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The vibes are bad — but the data is great.
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 talk with Michael Grunwald, author of the new book We Are Eating the Earth.
Food is a huge climate problem. It’s responsible for somewhere between a quarter and a third of global greenhouse gas emissions, but it concerns a much smaller share of global climate policy. And what policy does exist is often … pretty bad.
On this week’s episode of Shift Key, Rob and Jesse talk with Michael Grunwald, the author of the new book We Are Eating the Earth. It’s a book about land as much as it’s a book about food — because no matter how much energy abundance we ultimately achieve, we’re stuck with the amount of land we’ve got.
Grunwald is a giant of climate journalism and a Heatmap contributor, and he has previously written books about the Florida everglades and the Obama recovery act. Shift Key is hosted by Jesse Jenkins, a professor of energy systems engineering at Princeton University, and Robinson Meyer, Heatmap’s executive editor.
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:
Robinson Meyer: How did writing the book change how you, yourself, approached food — or you, yourself, eat? Do you find yourself eating less meat now? Do you find yourself eating less dairy?
Michael Grunwald: I cut out beef pretty early in my reporting. It became really obvious early on that beef is the baddie. I mean, if you’re a vegan, that’s amazing. That’s the best thing you can do from a climate perspective. If you’re vegetarian, that’s also great. But it turns out that cutting out beef is about as good as going vegetarian because vegetarians tend to eat more dairy, and cows are really the problem.
Beef is like, use 10 times more land and generate 10 times more emissions than chicken or pork. And yeah, chicken or pork are worse than beans and lentils. But I, like many people are weak. I’m a hypocrite. I feel like this stuff, it’s sort of like organized religion — you have to find the level of hypocrisy that you’re comfortable with. And I couldn’t justify continuing to eat beef while writing a book about how beef is really the problem, and we need to eat less beef and better beef.
But look, you know, our ancestors started eating meat 2 million years ago, and we’re really, I think, kind of hardwired to eat it. That said, I have stuck to it. I write in the book about how I did a bunch of reporting on cattle ranches in Brazil, and I spent two weeks sort of trying to think about how we could have better beef. And I did fall off the wagon during those two weeks because like, steak is delicious. People told me that, you know, Oh, if you’re still eating chicken and pork, after a month, you won’t even miss beef. And they lied. I still miss beef.
But look, I do think — and we can talk about this — I know in the climate world it’s become kind of uncool to talk about individual action. There’s this whole spate of stories about like, you know, I’m in the climate movement and I don’t care if you recycle, or veganism isn’t gonna save the world. But I honestly think, first of all, emissions are us. JBS and Donald Trump and McDonald’s are not forcing us to eat all this beef. These are decisions we make. Second of all, that if we do take this seriously as a climate crisis — I mean, it’s true. Policy is going to matter more. Corporate behavior is going to matter a lot. But individual emissions matter, too. And I don’t like the idea of people saying, like, Yeah, this is a horrible crisis, but also your emissions don’t matter.
I guess I understand enviros don’t want to sound like scolds. They used to have a bad reputation. But honestly, I think … well, now I think their reputation is for ineffectual rather than scoldy. And I think I liked it better when they were scoldy.
Mentioned:
Preorder We Are Eating the Earth
The real war on coal, by Michael Grunwald
The Senate GOP’s seismic overhaul of clean energy tax credits
Music for Shift Key is by Adam Kromelow.
And it only gets worse from here.
Hot and humid weather stretching from Maine to Missouri is causing havoc for grid operators: blackouts, brownouts, emergency authorizations to exceed environmental restrictions, and high prices.
But in terms of what is on the grid and what is demanded of it, this may be the easiest summer for a long time.
That’s because demands on the grid are growing at the same time the resources powering it are changing. Between broad-based electrification, manufacturing additions, and especially data center construction, electricity load growth is forecast to grow several percent a year through at least the end of the decade. At the same time, aging plants reliant on oil, gas, and coal are being retired (although planned retirements are slowing down), while new resources, largely solar and batteries, are often stuck in long interconnection queues — and, when they do come online, offer unique challenges to grid operators when demand is high.
For the previous 20 years, load growth has been relatively steady, Abe Silverman, a research scholar at Johns Hopkins, explained to me. “What’s different is that load is trending up,” he said. “When you’re buying and making arrangements for the summer, you have to aim a bit higher.”
Nowhere is the combined and uneven development of the grid’s supply and demand more evident than in PJM Interconnection, the country’s largest electricity market, spanning from Washington, D.C. to Chicago. The grid now has to serve new load in Virginia’s “data center alley,” while aggressive public policy promoting renewables in states such as Maryland and New Jersey has made planning more complicated thanks to the different energy generation and economic profiles of wind, solar, and batteries compared to gas and coal.
PJM hit peak load on Monday of just over 161,000 megawatts, within kissing distance of its all-time record of 165,500 megawatts and far north of last year’s high demand of 152,700, with load hitting at least 158,000 megawatts on Tuesday. Forecast high load this year was around 154,000 megawatts. Earlier this spring, PJM warned that for the first time, “available generation capacity may fall short of required reserves in an extreme planning scenario that would result in an all-time PJM peak load of more than 166,000 megawatts.”
While that extreme demand has not been seen on the grid during this present heat wave, we’re still early in the year. Typically, PJM’s demand peaks in July or even August; according to the consulting firm ICF, the last June peak was in 2014, while demand last year peaked in July. On Monday, real time prices got just over $3,000 a megawatt, and reached just over $1,800 on Tuesday.
“This is a big test. A lot of capacity has retired since 2006 and the resource mix has changed some,” Connor Waldoch, head of strategy at GridStatus, told me. While exact data on the resource mix over the past 20 years isn’t available, Waldoch said that many of the fossil fuel plants on the grid — including those that help set the price of electricity — are quite old.
PJM’s operators have issued a “maximum generation alert” that will extend to Wednesday, warning generators and transmission owners to defer or cancel maintenance so that “units stay online and continue to produce energy that is needed.”
PJM also issued a load management alert, a warning that PJM may call upon some 8,000 megawatts of electricity users who have been paid in advance to reduce demand when the grid calls for it. Already, some large users of electricity in Virginia have reduced their power demand as part of the program. There are historically around one or two uses of demand response per year in each of the electricity market’s 21 zones.
“Demand response is a real hero,” Silverman said.
Elsewhere in the hot zone, thousands of customers of the New York Independent Systems Operator lost or saw reduced power on Monday, along with over 100,000 customers affected by voltage reductions. On Tuesday, NYISO issued an “energy watch” meaning that “operating reserves are expected to be lower than normal,” and asking customers to reduce their power consumption.
Further north, oil and coal made up 10% of the fuel mix in ISO New England by Monday night, according to GridStatus data. The region has greatly expanded behind-the-meter solar generation since 2010, which as of 2 p.m. Monday was generating over 21% of the region’s power. But the grid as a whole hasn’t been able to keep up, thanks to a nationally anomalous shortage of gas capacity and still-insufficient battery storage. As the sun faded, so too did New England’s renewable generation.
“You don’t see coal very often in the New England fuel mix,” Waldoch told me. In fact, there is only one remaining coal plant in New England, which can typically power around 440,000 homes — though that’s based on normal electricity usage. On days like the past few, it may power far fewer.
Moving into Tuesday, Secretary of Energy Chris Wright invoked emergency authorities to allow Duke Energy in the Carolinas to run certain of its units “at their maximum generation output levels due to ongoing extreme weather conditions and to preserve the reliability of bulk electric power system.”
The strained grid and high prices come as grid operators question how effectively their current and planned generation capacity can meet future demand. These questions have become especially pressing in PJM, which last year shelled out billions of dollars in payments to largely fossil fuel generators in what’s known as a capacity auction. That’s already translating to higher costs for consumers — in some cases as high as 20%. But even that could be nothing compared to what’s coming.
“If you take the current conditions that PJM is dealing with right now and you add tens of gigawatts of data to center demand, they would be in trouble,” Pieter Mul, an energy and infrastructure advisor at PA Consulting, told me.
Right now, Mul said, PJM can muddle through. “It is all hands on deck. Our prices are quite high. They’ve invoked some various emergency conditions.” But that’s before all those data centers are even online. “It’s a 2026, ’27, and beyond question,” Mul said.
Today, however, “it’s mostly just very hot weather.”
The state’s senior senator, Thom Tillis, has been vocal about the need to maintain clean energy tax credits.
The majority of voters in North Carolina want Congress to leave the Inflation Reduction Act well enough alone, a new poll from Data for Progress finds.
The survey, which asked North Carolina voters specifically about the clean energy and climate provisions in the bill, presented respondents with a choice between two statements: “The IRA should be repealed by Congress” and “The IRA should be kept in place by Congress.” (“Don’t know” was also an option.)
The responses from voters broke down predictably along party lines, with 71% of Democrats preferring to keep the IRA in place compared to just 31% of Republicans, with half of independent voters in favor of keeping the climate law. Overall, half of North Carolina voters surveyed wanted the IRA to stick around, compared to 37% who’d rather see it go — a significant spread for a state that, prior to the passage of the climate law, was home to little in the way of clean energy development.
But North Carolina now has a lot to lose with the potential repeal of the Inflation Reduction Act, as my colleague Emily Pontecorvo has pointed out. The IRA brought more than 17,000 jobs to the state, per Climate Power, along with $20 billion in investment spread out over 34 clean energy projects. Electric vehicle and charging manufacturers in particular have flocked to the state, with Toyota investing $13.9 billion in its Liberty EV battery manufacturing facility, which opened this past April.
North Carolina Senator Thom Tillis was one of the four co-authors of a letter sent to Majority Leader John Thune in April advocating for the preservation of the law. Together, they wrote that gutting the IRA’s tax credits “would create uncertainty, jeopardizing capital allocation, long-term project planning, and job creation in the energy sector and across our broader economy.” It seems that the majority of North Carolina voters are aligned with their senator — which is lucky for him, as he’s up for reelection in 2026.