EVs still on the brakes
For years, we’ve been fed a whimsical story that battery electric vehicles (BEVs) are on an unstoppable march to dominate our roads – spurred on by ambitious government targets, subsidies, that hydrocarbons are evil, and a steady drumbeat of headlines proclaiming that “electric is the future.”
A closer look at the current global automotive landscape reveals that future to be further out on the horizon than many thought and that a few hoped for.
The latest news is that major manufacturers, who were hitherto electric vehicle (EV) proponents, are scaling back production. And recent numbers hint at a deceleration, even reversal, of what was once heralded as the great EV revolution.
Meanwhile, government incentives are winding down, and consumer enthusiasm has been cooling, if not cold, for a while.
Not long ago, many governments talked of having nearly 100 per cent of new car sales being electric by around 2035. That figure has since been dramatically revised lower, reflecting a harsh truth: despite continued marketing, consumers – those who aren’t early adopters – aren’t embracing BEVs in the absence of subsidy sweeteners.
Even in countries that seemed to embrace EVs wholeheartedly, the story is becoming more complex. China had long been a poster child for booming electric car sales, buoyed by state incentives. But analysts there are starting to predict flat growth in exports of electric cars – a major red flag for a nation that was supposed to lead this segment. Rather than the classic narrative of BEVs rapidly outpacing all other drivetrain types, we’re seeing a more nuanced picture when hybrids – especially plug-in hybrids (PHEVs) – get lumped into “EV” sales figures.
As we have reported here previously. BEV sales in Australia are in an entrenched funk while sales of hybrids are surging. Plug-in hybrids straddle the line between traditional internal combustion engines and fully electric drivetrains. They appeal to buyers who like the idea of saving money on petrol but still want the reliability and range assurance of a n internal combustion engine.
And a band of would-be BEV buyers are adopting a wait-and-see approach, observing battery-electric technology continuing to evolve. For the vast majority of the population, the issue with BEVs is ‘range, resale and recharge”. Limited charging stations, the time required to top up a BEV’s battery on the road, range anxiety and plunging resale values top the list of objections causing a slump in new BEV sales.
For those with a heart for environmental issues, the jury is out on whether BEVs are better or worse for the environment given the mining of lithium is incredibly taxing on the Earth, the environmental footprint to manufacture an EV is reportedly 40 per cent greater than an internal combustion engine (ICE) vehicle, BEVs tend to be driven fewer kilometres than an ICE vehicle, and the recycling of BEV batteries is a problem yet to be solved.
EVs are often labelled “zero emissions,” but this classification ignores the upstream reality of electricity generation. If the local grid relies on coal or natural gas, then an EV’s carbon footprint may be less pristine than the marketing suggests. Buyers aware of this nuance may question whether “going electric” is truly the green choice, especially if the vehicles cost more and come with range and charging complexities.
Keep in mind community objection to wind farms, and also remember the debate about renewable’s inability to provide reliable baseload power.
It could be a long time before everyone can recharge a BEV with green power.
In Europe, changing policy towards EV support has also contributed to collapsing demand. For years, German buyers were given generous subsidies to purchase electric cars, and manufacturers benefited from sizeable incentives as well. It worked: Germany quickly became a hotspot for EV adoption. Then, in what might be a cautionary tale for other jurisdictions, those subsidies ended. Almost immediately, EV sales in the country plummeted – by some reports by nearly 30 per cent.
Some governments try to push EVs through mandates rather than direct incentives. The UK’s Zero Emission Vehicle (ZEV) mandate, for example, essentially penalises automakers for selling too many combustion-engine cars. The result? Manufacturers focus on hitting EV quotas – even if that means delaying the delivery of petrol or diesel models customers have already purchased. That heavy-handed approach skews the natural car-buying market and doesn’t necessarily reflect genuine consumer preferences.
The result is buyers hang on to their existing ICE vehicle longer and car dealers end up with a lot full of unsold EVs they have to discount and lose money on to move.
The removal of financial carrots laid bare a truth: without subsidies, many consumers have decided electric cars aren’t worth the premium. The German experience underscores how heavily propped up the EV market has been. And it raises a fundamental question: if people won’t buy these vehicles without government handouts, is the product itself truly compelling enough?
The slowdown in EV demand is causing big carmakers such as Mercedes and Porsche to start re-evaluating. Mercedes-Benz now expects electrified vehicles – including hybrids – to account for up to 50 per cent of the total by 2030 instead of 2026 as previously envisioned. Meanwhile, the German luxury car manufacturer is looking to re-introduce V8 and V12 internal combustion power to its AMG portfolio.
Over at Porsche, the company announced it would continue V-8 production for the Cayenne and Panamera beyond 2030. Porsche’s Chief Financial Officer, Lutz Meschke said the company was looking into creating hybrid or full combustion versions of vehicles originally slated to be electric only. The company announced it would scale back its EV transition amid evidence some of the company’s electric models have reportedly lost nearly 50 per cent of their value within the first year of being sold.
Consumers have shown they want simpler, cost-effective solutions that integrate seamlessly into their lives. Hybrids check that box by offering better fuel efficiency without the complete lifestyle shift demanded by BEVs.
If a product is genuinely transformative, you might expect it to sell on its own merits. Yet the data tells us many buyers need enticing incentives to even consider going electric. When those perks disappear, so does the appetite for BEVs. The picture becomes even more complicated when we see how manufacturers, especially in China, are scaling back export expectations due to lackluster foreign demand.
None of this says that the long run future eschews electrification. Battery technology is evolving, charging networks are expanding, and governments still see EVs as a linchpin to meeting climate targets. However, for the immediate future, the slump in demand and production cutbacks point to a sobering reality: the EV market is not as robust as once believed, and consumers aren’t universally sold on pure battery propulsion.
The reality is that without government handouts, consumers will stick with what’s familiar and affordable. Whether that means traditional ICE cars or hybrids, the choice for many will be guided by practical, everyday concerns like cost, convenience, and reliability.
Without a serious breakthrough in cost, technology or infrastructure, the BEV dream is officially on hold.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
