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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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Investing in red states doesn’t make defying Trump any safer.
In the end, it was what the letters didn’t say.
For months — since well before the 2024 election — when asked about the future health and safety of the clean energy tax credits in the Inflation Reduction Act, advocates and industry folks would point to the 20 or so House Republicans (sometimes more, sometimes fewer) who would sign on to public statements urging their colleagues to preserve at least some of the law. Better not to pull out the rug from business investment, they argued. Especially not investment in their districts.
These letters were “reassuring to a lot of folks in clean energy and climate communities,” Chris Moyer, the founder of Echo Communications and a former staffer for longtime Senate Majority Leader Harry Reid, told me.
“I never felt reassured,” Moyer added.
Plenty of people did, though. The home solar company Sunrun, for instance, told investors in a presentation earlier this monththat a “growing number of Republicans in Congress — including 39 overall House members and four Senators — publicly support maintaining energy tax credits through various letters over the past few months.” The company added that “we expect a range of draft proposals to be issued, possibly including draconian scenarios, but we expect any extreme proposals will be moderated as they progress.”
Instead, the draft language got progressively worse for the residential solar industry, with the version that passed the House Thursday morning knocking billions of dollars off the sector, as tax credits were further squeezed to help make room for other priorities that truly posed an existential threat to the bill’s passage.
What Sunrun and others appear to have failed to notice — or at least publicly acknowledge — is that while these representatives wanted to see tax credits preserved, they never specified what they would do if their wishes were disregarded. Unlike the handful of Republicans who threatened to tank the bill over expanding the deduction for state and local taxes (each of whom signed one of the tax credit letters, at some point), or the Freedom Caucus, who tend to vote no on any major fiscal bill that doesn’t contain sizable spending cuts (so, until now, every budget bill), the tax credit Republicans never threatened to kill the bill entirely.
Ultimately, the only Republicans to outright oppose the bill did so because it didn’t cut the deficit enough. All of the House Republicans who signed letters or statements in support of clean energy tax credits voted yes on the legislation, with a single exception: New York’s Andrew Garbarino, who reportedly slept through the roll call. (He later said he would have voted for it had he been awake.)
“The coalition of interests effectively persuaded Republican members that tax credits were driving investment in their districts and states,” Pavan Venkatakrishnan, an infrastructure fellow at the Institute for Progress, told me in a text message. “Where advocates fell short was in convincing them that preserving energy tax credits — especially for mature technologies Republicans often view skeptically — should take precedence over preventing Medicaid cuts or addressing parochial concerns like SALT.”
The Inflation Reduction Act itself was, after all, advanced on a party-line basis, as was Biden’s 2021 American Rescue Plan. Combined, those two bills received a single Democratic no vote and no Republican yes votes.
In the end, Moyer said, Republican House members in the current Congress were under immense political pressure to support what is likely to be the sole major piece of legislation advanced this year by President Trump — one that contained a number of provisions, especially on SALT, that they agreed with.
“There are major consequences for individual house members who vote against the president’s agenda,” Moyer said. “They made a calculation. They knew they were going to take heat either way. They would rather take heat from clean energy folks and people affected by the projects.”
It wasn’t supposed to be this way.
White House officials and outside analysts frequently touted job creation linked to IRA investments in Republican House districts and states as a tangible benefit of the law that would make it politically impossible to overturn, even as Congress and the White House turned over.
“President’s Biden’s policies are leading to more than 330,000 new clean energy jobs already created, more than half of which are in Republican-held districts,” White House communications director Ben LaBolt told reporters last year, previewing a speech President Biden would give on climate change.
Even after Biden had been defeated, White House climate advisor Ali Zaidi told Bloomberg that “we have grown the political consensus around the Inflation Reduction Act through its execution,” citing one of the House Republican letters in support of the clean energy tax credits.
One former Biden White House climate official told me that having projects in Republican districts was thought by the IRA’s crafters to make the bill more politically sustainable — but only so much.
“A [freaking] battery factory is not going to save democracy,” the official told me, referencing more ambitious claims that the tax credits could lead to more Democratic electoral victories. (The official asked to remain anonymous in order not to jeopardize their current professional prospects.) Instead, “it was supposed to make it slightly harder for Republicans to overturn the subsidies.”
Congresspeople worried about jobs weren’t supposed to be the only things that would preserve the bill, either, the official added. Clean energy and energy-dependent sectors, they thought, should be able to effectively advocate for themselves.
To the extent that business interests were able to win a hearing with House Republicans, they were older, more traditionally conservative industries such as nuclear, manufacturing, agriculture, and oil and gas.The biofuels industry (i.e. liquid Big Agriculture) won an extension of its tax credit, 45Z. The oil and gas industry’s favored measure, the 45Q tax credit for carbon sequestration, was minimally fettered. Nuclear power was the one sector whose treatment notably improved between the initial draft from the House’s tax-writing committee and the version voted on Thursday. Advanced nuclear facilities can still claim tax credits if they start construction by 2029, while other clean energy projects have to start construction within 60 days of the bill’s passage and be in service by the end of 2028.
“I think these outcomes are unsurprising. In places where folks consistently engaged, things were protected,” a Republican lobbyist told me, referring to manufacturing, biofuels, and nuclear power, requesting anonymity because they weren’t authorized to speak publicly. “But assuming a project in a district would guarantee a no vote on a large package was always a mistake.”
“The relative success of nuclear is a testament to the importance of having strong champions — predictable but notable show of political might,” a second Republican lobbyist told me, who was also not allowed to speak publicly about the bill.
But all hope isn’t lost yet. The Senate still has to pass something that the House will agree with. Some senators had made noises about how nuclear, hydropower, and geothermal were treated in the initial language.
“Budget reconciliation is, first and foremost, a fiscal exercise,” Venkatakrishnan told me. “Energy tax credits offer a path of least resistance for hitting lawmakers’ fiscal targets. As the Senate takes up this bill, the case must be made that the marginal $100 billion to $200 billion in cuts seriously jeopardizes grid reliability and energy innovation.” Whether that will be enough to generate meaningful opposition in the Senate, however, is the $600 billion question.
A loophole created by the House Ways and Means text disappeared in the final bill.
Early this morning, the House of Representatives launched a full-frontal assault on the residential solar business model. The new language in the budget reconciliation bill to extend the Tax Cuts and Jobs Act passed Thursday included even tighter restrictions on the tech-neutral investment tax credits claimed by businesses like Sunrun when they lease solar systems to residential buyers.
While the earlier language from the Ways and Means committee eliminated the 25D tax credit for those who purchased home solar systems after the end of this year (it was originally supposed to run through 2034), the new language says that no credit “shall be allowed under this section for any investment during the taxable year” (emphasis mine) if the entity claiming the tax credit “rents or leases such property to a third party during such taxable year” and “the lessee would qualify for a credit under section 25D with respect to such property if the lessee owned such property.”
This is how you kill a business model in legislative text.
“Expect shares of solar companies to take a significant step back,” Jefferies analyst Julien Dumoulin-Smith wrote in a note to clients Thursday morning, calling the exclusion “scathing.” Investors are “losing the now false sense of security that we had 'seen the worst' of it with the initial House draft.”
Joseph Osha, an analyst for Guggenheim, agrees. “Considering the fact that ~70% of the residential solar industry is now supported by third-party (e.g. lease or PPA) financing arrangements, the new language is disastrous for the residential solar industry,” he wrote in a note to clients. “We believe the near-term implications are very negative for Sunrun, Enphase, and SolarEdge.”
Shares of Sunrun are down 37.5% in mid-day trading, wiping off almost $1 billion worth of value for its shareholders. The company did not respond to a request for comment. Shares of fellow residential solar inverter and systems Enphase are down 20%, while residential solar technology company SolarEdge’s shares are down 24.5%.
“Families will lose the freedom to control their energy costs,” Abigail Ross Hopper, chief executive of the Solar Energy Industries Association, said in a statement, in reference to the last-minute alteration to the investment tax credit.
When the House Ways and Means Committee released the initial language getting rid of 25D by the end of this year but keeping a limited version of the investment tax credit, analysts noted that Sunrun was an unexpected winner from the bill. It typically markets its solar products as leases or power purchase agreements, not outright sales of the system.
The reversal, Dumoulin-Smith wrote, “comes as a surprise especially considering how favorable the initial markup was” to the Sunrun business model.
“Our core solar service offerings are provided through our lease and power purchase agreements,” the company said in its 2024 annual report. “While customers have the option to purchase a solar energy system outright from us, most of our customers choose to buy solar as a service from us through our Customer Agreements without the significant upfront investment of purchasing a solar energy system.”
The new bill, Dumoulin-Smith writes is “‘leveling the playing field’ by targeting all future residential solar originations, whether leased or owned.” The bill is “negative to Sunrun with intentional targeting of the sector.
Last year, Sunrun generated over $700 million from transferring investment tax credits from its solar and storage projects. The company said that it had $117 million of “incentives revenue” in 2024, which includes the tax credits, out of around $1.4 billion in total revenue.
But the tax credits play a far larger role in the business than just how they’re recognized on the company’s earnings statements. The company raises investment funds to help finance the projects, where investors get payments from customers as well as monetized tax credits. Fund investors “can receive attractive after-tax returns from our investment funds due to their ability to utilize Commercial ITCs,” the company said in its report. Conversely, the financing “enables us to offer attractive pricing to our customers for the energy generated by the solar energy system on their homes.”
Morgan Stanley analyst Andrew Perocco wrote to clients that “this is a noteworthy change for the residential solar industry, and Sunrun in particular, which dominates the residential solar [third-party owned] market and has recognized ITC credits under 48E.”
Current conditions: A late-season nor’easter could bring minor flooding to the Boston area• It’s clear and sunny today in Erbil, Iraq, where the country’s first entirely off-grid, solar-powered village is now operating • Thursday will finally bring a break from severe storms in the U.S., which has seen 280 tornadoes more than the historical average this year.
1. House GOP passes reconciliation bill after late-night tweaks to clean energy tax credits
The House passed the sweeping “big, beautiful” tax bill early Thursday morning in a 215-214 vote, mostly along party lines. Republican Representatives Thomas Massie of Kentucky and Warren Davidson of Ohio voted no, while House Freedom Caucus Chair Andy Harris of Maryland voted “present;” two additional Republicans didn’t vote.
The bill will effectively kill the Inflation Reduction Act, as my colleague Emily Pontecorvo has written — although the Wednesday night manager’s amendment included some tweaks to how, exactly, as well as a few concessions to moderates. Updates include:
The bill now heads to the Senate — where more negotiations will almost certainly follow — with Republicans aiming to have it on President Trump’s desk by July 4.
2. FEMA cancels 4-year strategic plan, axing focus on ‘climate resilience’
The combative new acting administrator of the Federal Emergency Management Agency, David Richardson, rescinded the organization’s four-year strategic plan on Wednesday, per Wired. Though the document, which was set to expire at the end of 2026, does not address specific procedures for given disasters, it does lay out goals and objectives for the agency, including “lead whole of community in climate resilience” and “install equality as a foundation of emergency management.” In axing the strategic plan, Richardson told staff that the document “contains goals and objectives that bear no connection to FEMA accomplishing its mission.”
A FEMA employee who spoke with Wired stressed that while rescinding the plan does not have immediate operational impacts, it can still have “big downstream effects.” Another characterized the move by the administration as symbolic: “There are very real changes that have been made that touch on [equity and climate change] that are more important than the document itself.”
3. Energy Department redirects Puerto Rican rooftop solar investment to upkeep of fossil fuel plants
The U.S. federal government is redirecting a $365 million investment in rooftop solar power in Puerto Rico to instead maintain the island’s fossil fuel-powered grid, the Department of Energy announced Wednesday. The award, which dates to the Biden administration, was intended to provide stable power to Puerto Ricans, who have become accustomed to blackouts due to damaged and outdated infrastructure. The Puerto Rico Electric Power Authority declared bankruptcy in 2017, and a barrage of major hurricanes — most notably 2017’s Hurricane Maria — have destabilized the island’s grid, Reuters reports.
In Energy Secretary Chris Wright’s statement, he said the funds will go toward “dispatching baseload generation units, supporting vegetation control to protect transmission lines, and upgrading aging infrastructure.” But Javier Rúa Jovet, a public policy director for Puerto Rico’s Solar and Energy Storage Association, added to The Associated Press that “There is nothing faster and better than solar batteries.”
4. EDF, Shell, and others to collaborate on hydrogen emission tracker
The Environmental Defense Fund announced Wednesday that it is launching an international research initiative to track hydrogen emissions from North American and European facilities, in partnership with Shell, TotalEnergies, Air Products, and Air Liquide, as well as other academic and technology partners. Hydrogen is an indirect greenhouse gas that, through chemical reactions, can affect the lifetime and abundances of planet-warming gases like methane and ozone. Despite being a “leak-prone gas,” hydrogen emissions have been poorly studied.
“As hydrogen becomes an increasingly important part of the energy system, developing a robust, data-driven understanding of its emissions is essential to supporting informed decisions and guiding future investments in the sector,” Steven Hamburg, the chief scientist and senior vice president of EDF, said in a statement. Notably, EDF took a similar approach to tracking methane over a decade ago and ultimately exposed that emissions were “a far greater threat” than official government estimates suggested.
5. The best-selling SUV in America will now be available only as a hybrid
Toyota
The bestselling SUV in America, the Toyota RAV4, will be available only as a hybrid beginning with the 2026 model, Car and Driver reports. The car will be available both as a conventional hybrid and as a plug-in that works with CCS-compatible DC fast chargers, meaning “owners can quickly fill up its battery during long road trips” to minimize their fossil fuel mileage, The Verge adds. The RAV4 will also beat the Prius for electric range, hitting up to 50 miles before its gas engine kicks in.
Toyota’s move might not come as a complete surprise given that the automaker already introduced a hybrid-only lineup for its Camry. But given the popularity of the RAV4, Car and Driver notes that “if you ever wondered whether or not hybrids have entered the mainstream yet, perhaps this could be a tipping point.”
Nathan Hurner/USFWS
The Fish Lake Valley tui chub, a small minnow threatened by farming and mining activity, could become the first species to be listed as endangered under the second Trump administration.