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If you’ve read about electric vehicles in the news lately, you know the vibes are bad. Over the past few weeks, the media has fixated on the idea that consumer demand for EVs is “slowing,” “chilling,” or “losing its charge.”
But are sales even slowing? Has federal policy failed to spark the EV transition? Is there any cause for panic? The data shows none of that is true.
The best (and only) quantitative evidence presented for the dominant media narrative is data from Cox Automotive, as presented in a recent Wall Street Journal article, showing that dealers are taking more time and resorting to bigger discounts to move EVs off their lots. That’s true, but does it really indicate that EV sales are “slowing”?
First, this data excludes the space’s biggest player by far — Tesla — as well as other EV-only makers like Rivian who don’t use dealer networks, so this is really a story about traditional automakers (Ford, GM, Volkswagen, etc). And with high interest rates making a new car more costly to finance or lease, dealer discounts are trending steadily upwards for all vehicles in recent months, not just electric models, according to the Cox data.
Second, if we take a look at actual sales data, there’s no sign the growth in EVs is flagging. In fact, sales of battery electric and plug-in hybrid vehicles in the third quarter of 2023 exhibited the strongest year-on-year growth since the fourth quarter of 2021.
Putting aside plug-in hybrids, which have shorter electric range and retain a gasoline engine, sales of purely electric vehicles have been steadily increasing at a roughly 60 percent annual growth rate for each of the last six quarters. That’s fast enough to double EV sales every 14 months!
Overall, year-to-date sales of electric and plug-in hybrid vehicles in the U.S. topped 1 million in September for the first time and are on pace to exceed 1.4 million by year’s end.It’s hard to square the actual data with the bad vibes.
The main story here is not of cooling consumer interest in EVs or a slow-down of the electric transition, but rather the confluence of two other major factors — Tesla’s defensive price war and rising interest rates — which have forced some incumbents to rethink their strategies.
For most of the last decade, Tesla has basically had the EV market to itself. As a result, they priced even their mass-market models, the Model 3 and Model Y, as if they were in competition with Audis and BMWs not Corollas or CRVs. Tesla’s long head start also gave them ample time to bring down manufacturing costs. High price points and falling production costs sent Tesla’s profit margin soaring to a peak of nearly 30% in March 2022, compared to the single digit margins more typical of a high-volume auto manufacturer.
Then, as soon as traditional automakers got serious about the EV business and new start-ups like Rivian and Lucid started scaling, Tesla aggressively slashed prices. The base Model 3 cost over $48,000 last year. Today, it costs around $38,000, a 20% drop. Prices for the Model Y have fallen by a similar magnitude.
Yes, price cuts have eaten into Tesla profitability, but they appear to be an effective defensive weapon that hit their rivals at exactly the same time the Fed was ratcheting up interest rates, substantially increasing the cost of financing or leasing any new vehicle.
In 2021 and 2022, as traditional automakers were launching new flagship EVs, it seemed like they could easily sell every EV they could produce at premium-prices, all while dealers charged big markups.
But just as the market was flooded with new electric offerings, high interest rates made buyers more cost conscious and Tesla’s price cuts took all the fat out of the market. The EV market of 2023 is cutthroat, and aggressive pricing is king.
These shifting market realities seem to have caught several legacy automakers off guard and forced a major refocus on reducing cost of production.
Indeed, if we dive into the data, it’s clear that the ominous headlines about the “slowing” EV market are more a story about Ford and GM in particular, than anything else.
Sales of Ford’s Mach-E have indeed flatlined this year, likely due to competition from Tesla’s now-discounted Model Y. Noting that reducing sticker price on electric vehicles would be their top priority, Ford CEO Jim Farley recently announced adjustments to F-150 Lightning and Mach-E production ramps and delayed some capital spending.
GM’s EV ambitions are stuck in neutral too, but their woes can hardly be attributed to a lack of customer interest. The company is struggling with serious difficulties assembling the Ultium batteries meant to power their next generation of electric SUVs and pickups. As a result, GM shipped only 2,316 of their Cadillac Lyriq crossover and 65 electric GMC Hummers in the first half of this year, a slower pace than 2022. Less than 200 of their Chevy Blazer and Silverado EVs found their way to American homes through September. Amidst these production troubles, GM pushed back the launch of the Chevy Equinox EV and full-scale production of their electric pickups by several months. Meanwhile, sales of the one EV they do have on the market, the affordable Chevy Bolt, are going gangbusters. Unfortunately, GM plans to stop producing the Bolt by year’s end as it focuses on modernizing the venerable model.
(Stellantis, the parent company of Chrysler, Jeep and Ram, has yet to launch any all-electric vehicles in the United States, though their plug-in hybrid Jeeps are selling strongly this year).
Still, contrary to recent headlines, none of the major automakers are scrapping plans for huge investments in electric vehicles. Fresh details on the recent deals struck between the UAW and the Big Three (GM, Ford, and Stellantis) show the automakers all continue to plan multi-billion-dollar investments in new EV factories and models.
“Our commitment to an all-EV future is as strong as ever,” GM CEO Mary Barra told analysts on a conference call last month. The company plans to be 100% electric by 2035.
Ford is “not moving away from our second generation [EV] products,” the company’s CFO also said in October.
Meanwhile, Hyundai Motor Group (parent to Hyundai, Kia, and Genesis brands) continues to launch new electric models and its executives told investors the company isn’t pausing EV plans as they “believe EV sales will grow longer term.” In fact, the Korean auto group vaulted ahead of GM and Ford to snag the #2 spot for total U.S. EV sales this year.
Volvo’s electric sales more than doubled over the past year to reach 13% of total sales for the brand, and the company reported a healthy 9% profit margin on its electric models.
Upstart Rivian is going strong too. Sales of its R1 series tripled over the last year, and the firm just increased its 2023 production estimates by 4 percent to 54,000 vehicles as it continues to move towards profitability with a focus on reducing costs and ramping up production.
The upshot of all this is that EVs are getting more affordable, which is the key to future growth. Prices are falling. Dealer markups are gone. And the price of an average EV in September was $50,683 (before tax credits), barely higher than the average for all new vehicles ($48,000).
In January, the personal EV tax credit will be available to buyers at the point of sale for the first time too, effectively turning it into a rebate. Already, intense competition is forcing dealers to pass the credit through as a down payment that cuts the monthly cost of leasing a $40,000 EV nearly in half.
Next year will also see the more affordable Volvo EX30 and Chevy Equinox EV hit the market, joining the Tesla Model 3, Hyundai Kona, and Kia Niro and Ioniq 6 in the under $40k segment.
In 2024, Tesla’s extensive Supercharger network will also open up to non-Teslas, virtually all automakers will adopt NACS chargers natively in model year 2025 vehicles and beyond, and the Bipartisan Infrastructure Law’s National Electric Vehicle Infrastructure grants will finally start to flow in earnest to build out chargers.
So while Ford and GM are facing real challenges, the overall state of the electric vehicle market is healthy.
As GM’s Barra said: “As we get further into the transformation to EV, it's a bit bumpy.” But that doesnt mean the journey is slowing. Sales of EVs keep growing rapidly, new models are expanding the market, and competition is making it all more affordable. Doesn’t that deserve some good vibes for a change?
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Rob and Jesse hang with Dig Energy co-founder and CEO Dulcie Madden.
Simply operating America’s buildings uses more than a third of the country’s energy. A major chunk of that is temperature control — keeping the indoors cool in the summer and warm in the winter. Heating eats into families’ budgets and burns a tremendous amount of fuel oil and natural gas. But what if we could heat and cool buildings more efficiently, cleanly, and cheaply?
On this week’s episode of Shift Key, Rob and Jesse talk to Dulcie Madden, the founder and CEO of Dig Energy, a New Hampshire-based startup that is trying to lower the cost of digging geothermal wells scaled to serve a single structure. Dig makes small rigs that can drill boreholes for ground source heat pumps — a technology that uses the bedrock’s ambient temperature to heat and cool homes and businesses while requiring unbelievably low amounts of energy. Once groundsource wells get built, they consume far less energy than gas furnaces, air conditioners, or even air-dependent heat pumps.
Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University. Jesse is an adviser to Dig Energy.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, YouTube, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Jesse Jenkins: We’ve been throwing a few different terms around here to describe this. We talked about geothermal heating and cooling, ground source heat pumps, geoexchange. There’s a little bit of ambiguity here in the language people used to talk about these things. What’s your favorite way to talk about this product and why?
Dulcie Madden: Ugh.
Jenkins: Or is this just an endless debate that is not resolved?
Madden: It is a great question. It’s a big debate. When I think of geoexchange, just so everyone knows, it’s really about, like, are you able to basically create a larger array, potentially, across buildings, more like exchanging heating and cooling, like both point source and — I think about it more in the context of Princeton, where it’s also across buildings, right? And that starts to move into what some people call a thermal energy network. And so there’s some work there.
There is a lot of back and forth between geothermal heat pump and ground source heat pump, and a lot of people will use them interchangeably. I think that there is technically a differentiation, but I don’t know if there’s a didactic, like, This is what it is. It’s just … you have to be interchangeable.
Jenkins: Yeah, I’m curious, I don’t know what the best marketing term is, what people actually resonate with beyond the technical crowd. I was describing what you guys were doing when you closed your seed series round on X or BlueSky, and somebody jumped into the replies. That’s not geothermal energy, it’s ground source heat pump. And it’s like, okay. And I guess the argument is that, because it’s basically just using it as a source for heat exchange in the heat pump operation as opposed to extracting heating out of the ground — which you can do. I mean, you can just do direct heating from geothermal.
Madden: Right.
Jenkins: Deep geothermal drilling, as well. It’s something that Eavor, which is an Alberta-based deep geothermal company that I advise, as well, is working on their first commercial project in Bavaria. That’s gonna go into a district heating system. So they’re going produce a little bit of power, but a lot of that is just direct heat. But again, they’re drilling, five, six kilometers deep and pulling out heat at high temperatures. And so it’s because it’s kind of back and forth, you’re using this kind of buffer for both heating and cooling. I think that’s why people might push back on the idea that it’s geothermal. But you’re using the heat in the ground.
Mentioned:
TechCrunch: “Geothermal is too expensive, but Dig Energy’s impossibly small drill rig might fix that”
Princeton University’s Geo-Exchange System
Jesse’s downshift; Rob’s downshift.
This episode of Shift Key is sponsored by …
Hydrostor is building the future of energy with Advanced Compressed Air Energy Storage. Delivering clean, reliable power with 500-megawatt facilities sited on 100 acres, Hydrostor’s energy storage projects are transforming the grid and creating thousands of American jobs. Learn more at hydrostor.ca.
A warmer world is here. Now what? Listen to Shocked, from the University of Chicago’s Institute for Climate and Sustainable Growth, and hear journalist Amy Harder and economist Michael Greenstone share new ways of thinking about climate change and cutting-edge solutions. Find it here.
Music for Shift Key is by Adam Kromelow.
Though high costs have become central to the upcoming election, they’re mostly out of the state’s control.
New Jersey suffers from some of the highest and fastest-rising retail electricity prices in the nation, according to Energy Information Administration data. From July 2024 to this year, retail prices exploded by more than 20%. Now, energy policy is at the forefront of the state’s gubernatorial election, in which Democratic nominee Mikie Sherrill has promised to cap electricity rate increases in the course of fighting off a strong challenge from Republican Jack Ciattarelli.
So what did the Garden State do to deserve this? “The short answer is that it’s a variety of factors, including transmission and distribution costs and higher capacity prices, largely driven by data centers,” Abraham Silverman, a research scholar at Johns Hopkins and former New Jersey utility regulator, told me.
New Jersey is a microcosm of how and why electricity prices are rising faster than inflation. The system is expensive to maintain and operate. It exists within an electricity market that has seen some of the fastest data center growth in the country. And it has struggled to bring on new supply quickly.
A lot of this comes down to the electricity market the state is in — PJM Interconnection, the country’s largest grid operator. Over the past two years, the cost of guaranteeing that the grid will be able to meet peak demand has skyrocketed to $16.1 billion, from just $2.2 billion in 2023.
These prices are set at auction, in which generators tell the market how much they’d need to be paid to be around in times when the grid is most in need. “PJM’s capacity market — its primary means of incenting investment in new power plants — has not worked as designed since 2018,”, Silverman testified before the New Jersey legislature in March. (The auctions are supposed to be held annually, but were delayed several times toward the end of the last decade as PJM and the Federal Energy Regulatory Commission reviewed proposed rule changes.)
In February, the New Jersey Board of Public Utilities said that its own auction to procure services from PJM, which follows the prices set in the PJM auction, would result in roughly 20% increases in retail electricity bills. “PJM’s recent capacity auction results are the main driver of these increases,” Christine Guhl-Sadovy, the board’s president said in a statement. In practical terms, that’s about a $20 increase per residential electricity bill on average, according to the non-profit urban planning group the Regional Plan Association.
When Silverman analyzed the components of New Jersey’s electricity price increases, he identified an 8.5% increase in energy prices paid through PJM from 2023 to 2024, a five-fold increase in capacity prices, and transmission costs that had doubled over the previous decade, including a 9% increase in just the previous year.
As for what’s behind those skyrocketing capacity price increases, I’ll give you one guess.
“Data center load growth is the primary reason for recent and expected capacity market conditions, including total forecast load growth, the tight supply and demand balance, and high prices,” PJM’s independent market monitor said in a report on the 2024 capacity auction, attributing over $9 billion of the increase to the demands on the grid due to data centers.
While much of that data center demand has been in other PJM states like Virginia, Ohio and Pennsylvania, within the service territory for New Jersey’s largest utility, Public Service Electric & Gas, “interconnection inquiries from data centers and other large customers have increased dramatically, from 400 megawatts a year ago to 4,700 megawatts today,” PJM official Jason Stanek said in testimony before the New Jersey State Senate in March. He also referred to “a shrinking supply of energy and capacity,” which was a polite way of saying that PJM has failed to get new resources through its interconnection queue at a pace that matches planned retirements of older, fossil fuel-fired resources. That, “combined with increasing demand, will result in upward pressure on wholesale and retail prices,” Stanek said.
For years, PJM’s auctions, when they happened, were arguably delivering prices that were too low, leaving the market short of capacity as data center construction and interconnection requests boomed, leading prices to shoot up dramatically, shouldering retail ratepayers with rising bills but not quickly resolving the system’s potential reliability issues.
Still, New Jersey is one of 13 states in PJM, but it has seen some of the sharpest electricity increases among that group. In neighboring Pennsylvania, for instance, electricity prices are about a fifth lower and have only risen around 12%.
A major study of recent electricity price increases by the Lawrence Berkeley National Laboratory and the Brattle Group identified New Jersey as an especially severe case — the worst, in fact — even within the dramatic price increases throughout PJM. “New Jersey is experiencing some of the highest price increases of all PJM states in summer of 2025,” the study found.
New Jersey is also exceptionally exposed to natural gas prices. About 60% of its electricity generation comes from natural gas — although that explains more of the price increases in the years immediately following the Russian invasion of Ukraine, and less of the recent price hikes, according to the Lawrence Berkeley and Brattle Group researchers.
New Jersey is the nation’s most population-dense state, but it is also at the mercy of national markets and other states for its power, explained Kyle Mason, an associate planner at the Regional Plan Association.
“A major New Jersey factor is that it’s a net importer,” Mason told me, meaning that the state can’t always satisfy its own demands with home-grown power. “So in times of peak demand, they have to import energy from other states within PJM, and that makes them more reliant on PJM markets, particularly their capacity market,” Mason said.
New Jersey has been working to maintain and expand its existing clean energy generation, including subsidizing nuclear power plants when prices were low and investing in distributed solar power.
But it could do more. Silverman pointed to this in his testimony when he said that “a number of New Jersey-based storage projects have already survived the interconnection gauntlet and could be deployed quickly with the right incentives” — that is, they’ve been approved by PJM but have yet to be built.
New Jersey's offshore wind efforts — which would have provided large amounts of in-state clean generation — have been stymied by a combination of supply chain challenges and Donald Trump. Ciattarelli, the Republican candidate for governor, has said he would ban offshore wind, while both he and Sherrill support more nuclear power.
But even the governor of New Jersey can only do so much. “They are at the mercy of the federal government and the larger PJM body,” Mason said.
It’s an electric vehicle success story, but based on its new future guidance for investors, GM is still getting hammered by the shift in federal policy.
General Motors is on a hot streak with its electric cars. The Chevrolet Equinox EV topped 25,000 in sales during the third quarter of this year, becoming America’s best-selling electric vehicle that’s not a Tesla. The revived Chevy Bolt is due to arrive just after the new year at a starting price under $30,000, and the company promises that more low-cost EVs are on the way. And a variety of new electric offerings have, at the very least, breathed new life and intrigue into the struggling Cadillac brand.
With its Ultium platform helping GM to scale up production of these battery-powered cars, the Detroit giant seems well-positioned among the legacy carmakers to find success in the EV era. Yet last week, GM put out information for investors that predicted a loss of $1.6 billion compared to its previous outlook on the EV market.
Blame chaos. Automakers crave the boring and the predictable. It can take years to tweak the looks or the specs of an existing vehicle, to say nothing of the half-decade or more required to design and build a new car from scratch. With so much time and money on the line, car companies want to know what kind of world will greet their new creations.
But because of the shifting political winds in America, predictability has been hard to come by. Automakers planned and publicized big pushes into electric cars on the assumption that federal policy would continue to move the nation in that direction. They started to move manufacturing into the U.S. to satisfy Biden-era rules for tax credit eligibility. Then they were jerked in the opposite direction by a Trump administration that killed those federal incentives, slapped on haphazard new tariffs that penalize EVs, and got rid of the pollution penalties that nudged carmakers toward a cleaner future.
GM says its newly gloomy outlook is based partly on a decrease in predicted demand. In the absence of federal tax credits that made it more affordable for drivers to choose EVs (gone as of October 1), GM revised down the number of electric cars it expected Americans to buy. As the car market abruptly changes direction — again — GM must change plans to keep up, which means retooling factories to produce fewer EVs and more still-profitable ICE vehicles.
As GM says in its official investor release: “Following recent U.S. government policy changes, including the termination of certain consumer tax incentives for EV purchases and the reduction in the stringency of emissions regulations, we expect the adoption rate of EVs to slow. These charges include non-cash impairment and other charges of $1.2 billion as a result of adjustments to our EV capacity.” Another $400 million in estimated losses come from “contract cancellation fees and commercial settlements associated with EV-related investments,” which is how they arrive at the total of $1.6 billion.
The conglomerate says that this bit of bad news won’t affect its current lineups. But its predicament is emblematic of how the car giants find themselves stuck between the past and the future. In China and other nations around the world, EV adoption continues apace, but the established big automakers simply can’t compete there with the rock-bottom prices of Chinese-made EVs. In the West, meanwhile, the new wave of EV antagonism is pushing the industry back toward the fossil fuels that provided their profits in the past — despite the billions they’ve already invested in electrification.
GM is not alone in this, of course. Ford has gone through several rounds of whiplash during its electrification process — first losing billions on its early EVs, then slowing its EV development plans to retreat toward the easy profitability of combustion, before recently unveiling a different vision to make its EVs scalable and affordable. Companies like Hyundai, which tried to win the EV race, find themselves penalized for trying to qualify for the now-dead Biden tax incentives. Those that dragged their feet, like Toyota, are well-positioned to keep making money in this weird moment.
The end result is that for the sake of survival, companies like GM find themselves talking out of both sides of their mouth. At the end of the previous decade, when it looked as though the 2020s would be the era of EVs, GM pledged itself to a zero-emissions future. And while GM has been an EV success story of late, the Detroit giant also has spent enormous amounts to lobby the federal government against clean air regulations whose disappearance would make its combustion sector more profitable.
If there’s a positive sign from GM’s sour note, it is the statement from James Cain, executive director for finance and sales communications, that, regarding its stable of current EVs, “we will build them to demand.” In other words, it’s not as though GM is throwing in the towel — if Americans keep buying electric Cadillacs and Chevys despite the mess of a market, it’ll keep making them. Even if that means changing plans and retooling factories again.