Top executives of Ford, General Motors and Mercedes-Benz all addressed concerns over waning demand for electric vehicles this week, as the major automakers navigate losses and price wars amid an EV push that not enough consumers are buying.
On Thursday, Ford withdrew its full-year results forecast, citing “uncertainty” over its tentative deal with the United Auto Workers and warned of continued pressure on electric vehicles as customers balk at paying a premium for EVs over other models.
“It’s been a challenging situation, for sure,” Ford CEO Jim Farley said during the company’s third-quarter earnings call after posting greater losses than expected on EVs. “Matter of fact, our business is never short of challenges, especially right now with the evolution of the EV market and new global competitors from China, as well as the technology disruptions.”
“A great product is not enough in the EV business anymore,” Farley continued. “We have to be totally competitive on cost.”
He added that, for consumers, “affordability is an issue” when it comes to EVs.
GM on Tuesday withdrew its 2023 profit outlook, and CEO Mary Barra said the automaker will slow the launch of several planned EV models to cut costs.
“We are reducing our fixed costs by $2 billion net of depreciation and amortization as we exit 2024,” Barra wrote in a letter to shareholders. “We are also moderating the acceleration of EV production in North America to protect our pricing, adjust to slower near-term growth in demand, and implement engineering efficiency and other improvements that will make our vehicles less expensive to produce, and more profitable.”
The next day, GM and Honda issued a joint statement announcing the end of a $5 billion partnership to develop affordable EVs together, just one year after launching the effort.
GM also made the decision earlier this week to postpone a $4 billion electric truck plant in Michigan.
Mercedes-Benz reported this week that its third-quarter earnings fell as margins on EVs remained lower than previously assumed.
Mercedes-Benz financial chief Harald Wilhelm noted during a call with analysts that some traditional players are selling EVs below the pricing level of internal combustion engine vehicles despite their higher production costs, saying, “I can hardly imagine the current status quo is fully sustainable for everybody.
Rival automakers are on a quest to take on EV giant Tesla, which dominates the arena and has made several price cuts to vehicles this year to keep the cost of its cars competitive for consumers.
In the company’s earnings call last week, Tesla CEO Elon Musk voiced his concerns that high interest rates are making it more difficult for consumers to afford buying a car and left the door open to further price cuts in the future.
The prospect of further cuts did not go over well with some.
In a note the next day, Wedbush analysts wrote, “In a nutshell we would characterize last night’s conference call as a ‘mini disaster’ as the Street wanted to get their arms around the falling margins and constant price cuts seen globally, but instead we heard from a much more cautious Musk…”