Electric car boom is slowing for one reason: they aren't good enough

Road Cars

The car industry is ploughing billions of pounds into electric cars but sales declined among private buyers in September. Andrew Frankel puts his finger on the problem

EV charging overhead picture

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Andrew Frankel

I talk a lot to people in many departments of the car industry: engineering, design, production, marketing and so on. And almost all of them has one thing in common: their budgets have been slashed to pay for electrification. Everyone in the industry has been affected by it in one way or another.

It’s no surprise, really. It’s been about 120 years since the internal combustion engine beat steam and electricity as the power source au choix for the automobile and we’ve been building them like that ever since. And now the industry faces its biggest upheaval since that time. And you can’t just slot electric motors where internal combustion engines once were or, rather, you can but the result will be an inefficient compromise that might suffice as a stop gap during this transition phase but no more. Manufacturers need not only to design brand new cars, but brand new platforms on which they can sit, in many cases brand new factories in which they can be built and create brand new supply chains too. It is an almost unimaginably expensive process, hence all those cuts.

But what if it starts to show signs of not working? Like all investment, the money spent has to be careful calibrated against expected returns and, well over a decade after we knew for sure which way the wind was blowing, there are signs that returns may not be quite what was hoped for or expected.

Mercedes EQE plugged in to electric car charger

Mercedes has nine electric cars in its range, including this EQE, but says it’s having to cut prices too low

Mercedes

A few examples: General Motors has said it is reassessing its plans in the face of lower than anticipated EV sales, Mercedes-Benz has said the EV price war is ‘unsustainable’, Stellantis boss, the talismanic Carlos Tavares has said he expects EV sales to slow in 2024 and even Elon Musk doesn’t disagree. The reasons quoted are often different: Tavares blames the likely outcomes of forthcoming elections in the US and Europe, Musk points the finger at interest rates, but the result is the same.

There are worrying signs in the UK too. The market in general is buoyant as it recovers from Covid and, superficially, new EV sales look strong and growing. Look a little closer however and what you’ll discover is that while fleet sales were up by over 50 per cent, the number of EVs bought by people with their own money is actually falling, by 14.3% in September, the month the latest registration plate was introduced. That’s not a reduction in the rate of growth, that’s fewer cars.

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For those charged with selling EVs in the UK, there was more bad news in the recent budget. The Office for Budget Responsibility now says that instead of EVs accounting for a quarter of all new car sales in 2023, the actually number will be less than one fifth. And if you think that’s bad, four years from now instead of EV sales accounting for 67% of sales, the new projected number is just 38%. In other words from over two thirds of new car sales to less than two fifths.

There are no shortage of culprits to blame, the government only being the most obvious, first for not putting more money into infrastructure building, second for kicking the can for the cessation of sales of new pure ICE cars back to 2035. But so too can you blame high interest rates and the generally downward trend of the oil price.

But ultimately, at least in my simplistic and probably overly binary mind, it comes down to one fact, which the industry does not care to talk about which is why it seeks to blame any external issue it can find. But at its most basic, electric cars are not yet good enough to justify the enormous cost of buying them. This is not quantum physics: until you can buy a car an electric car that’s as good as an old Ford Fiesta, for the same money as you’d have paid for an old Ford Fiesta, people will stick to their old Ford Fiestas. And whatever happens with interest rates, the oil price or the identity of the next occupant of Number 10, I can’t see that changing any time soon.

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