US consumers bought just under 16,000,000 new cars in 2024, which is 2.2% more than the prior year and the new sales record since the pandemic. Most automakers did well as they adjusted to slowing demand for EVs and focused on their core business in the United States of gasoline powered trucks and SUVs. The American car market continues to be dominated by larger and heavier cars, where demand for SUVs has grown hugely over the last 50 years.
Brands like Toyota and Ford benefited from growing demand for hybrids in recent years. Mazda saw the biggest gains, which sales up at nearly 17% in the United States, where they sold more cars in 2024 than ever before. Other top performers were Honda and Mercedes-Benz.
The best selling vehicle in the United States was once again the Ford F Series truck, followed by the Chevy Silverado and then the Toyota Rav 4. This is no surprise as the F Series has been the best selling truck in the United States for 47 years and the best selling vehicle of any kind in the US for 42 years. General Motors and Ford both reported their best year of U.S. sales since the pandemic, as lower interest rates, higher inventory and dealer incentives
persuaded shoppers to buy. The worst performers in terms of sales in 2024 were Stalantis, followed by Tesla. Despite Tesla's stock price rising more than 70% in 2024, the number of vehicles they sold fell by 1%. This was their first sales decline in more than a decade, and it came in a year when they're much hyped truck was introduced, which is supposed to be more in line with American vehicle purchasing trends than the sedans that they've been
selling up until now. This decline in sales for a company priced for extreme growth indicates that investors may be pricing in growth that's unlikely to occur. In recent years, Tesla investors have mostly ignored sales figures, focusing instead on the eventual development of robo taxis, robots, solar roofs, a battery business and rocket equipped sports cars, all of which are coming next year.
Stellantis, which is made-up of 14 automotive brands, was formed by a merger between Fiat Chrysler and Peugeot Citron. The company's revenues have been hit by weak demand, Chinese competition and regulatory uncertainty around electric vehicles. They missed analyst expectations, warned on profits and the CEO left abruptly last month. Reflecting these difficulties, the stock fell by more than 40% in 2024.
Stalantis's problems are largely driven by the fact that they raised prices in the post pandemic period, focusing on high end models pricing some new Jeeps north of $100,000, which caused vehicle sales to crater. Stalantis to today have some of the highest inventories of vehicles on dealer lots, as their expensive cars and trucks are simply not selling. Dodge, which was once famed for its Hemi V8 engines, has just pivoted to building electric vehicles.
While Architectural Digest raved about the new electric muscle cars, automotive journalists were less positive. I'm not sure how them Du Bois would feel about paying $70,000 for a car that's slower than a cheaper Tesla Model 3, which
also has more range. On the plus side, the Charger is a great name for an EV and it does have speakers where the exhaust pipe should be so that you can still annoy your neighbours revving up your EV. Over the summer, Jaguar entirely halted production of all of their cars, which were not selling very well, so that they could fully electrify the brand by 2025. In November, they unveiled a new brand identity, which drew a lot of press and switched the design
focus from classic British heritage to a more colorful and controversial look. Their advertising campaign used the slogan Copy Nothing, and they unveiled a new logo of which appeared to be copying the Dyson vacuum cleaner logo. I guess both firms are now in the electric appliance business. Jaguar later revealed a concept car, the Type 00, which appears to have been designed using Microsoft Paint and has no rear window, but at least it still has wheels for now.
Auto manufacturers stepped up their R&D spent massively over the last 10 years, spending 10s of billions of dollars developing electric vehicles and self driving technologies with little to no short to medium term returns on their investments. As the growth in demand for EVs appears to be waning, is electrification killing the car industry? The pace of US car sales picked up towards the end of 2024 as falling interest rates and improved dealer inventories attracted shoppers.
There was a lot of talk after the US election that EV buyers would rush out to take advantage of the Biden era electric vehicle tax credits, which are worth up to seven and a half $1000 before they possibly go away as Trump promised to eliminate these incentives on the campaign trail. There was a small pop in EV sales in December, with General Motors doing quite well. But if that's what a rush looks like, what will sales be like without the government
incentives in place? Even with the tax incentives, Boston Consulting Group reported earlier this year that automakers lose roughly $6000 on every EV they sell in America. Last year, Rivian revealed that it lost $33,000 on every truck they sold. Around the same time, Lucid reported that they lost $338,000 on each car sold. The problem for both of these companies is that they're selling in the luxury vehicle segment and EV buyers want more
affordable cars. The biggest success in EV adoption globally has of course been Norway, where 90% of new sales are electric. This was achieved through massive government incentives, where EV subsidies make up 2% of Norway's national budget. New electric vehicles in Norway are exempt from several taxes, including a 25% value added tax on cars. According to the IER, an equivalent ICE vehicle in Norway would be subject to $27,000 in various taxes that are avoided by buying an EV.
For that reason, it's no surprise how many EVs are sold. Electric cars were additionally made exempt from any road or fairy tolls and were allowed to drive in bus lanes. A number of these incentives have been reduced over time, partially because of complaints that they disproportionately benefit the wealthy who can afford EVs.
Norway was able to afford to spend billions a year on EV subsidies like this because they have the largest sovereign wealth fund in the world, funded by revenue from their oil and gas production. With such high EV adoption, all of the important EV infrastructure has been installed in Norway, making the cars extremely convenient there.
According to Vox, one of the negative side effects of the EV subsidies in Norway is that they've made driving so cheap that fewer people use public transportation, bicycles or walk. Norway today has one of the lowest rates of public transportation usage in Europe and a higher car ownership rate than Denmark and Sweden. It's Scandinavian neighbours. EV subsidies have been found to really move the needle in Germany.
Electric vehicle sales dropped almost 40% last year when the German government ended its €6000 EV subsidy. In 2022, Sweden eliminated a number of EV subsidies, which resulted in a 20% drop in electric vehicle sales. A huge part of the transition to electric vehicles globally is driven by government policy rather than customer demand. And even with government incentives in place, automakers are still generally losing money building these cars.
A huge problem affecting the demand for new EVs is the terrible depreciation buyers are hit with. I made a video last year on how many EVs have more than halved in value over their first year of ownership. It'll take quite a while to recover that kind of loss with fuel savings. In the UK there was a huge surge in EV sales in December when sales of battery powered cars jumped around 60% from a year earlier.
The reason this happened is that under UK law, automakers are fined 15,000 lbs, which is around $19,000 per car if 22% of their sales were not electric. Thus, they had to sell EVs at great discounts to avoid the fines. Despite the end of year surge, which automakers still fell short of the 22% target and the target for next year will be 28%. The required quota of electric vehicles to be sold in the UK ratchets up every year until
2035, when it reaches 100%. The British Society of Motor Manufacturers and Traders told the press that the discounts needed to boost EV sales to hit last year's targets were unsustainable, so 2025 could be even worse for the industry. Last year, according to Bloomberg, only one in 10 private buyers in the UK chose an EV, with business and fleet customers driving the majority of the demand.
Stellantis cited the UKEV mandate when it announced plans in November to stop manufacturing Vauxhall vans in the UK after 120 years of production. Nissan, who employ over 7000 workers in the UK, said last November that the EV mandate risks undermining the business case for manufacturing cars in the UK. Ford, who laid off 800 British auto workers in November, blamed unprecedented regulatory and economic headwinds.
So far, the British government is resisting pressure to weaken the EV mandate, but they may have to back down if it starts to impact employment. The change from ICE cars to EVs is mostly a minor one for consumers. The new cars serve the same purpose as the old ones did and mostly work the same other than having a huge screen on the dashboard to distract the driver. The major worry for EV buyers is whether they'll be convenient to charge and if they'll be as durable as an ICE vehicle.
For manufacturers, the transition is much more complicated. All of the intellectual property that they've built up from decades of manufacturing mechanical cars loses its value when they move to building EVs. The firms have to shift from their background in mechanical engineering to software development and battery manufacturing, which might involve an entirely different
workforce. If tailpipe emissions were the only thing that mattered to governments, they might push ahead with the change and just let customers buy EVs from China. But the auto industry employs 2.4 million Europeans and more than 4 million Americans. It's not just auto workers either.
There are 13 million Europeans and a similar number of Americans who rely on the auto industry for employment, making various components that are part of the auto industry supply chain, repairing cars, or selling spare parts and consumables. The workers who make car seats, door hinges, windshields, suspension components, and so on should be fine, as these are needed on EVs too.
But the highest paid jobs have historically historically been in manufacturing, engine and transmission components, and these workers and businesses won't be able to easily transition to making batteries and electric motors for EVs. It's an entirely different skill set. For this reason, governments are forced to weigh their commitments to workers and voters in their countries against their commitments to the Paris Climate Accords.
In recent months, a number of major automakers have announced plans to slow their transition to electric vehicles. Volvo announced that they wouldn't move as quickly as planned to an all EV lineup, and both Ford and General Motors said that they would delay the introduction of previously announced models. Five years ago, Ford said that it would go almost completely electric in Europe by the end of the decade, but they're now walking back those plans.
In November, they announced that they would be laying off another 4000 workers in Europe, where the transition to EVs is losing traction industry wide. Volkswagen and Stellantis have issued a profit warnings in recent months, citing a broad slowdown in vehicle sales and that governments are pulling support for EV purchases. Volkswagen even announced that they can't rule out plant closures in Germany for the
first time in their history. General Motors, which has had a lot of success with EVs, has still lowered their planned EV production and said that they would delay the launch of the first Buick EV, which they had been planning. Overproduction has LED Ford to announce that they're cancelling their planned all electric three row SUV and that they will instead use the plant that they've been retooling to build F series Super Duty pickup trucks.
A lot of this turmoil stems from EV production growing faster than consumer demand, particularly in Europe where governments are mandating the change. According to NPR, a slowdown in EV sales growth doesn't necessarily signal that EVs aren't coming. They argue that the question is about the pace of the journey, not the destination, making the case that the nature of any adoption curve is that new technologies catch on. 1st with a a tiny slice of tech geeks, the innovators.
Then they reach the early adopters who will put up with some inconveniences and are willing to pay a little more for cool tech. The problem for EV manufacturers, according to NPR, is that mainstream buyers are much harder to win over. They point out that it took 20 years for hybrids to become mainstream. Right now, most car owners are happy with the existing technology and see no reason to make a change.
It may still take some time to convince them, but this won't help investors who were expecting 50% annual sales growth and are now seeing both higher competition and lower overall market growth. GM, Ford and Volkswagen have all said that they are committed to ramp up their EV businesses, but that the pace of consumer adoption might not be as fast as
was previously expected. A big dilemma for politicians is that while they want cheaper EVs for environmental reasons, they don't want to undermine their domestic auto manufacturers or local employment by importing them from abroad. Governments so far are not backing down on their mandates, but they are equally not willing to see their manufacturing industries be wiped out by cheap Chinese imports.
According to most auto analysts, EVs are still expected to eventually make up most of the global automotive fleet due to tightening environmental legislation around the world. While many big automakers are struggling to meet government targets due to lower than anticipated consumer demand, they are still lobbying governments to keep many of the requirements in place, but with more time for compliance and lower penalties for companies that don't meet the
requirements. The reason that they want this is that they've invested billions of dollars in new facilities and don't want this investment to become worthless if the government's mandated demand goes away. A change in direction from governments would be extremely difficult for big businesses, as governments have encouraged companies to install things like charging infrastructure or to mine for minerals needed for batteries. If governments change direction, a lot of this investment could
become worthless. According to the New York Times, 3 of America's largest automakers are strategizing on how to ask Donald Trump to not scrap the federal regulations that compelled the industry to sell electric vehicles. While they don't love Biden's rules, they've already invested close to $150 billion into EV manufacturing and worried that if Trump made an abrupt change, they could lose out to automakers like Toyota and Mazda, who focused on
traditional cars and hybrids. A big question for the coming years is whether governments will continue to subsidize EVs while they're still mostly being sold at a loss. Even after the subsidies, Trump says that he won't. And while European governments seem more committed, their budgets are a lot tighter and they may not be able to afford
the subsidies. While Norway was able to complete the transition to EVs and get all of the charging infrastructure in place, they did it at enormous cost, which they could afford due to their fossil fuel wealth. Other countries don't have that much money to throw at the problem. According to most estimates, the battery of an electric vehicle typically accounts for around
40% of the overall vehicle cost. This compares to ICE cars, where the engine makes up only around 1/10 of the value of the vehicle. It's not unreasonable to ask if a company is even in the EV business if they don't make their own batteries. China is the world's leading producer of EV batteries, accounting for 75% of battery cell manufacturing capacity. China also produces and refines over half of the world's lithium, cobalt, and graphite.
China's BYD started out making batteries for mobile phones and only later moved to building EVs. They were, after all, already building the most complicated component. Most manufacturers outside of China don't make their own batteries. Tesla, for example, buys most of its battery cells from suppliers like CATL and Panasonic. They have, however, made efforts to produce their own 4680 battery cells, which are currently only used in the Cybertruck, a low volume
vehicle. Northfold was founded in 2016 with the goal of manufacturing EV batteries in Europe and selling them to European automakers. It quickly became the symbol of Europe green ambitions and later its failings. Northvolt took in around $13 billion in debt and equity financing since its founding last year. They manufactured less than 1% of the batteries they were theoretically capable of producing and ended up filing for bankruptcy in November.
After burning through billions of dollars in investment they raised from firms like Volkswagen and Goldman Sachs, Northvolt quickly transformed from Europe's best shot at local battery production to a company companies struggling to survive due to production difficulties, the loss of BMW as a major customer, and a lack of funding. Pure EV companies like Lucid and Rivian have been struggling despite building vehicles that
are praised by their owners. Lyon Electric, a Canadian electric bus manufacturer, received almost $50 million in taxpayer subsidies before filing for bankruptcy, resulting in the complete loss of those public funds. Some of the slowdown in sales at Tesla has been blamed on Elon Musk's involvement in politics, which might be pushing some buyers away who don't share his political views.
While 1/3 of E VS sold in America are sold in California, a left-leaning state, CNN found that many of the reasons people choose in EV are unrelated to politics. And a lot of conservatives do buy electric vehicles. EV buyers are often the same same people who upgrade their computer and mobile phone every year because they love new
technology. EV buyers are driven by things like brand status, charging station availability, a desire to own the newest technology, and of course incentives like rebates. According to LendingTree, Tesla buyers are amongst the most indebted new car buyers and they take out the longest duration car loans to finance the
purchase. It is possible that the slowdown in sales at Tesla is less related to politics and is driven instead by increased competition in the EV space and slowing demand from mainstream buyers who are happy with the existing technology. According to Ernst and Young, fewer buyers are considering buying an EV today than we're
considering 1A year ago. A recent Wall Street Journal article argues the 2025 may be the year that net zero dies, as voters lose patience with the project and grow less shy about saying so. Some of that can already be seen in recent election results around the world.
The author argues that Britain's Labour Party has already started to backtrack on its green electricity pledges and may be getting cold feed about the EV mandate now that job losses are starting to mount in the domestic auto industry. He says that the climate policies pursued by Angela Merkel and her successor Olaf Schultz are at the root of Germany's slowdown, and the politician likely to replace Schultz promises a significant rethinking of energy and climate
policies. If German voters do step back from net zero, the rest of the EU is unlikely to be far behind. The reason that voters have grown tired of net zero is that they were promised that the transition could happen with no noticeable dent to prosperity or reduction in living standards, which no longer appears to be true. While some jobs are disappearing, the green jobs that were supposed to replace them are not materializing.
In Europe, France's government recently suggested that meeting it's net 0 targets would require households to tolerate lower temperatures inside their homes during the winter and to travel less on holidays. None of which is particularly
surprising. The article says that the main reason net Zero might die in 2025 is because of how destructive the policies have been on the auto industry, a huge employer in Europe. It seems to me that we're likely to see significant turmoil in the auto industry in the coming years, where historic brands like Jaguar and Dodge could disappear if they botched the transition to electric vehicles by alienating their existing customers without convincing a
new audience to buy their new products. The biggest problem for the auto industry might be the geopolitical tensions between the US, Europe, and China. Automakers may struggle to deal with changing environmental regulations, new trade rules, tariffs, restrictions on tech transfers, and a general reversal of globalization. Thanks again for tuning into this week's podcast.
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