by State of the Automotive Industry
The automotive industry is constantly changing. Although electric vehicles are gaining increasing popularity worldwide, in the US they face serious challenges. The federal government no longer subsidizes them, internal combustion engine vehicles do not carry severe penalties for violating economic standards, and the average price of electric vehicles remains higher. Despite this, former Ford CEO Mark Fields is confident that electric vehicle adoption will continue to gradually increase.
Growth Prospects
During an interview with CNBC on Friday, Fields stated that he expects “gradual growth” in demand for electric vehicles following the Trump administration’s decision in September to discontinue $7,500 tax credits for new and $4,000 credits for used electric vehicles. The former Ford leader, who headed the company from 2014 to 2017, believes that long-term implementation remains inevitable as consumers increasingly transition to renewable energy sources.
You will see these rates increase over time, but not at the pace automakers expected. That is why you see the large write-offs that Ford, GM, and others have made.
GM announced that it is making a $1.6 billion write-off related to the “strategic reformatting” of its electric vehicle development plan.
Management Views
Current Ford CEO Jim Farley also stated earlier this month that the loss of tax credits could cut US electric vehicle sales in half in the near term. Like Fields, Farley believes that adoption rates will continue to grow with the emergence of more affordable models. The former executive noted that automakers “rushed into electrification” without fully understanding consumer demand.
You will see more write-offs in the future as the industry adapts to the new demand curve.
Alternative Opinions
However, not everyone agrees that the cancellation of subsidies will impact adoption as significantly as expected. Former Tesla global sales head John McNeill told CNBC earlier this month that European markets continued to grow despite similar subsidy reductions. Thus, there is a possibility that the American market could recover as buyers adapt to the new prices.
The transition to electric vehicles remains a complex goal for automakers, especially amid regulatory changes and economic uncertainty. However, long-term trends such as decreasing battery costs and expanding charging infrastructure may contribute to further development of this sector. Automakers will likely need to balance investments in electrification with maintaining traditional product lines to meet diverse market needs.
