Is it the end of the road for electric cars?

The financial reporting season for the third quarter of 2023 brought particularly unpleasant "surprises," both for investors and for customers of companies producing electric vehicles (EVs), eager to showcase their progressivism and strong desire to combat climate change, but only with generous state subsidies.

With the reduction or even complete elimination of these subsidies, demand vanished, often like magic.

Business Insider recently reported that "auto industry executives are starting to tell the truth," that "electric cars aren't selling." Acceptance of reality comes after many months during which dealers have been signaling a sharp decline in demand.

Mary Barra, CEO of GM, announced during the latest quarterly earnings presentation that they are abandoning the production target for electric vehicles for the second half of this year, of 100,000 units, as well as the target of 400,000 units for the first half of next year, as reported by Bloomberg.

Given that dealers have to apply significant price reductions to sell EVs, the chief financial officer at Mercedes-Benz stated, "we are in quite a brutal space," and "it is hard to imagine that the current situation is sustainable for all," as emphasized by Harald Wilhelm.

Online publication The Verge recently reported that Ford is postponing a $12 billion investment for building a new factory and a battery production unit in Kentucky.

The decision comes amid massive losses recorded in the EV division, about $3.1 billion in the first nine months of this year. Estimated losses for the entire year are around $4 billion.

A recent article on Electrek.co shows a massive drop in EV orders received by Volkswagen for Europe. The decline of about 50%, down to 150,000 units, was announced by the company's CFO after the publication of the financial report for the first nine months of this year, which showed about a 45% increase in EV deliveries.

The worsening outlook for EV manufacturers is also reflected in a Bloomberg index that includes global companies' stocks in the sector. From the peak recorded in November 2021, the Bloomberg Electric Vehicles Price Return Index (BBEV) has dropped by over 52%, to around 2,700 points, while the decline since the beginning of this year has been about 16% (see the chart).

A "collateral" victim of the new trends in the EV market is Hertz, which announced a few years ago, after emerging from bankruptcy, that it would build a massive fleet of Tesla vehicles.

Recently, Hertz's shares hit multi-year lows due to a significant decrease in net income, mainly driven by high repair costs for the EVs in its fleet, according to a Bloomberg report.

The costs for repairing electric cars have been higher than expected, about double what the company pays for repairing gasoline cars, as stated by Stephen Scherr, Hertz's CEO.

Beyond the high prices, the appeal of electric cars seems to be strongly tempered by the reality of high maintenance costs, which stubbornly defy the promises made to customers.

Nikhil Naikal, CEO of Kinetic, a company specialized in repairing electric and autonomous cars, outlined some reasons why these vehicles might need more maintenance than traditional ones, despite having fewer moving parts.

With significantly more mass than traditional cars, EVs accelerate and move much faster. In these conditions, suspensions are more affected, as well as steering and brakes. Additionally, there is a need for more frequent tire replacements.

Optimists may say that the current negative dynamics in the EV market are temporary, and the causes will be eliminated with the introduction of new technologies to increase autonomy and reduce battery charging time.

Unfortunately, increasing autonomy and reducing battery charging time cannot change a fundamental aspect: the capacity of electrical grids to handle additional demand, especially since they will theoretically transport primarily electricity produced from variable sources, such as solar or wind power.

Even a hypothetical success in achieving complete electrification solely from renewable sources would still be a failure, as it would create an extremely fragile system marked by an extraordinary dependence on sources that do not guarantee continuous electricity supply.

For now, these "details" are not enough to convince authorities in the United States and Europe to reassess their "climate" objectives. The next step will probably be a widespread bailout for electric car and "renewable" energy producers, according to estimates presented by The Wall Street Journal, because "even if EV manufacturers manage to produce cars at reduced prices, there is no guarantee that customers will buy them."

Bill Ford, CEO of Ford, recently stated in an interview with The New York Times that electric cars risk becoming "collateral damage in a much broader cultural war."

"Certain conservative-leaning states argue that mandating electric vehicles is akin to mandating vaccines, which are forced by the federal government, even if we don't want them," emphasized Henry Ford's great-grandson.

The WSJ columnist supports this opinion and asserts that "progressives impose the green transition and their supposed superior cultural values, although the general public does not share them."

Furthermore, "if government mandates turn against car manufacturers, then taxpayers will be forced to pay for repairing this industrial sector," as The Wall Street Journal further illustrates.

But how significant could this burden imposed on taxpayers be, amid an explosive international context that will "guarantee" increasingly higher prices, not only for basic products and energy but also for essential raw materials necessary to achieve climate goals?

And what will happen when the limits of patience are reached, and the "hunger games" begin?