While electric vehicle (EV) sales continue to grow, that growth has materially slowed this year. Deliveries of EVs in the U.S. increased by 11% in the second quarter, which was a big drop from the more than 50% growth EVs experienced in 2023.
Growth has slowed even more in Europe, with just 1% more deliveries in the first half compared to a year ago. For the full year 2023, EV sales in Europe increased 16%.
Meanwhile, according to recent survey results, it doesn't appear that EV sales are about to pick up any time soon.
Fewer people are planning to buy EVs
According to a new survey from EY (Ernst Young), among U.S. consumers looking to purchase a new vehicle within the next two years, only 34% intended to purchase an EV. That's down considerably from the 48% of respondents who said they intended to buy an EV in EY's 2023 survey.
However, EY's survey uses a broad definition of EVs, which also includes hybrids and plug-in hybrids (PHEVs). When looking at just fully electric vehicles, the percentage of people who intend to buy an EV plunged from 22% a year ago to just 11%. Meanwhile, the number of car buyers planning to buy hybrids increased from 15% to 17%.
The biggest deterrents to consumers buying EVs in the survey were expensive battery replacements (26%), limited range (24%), and a lack of public charging stations (23%). Meanwhile, the survey noted an increasing interest in hybrids, with respondents liking the security of being able to use gasoline if needed.
The EY survey echoes similar results from a J.D. Power survey earlier this year. The J.D. Power survey saw a drop in EV purchase intentions for the first time since it was started in 2021, with 24% of new car buyers indicating that they are "very likely" to consider purchasing an EV, down from 26% in 2023. Meanwhile, shoppers who indicated they were "overall likely" to consider buying an EV fell from 61% to 58%.
The biggest concerns for car shoppers regarding EVs included a lack of public charging stations, higher purchase prices, driving range, charging times, and not being able to charge vehicles at home or work.
Image source: Getty Images.
What to do with EV stocks?
With EV growth slowing, the question now is what to do with EV stocks. For EV companies outside of China, they certainly fall into a few camps.
In the one camp is Tesla (NASDAQ: TSLA), which is the established leader in the space. The company has strong market share and is profitable. However, it has been seeing its EV market share decline due to the introductions from both established automakers and new EV upstarts. In addition, its overall sales of EVs have started to decline.
For Q2, Tesla's auto deliveries fell 5% while its automotive revenue dropped 7%. Tesla has other ventures outside of just EVs, with robotaxis one of the biggest opportunities for the company. However, the company is lagging behind Alphabet's Waymo, and there have been a lot of questions about the company's self-driving technology recently.
In the second camp are traditional automakers that are trying to make inroads into the EV space. While a number of these companies are seeing their EV sales skyrocket, such as Ford and Hyundai/Kia, in many cases these sales come at steep losses. For example, in the first half, Ford lost about $2.5 billion on EV sales, while Kia was recently massively discounting its new EV9 vehicle. The question is whether these pushes into the EV market are sustainable given the losses, especially with EV demand slowing. Ford has started looking more into hybrids, while Toyota has been leading with a hybrid-first strategy with good success.
The third category includes upstart EV players like Rivian(NASDAQ: RIVN) and Lucid Group. Both are seeing strong sales of their vehicles despite the overall EV growth slowdown, but both also have negative gross margins losing money on every vehicle they produce even before corporate costs. They also both have partnerships with large automakers, which helps give them some runway to scale their businesses and reduce their production costs.
At this point, investing in EV stocks looks tough overall. Toyota's strategy of patiently waiting and then moving to hybrids as the market started to move in that direction looks like it will be the winning strategy. The company didn't invest heavily in EVs, and therefore didn't rack up the same magnitude of losses as many other traditional automakers chasing the EV market. As such, it looks like one of the best options in the auto space.
For pure EV companies, I'd pick Rivian as my favorite. It's a luxury brand that is gaining share and moving closer to achieving positive gross margins with strong backing from Volkswagen and Amazon. That said, it is still a highly speculative play.
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