The recent tumultuous performance of Tesla, resulting in a $28 billion loss for Elon Musk, has raised questions about the electric vehicle (EV) industry’s profitability. Toyota’s chairman and former CEO, Akio Toyoda, who has been a vocal critic of the EV fervour, is now feeling vindicated. He had stepped down from his role at the Japanese automaker earlier this year, partly due to his scepticism about electric vehicles.
With Tesla reporting disappointing third-quarter earnings, investors are beginning to realize that EVs may not be a guaranteed path to substantial profits. “People are finally seeing reality,” Toyoda stated on Wednesday.
Toyoda has consistently argued that carbon neutrality in the automotive industry can be achieved through various means, stating, “There are many ways to climb the mountain.” Other major automakers are also reconsidering their EV strategies. Lucid has reduced production by 30%, and GM has postponed the launch of the Chevy Silverado EV by a full year.
President Joe Biden has placed a significant emphasis on electric vehicles as part of his strategy to reduce U.S. carbon emissions and combat climate change. However, the EV market is facing challenges as high-interest rates are dampening customer demand for electric and conventional vehicles. This has been a hindrance for many potential buyers, as noted by Jessica Caldwell, head of insights at Edmunds.
While EV sales continue to grow, the pace of growth has slowed. In the first half of 2023, EV sales increased by 49% compared to the previous year, a slower rate than the 63% increase in the previous year, according to the Wall Street Journal.
“We’re transitioning to a brand new technology. It’s expensive. It requires people to have a different relationship with their vehicle that has been largely unchanged for decades,” Caldwell explained. “So to think that everything was going to roll out smoothly and we follow this nice adoption curve, it was a bit unrealistic.”
Furthermore, Elon Musk, Tesla’s CEO and a prominent advocate for EVs, recently experienced a significant hit to his net worth, losing $30 billion. Tesla posted its lowest quarterly earnings per share (EPS) in two years, falling 10% below already negative analyst forecasts. Tesla’s stock value promptly declined by over 17%, and the company’s market capitalization dropped by $138 billion in just over two trading days.
Despite these challenges, Caldwell believes that these setbacks are merely “growing pains” on the road to EV dominance in the auto industry. She notes that the industry is undoubtedly moving toward EVs, even though the exact path to that future remains uncertain.