Electric vehicles are losing their luster as major automakers grapple with waning customer demand and the realization that mass adoption of EVs won’t happen without some hiccups. Mercedes-Benz is the latest to feel the pinch of high interest rates on consumers, with its chief financial officer, Harald Wilhelm, describing the EV market as a “pretty brutal space,” Reuters reported.
Mercedes-Benz noted rocky third-quarter earnings on Thursday, with profits and revenues down year over year. The German car company’s shares fell nearly 6% to $15.17 after the announcement. Tesla, the American leader in EVs, also reported disappointing quarterly results, which tanked Elon Musk’s net worth by some $30 billion as Tesla investors pulled back. And other traditional automakers are slowing their EV rollout plans as they fight to compete with low prices and as Detroit’s Big Three wrestle through a historic autoworkers’ strike, which may soon end.
“I can hardly imagine the current status quo is fully sustainable for everybody,” Wilhelm said, according to Reuters.
He explained the pricing predicament: In order to compete with Tesla’s and Chinese competitors’ stunningly low prices, traditional automakers are selling their EVs for less than regular combustion-engine cars, even though EVs are more expensive to produce.
Mercedes reported a net profit of 3.7 billion euros ($3.9 billion), down roughly 7% from the same period last year. Revenue dropped 1% from the same period last year, coming in at 37.2 billion euros ($39.2 billion). In a press release, the company pointed to “a subdued market environment marked by intense price competition, particularly in the electric vehicle segment.”
Trouble in EV paradise
President Joe Biden is aggressively betting on EVs as part of his ambitious agenda to reduce carbon emissions and fight climate change. But the market is wobbling as high interest rates dampen customer demand for electric and other vehicles. That’s “preventing a lot of people from even getting into the market,” Jessica Caldwell, head of insights at Edmunds, previously told Fortune.
Though EV sales are still growing, the pace of growth has slowed. In the first half of 2023, EV sales rose 49% from the previous year, a slower rate than the 63% increase in 2022, the Wall Street Journal reported.
Ford and General Motors are already feeling the pinch from the decelerating demand and ongoing strikes—of which the impending EV revolution is a core issue as it threatens the job security of thousands of autoworkers. Ford announced it will slow production of its electric F-150 Lightning pickup, and GM has delayed the introduction of the Chevy Silverado EV by a whole year and just scrapped plans to codevelop “affordable” EVs with Honda.
“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 said. “So to think that everything was going to roll out smoothly and we follow this nice adoption curve, it was a bit unrealistic.”
But Toyota’s chairman, Akio Toyoda, says he saw it coming, telling reporters on Wednesday that, “People are finally seeing reality.” Toyoda has long denied that electric vehicles are the only way for the automotive industry to achieve carbon neutrality, saying, “There are many ways to climb the mountain.”
