tom Narayan at RBC Capital Markets.

What if, in this scramble to dominate the EV market, the EVs themselves are not the main issue? What if investors looking to China for the next great automotive opportunity are missing the real opportunity in this? They may well be. For, as anyone caught in the recent blackouts of Los Angeles will tell you, EVs aren’t worth much without the E.

Never forget that California politicians want to mandate EVs while at the same time telling you not to charge them because the grid can’t handle the load.
— Chris McPherson, WSJ comment, “Lights Out in La La Land,” 9/9/24

Follow the money in this global race and you’ll wind up at the E, not the EV — and there’s no “e” in solar or wind.