3 months ago • 2 mins
What’s going on here?
The number of electric vehicles (EVs) stuck in US dealers’ lots hit a new high.
What does this mean?
EVs only become eco-friendly once they’ve been driven some distance. So right now, we’re far from green. Almost twice as many EVs were stuck in dealers’ garages at the start of December compared to the same time last year, excluding straight-to-driver sellers Tesla and Rivian. That’s partly because US drivers are balking at EVs’ spotty charging infrastructure and sputtering driving range when the weather’s too hot or cold. Any buyer still in the market has to scrape together a ton of cash to buy one, too – a hard task in this economy. But it’s also because carmakers are pumping out new models faster than they can sell them, so much so that dealers asked the US president to relax pro-EV mandates last month to ease their heaving inventories. That may be needed: Bloomberg now expects drivers to buy roughly 775,000 fewer EVs next year than it predicted in June.
Why should I care?
For markets: If it sounds too good to be true…
The aptly named KARS exchange-traded fund (ETF) has fallen halfway from its 2021 peak, while the broader DRIV ETF is sitting nearly a quarter behind its own highpoint. Now it’s true, high interest rates, China’s slowdown, and tense geopolitical landscapes may have hurt the sector. But with carmakers falling behind the lofty expectations set a couple of years ago, you can’t blame investors for becoming disillusioned.
The bigger picture: Buckle your seatbelts.
Market leaders Tesla, General Motors, and Ford are spending money with a more cautious hand now, waiting for hints on buyer demand before putting more cars on the production line. These days, they can’t afford to waste a dollar: carmakers will likely be forced to slash prices to attract would-be buyers, but with costs showing no sign of deflating, that’ll take a toll on profit margins.
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