EV’s hit speed bumps on the road to their future

It’s been a while since we took a look at the ongoing transition to electric vehicles in this space, and there’s been a lot of industry news in the last few weeks that deserves some attention. Georgia has become one of the biggest players in this emerging corner of the automotive industry with new vehicle manufacturing plants, EV battery manufacturers, and the suppliers for each of them.

There are billions of dollars in private investment, hundreds of millions in tax incentives and abatements, and tens of thousands of Georgia based jobs on the line. The potential is huge for the state.

The road between here and the potential payoff will be bumpy. Many of the plans and promises of the transition seemed to hit reality in the last few weeks. Some of the recent headlines include:

“Ford pausing work on $3.5 Billion Michigan electric vehicle battery plant” – CNN

“GM to delay all-electric truck production at Michigan plant until late 2025” – CNBC

“GM delays Chevrolet Equinox EV market launch” – Inside EVs

“Honda, GM scrap $5 billion plan to co-develop cheaper EV’s” – Reuters

“Hertz slows down on EV plans” – The Verge

“Ford will postpone about $12 Billion in EV investment as buyers become more cautious” – CNBC

“Mercedes-Benz EQ (EV) models have been slow to sell, dealers report” – Teslarati

After reading those headlines those inclined to worry could be approaching panic attack status, while those who have already decided EV’s will be a market failure will decide they have been proven correct. Let’s group them into a couple of different categories for a closer look, starting with the Big 3.

GM has been over-promising and under delivering on the transition to EV’s for decades. They managed to burn through the maximum original federal tax credits by making Volts and Bolts that never made the company much money, with many of the Bolts ultimately having to be recalled for fire risk due to a manufacturing problem with their supplier.

Their newer “Ultium” technology batter has taken so long to get into mass production that it’s no longer cutting edge with respect to range or acceleration in most models, and the battery recharge time is slower than most competitors.

Ford made the questionable decision to partner with a Chinese firm on their Michigan battery factory, which drew scrutiny from federal bureaucrats and politicians. A key component of the new EV incentive structure is that cars and batteries will be American made with components sourced domesticalor from allied countries. It was not sure Ford’s partner would meet that test.

Both companies have spent the last month with increasing strikes from the UAW, with the result to increase each company’s cost per vehicle produced guaranteed to increase with new contracts. The high cost of each company’s offerings – combined with consumer interest rates that have more than doubled in the past year – has put most of their offerings out of reach from the average American consumer, even after tax credits are factored in.

The news from Hertz bears some exploration, as they only attained about one third of the EV’s of their original goal and are slowing down fleet additions. The company cited Tesla’s price cuts as a factor, which reduced the value of cars in their fleet and caused losses on disposition of retired vehicles.

More interestingly, the costs for both maintenance and collision repair for their electric fleet was more than Hertz had anticipated. The former is often cited as part of the reason EV’s will be cheaper for consumers in the long run. The latter will result in higher insurance costs if the same experience is what real world consumers face.

Tesla, meanwhile, remains profitable despite recent price cuts. They have been able to spread their costs over what will be just shy of 2 million vehicles produced this year, and have designed their cars to minimize maånufacturing expense.

Ford and GM are now going back to their own designs and try to get their price points down, chasing Tesla. Morgan Stanley auto analyst Adam Jonas suggests that Ford and GM may want to focus on internal combustion cars and scrap expensive EV plans altogether. The problem with this plan is that it would relegate them to mostly a US manufacturer only. Regulations in China and Europe – both bigger markets than the U.S. – will make it virtually impossible to meet emissions standards with gas powered vehicles within a decade.

As for Georgia’s main EV manufacturers – Hyundai/Kia and Tesla – they are not burdened with UAW contracts, and both are designing purpose built EV’s that don’t rely on older gas powered designs with their embedded costs. They are the future of manufacturing, and they are not burdened with the legacy baggage of Detroit.

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