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“I was a little bit bearish on Tesla for this quarter — and I should’ve been darker.”
The electric vehicle market is anyone’s game.
That’s the takeaway from this year’s first tranche of EV sales data, which saw the two global market leaders — Tesla and BYD — turn in dismal sales for the first three months of the year. Those were in contrast to other automakers including Rivian, Hyundai, and Toyota, all of which reported healthier numbers.
Tesla’s deliveries, which Wall Street uses as a decent proxy for sales, came up well short of analysts’ expectations at 386,810 vehicles for the quarter — down about 9% from the first quarter of 2023. Analysts have consistently cut their estimates for this quarter’s deliveries over the past few weeks, but even so, the real numbers came in well below even the lowest expectations.
“I was a little bit bearish on Tesla for this quarter — and I should’ve been darker,” Corey Cantor, an EV analyst for BloombergNEF, a new-energy research firm, told me.
But despite those meager results, Tesla edged out BYD on sales for the quarter. The Chinese EV giant — whose new $9,000 Seagull hatchback has stunned Western automakers and triggered protectionist impulses around the world — reported far less stunning sales data. BYD sold 300,114 vehicles in the first three months of 2024, down 42% compared to a year before.
That means Tesla is once again the world’s No. 1 seller of electric vehicles, after ceding that title to BYD last year. But little else is going right for Elon Musk’s car company.
Tesla has an aging vehicle line-up, and its newest North American offering, the Cybertruck, has not impressed reviewers. By its own admission, the company is struggling to scale up the Cybertruck’s production as well.
Perhaps most worrying for Musk is that Tesla produced almost 47,000 more vehicles during the first quarter than it sold, suggesting that it is beginning to hit real limits on customer demand for its cars.
“There must be some kind of supply-demand imbalance here,” Cantor said. Tesla has slashed its vehicle prices by thousands of dollars over the past year in order to stimulate demand. Tesla doesn’t break out its sales data by region, which is a shame because that could help clarify what is going on. If Tesla’s sales are flagging in China and Europe, that could be because consumers are flocking to a new set of EV options. A sales decline in the U.S. would indicate that one of the company’s cash cows, the Model Y crossover, is beginning to falter.
“If you look at this, you can see where there are yellow flags here,” Cantor said. “Tesla can explain it however you want but the numbers speak for themselves. Anytime you’re down 9% year on year is a challenge.”
It’s harder to know how to read BYD’s fillip. Other Chinese automakers reported surging March sales. Xiaomi, a Chinese phone maker, has reported almost 90,000 preorders for its first-ever electric car, the SU7. Cantor speculated that the hiccup may be due to Lunar New Year, which tends to depress sales in January and February.
Elsewhere in the car market, other EV makers did better — although few reported surging sales. One exception was Hyundai, which reported EV sales up more than 60% from the first quarter of 2023.
General Motors’ electric vehicle sales fell 20.5% compared to the first quarter of 2023, even as the company’s overall sales of personal-use vehicles rose slightly. It reported higher sales for the Lyriq, its EV SUV, Cantor said.
Toyota says that it sold 206,850 “electrified” cars across North America in the first quarter, a gain of 74% over the year before. “Electrified,” however, is a Toyota term of art — it includes conventional hybrids, plug-in hybrids, and hydrogen fuel cell vehicles. About a third of Toyota’s North American sales now fall in this category.
The electric truck maker Rivian modestly surpassed expectations, beating both analysts’ and its own estimates with 13,588 deliveries in the first few months of 2024. While its total production of 13,980 vehicles for the quarter came in marginally below predictions, Rivian reaffirmed its earlier estimates for full-year production.
Even so, by late afternoon, Rivian’s stock was down 5% for the day. That might be partially explained by the planned weeks-long shutdown of its factory in Normal, Illinois, scheduled to begin at the end of this week. While the pause will allow for renovations designed to reduce costs and increase efficiency, it will also mean that next quarter is guaranteed to be a “wash” for Rivian, Cantor said.
As of last quarter, Rivian was losing about $43,000 on every vehicle it produced. Whether it can stem those losses and get on the “bridge to profitability” executives say is within sight remains, apparently, an open question for shareholders. Rivian is now focused on surviving long enough to sell the R2 SUV. “Every single thing we do within the business is focused on driving costs on this,” RJ Scaringe, Rivian’s CEO, told CNBC last month.
Tesla's and BYD’s flagging sales may also be signaling to investors that a general EV slowdown is coming. And then, of course, there's the general malaise that descended over the EV industry in 2023 as the big legacy American automakers reported sluggish sales for their splashy new electric models and planned to scale back production in the coming year. Though the data don’t present as clear a picture as the doomers might suggest, it is undeniable that, as Princeton energy systems professor and Shift Key podcast co-host Jesse Jenkins wrote for Heatmap, “the vibes are bad.”
“The narrative now will be harsh on Tesla and BYD,” Cantor said. “But if you’re another automaker, you should see this as an opportunity. We’re in the early stages here. None of this is written.”
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The culture wars are threatening one of the few bipartisan areas of climate policy.
Carbon capture has always been contentious, but its biggest critics have traditionally been climate activists on the left. Now, in an unexpected twist, it seems to be getting caught up in the same conservative climate culture war that has overwhelmed electric stoves and ESG investing.
Ron DeSantis, the governor of Florida, took to social media this week to castigate the Republican supermajority in his state’s legislature for hosting a hearing on a bill about carbon sequestration. “Carbon sequestration is a scam!” he said in a pre-recorded video. “It’s part of climate ideology, and it should not be in law in the state of Florida, certainly should not be the work of a Republican supermajority.”
The video was uncanny. DeSantis sounded like the ideological activists he thought he was attacking. The idea of capturing carbon from industrial plants and storing it underground has long held bipartisan appeal among policymakers — attractive to Republicans in oil and gas states that want to keep those industries in business, and to Democrats as a way to reach across the aisle on climate solutions
The Florida bill in question isn’t just about carbon capture technology. It would create a carbon sequestration task force to make recommendations for how the state can increase carbon uptake in the environment — in trees, soils, and the ocean — in addition to using equipment to capture it and store it underground. These kinds of initiatives have long been popular with Republican policymakers, as well, in no small part because they can be pursued without talking about fossil fuels at all. During Trump’s first term, he championed the then-popular idea of planting a trillion trees as a climate solution.
In the video, DeSantis mischaracterizes the bill as calling for “injecting carbon into our soil, aquifers, and even our ocean floor,” conflating nature-based and technological storage solutions and making the legislation sound all the more threatening.
The video is not the only recent example of a prominent Republican coming out against carbon capture and sequestration. In March, Scott Perry, a Republican Congressman from Pennsylvania, co-sponsored the “45Q Repeal Act” with Ro Khanna, a progressive Democrat from California. The bill proposes killing the 45Q tax credit, a subsidy that pays between $60 and $180 for every ton of carbon pumped underground. The amount depends on from where the carbon was captured and whether it is simply sequestered underground or used to pump oil out of aging wells, a process called enhanced oil recovery.
Khanna and other Democrats have introduced bills to kill 45Q each year for the past several years, arguing that it was primarily subsidizing more oil production to the tune of hundreds of billions of taxpayer dollars, fueling climate change rather than slowing it. But this is the first time a Republican has signed on as a co-sponsor. Perry painted the bill as a way to “reduce overregulation and fraud” and to help pay for the tax cuts that Trump has asked for. “The 45Q tax credit subsidizes technologies that serve no purpose beyond distorting energy markets,” states a press release from Perry’s office.
“It’s one of these, what we would call Baptist/Bootleggers type of coalitions,” David Reiner, a political scientist and professor of technology policy at the University of Cambridge, told me. “The people who hate climate change and the people who hate the idea that the way of solving climate change would be to engage the oil and gas industry.”
The environmental news outlet DeSmog has also reported on a growing conservative backlash to carbon capture in Canada, with a far-right group called Canada Proud running anti-carbon capture ads to its more than 500,000 followers on Facebook. “Carbon capture is billed as a green technology that stops carbon from entering the atmosphere,” the ads said. “But is it really good for the environment? As it turns out, not really.” Environmental groups like the Sierra Club, the Center for Biological Diversity, Greenpeace, and Food and Water Watch have been saying the same thing for years.
The rhetoric around carbon capture tends to oversimplify complex challenges into absolute statements. Critics say that carbon capture “doesn’t work” or is a “false solution.” Advocates say it’s “proven” technology that’s already avoided millions of tons of carbon from entering the atmosphere.
It’s true that to date, captured carbon has mostly been used to get more oil out of the ground. Oil and gas companies have thus far benefited more than people or the environment, despite their exaggerated advertisements saying otherwise. For many potential use cases, it’s far easier and cheaper to use renewable energy than capture and sequester carbon. The technology is expensive, and without heavy subsidies, it either isn’t economic or would increase energy costs. There are some cases, however, such as removing carbon from the atmosphere or decarbonizing cement production, where it could be one of the best solutions. The technology’s most progressive proponents often argue that the criticisms of carbon capture can be addressed with better policy. But there are no powerful political coalitions pushing for a different vision.
On the contrary, the most powerful proponents of carbon capture are pushing for more generous subsidies. In February, John Barasso, a Senator from Wyoming, introduced “The Enhancing Energy Recovery Act” with six Republican co-sponsors. The bill would expand 45Q so that all carbon sequestration projects, whether they increase oil production or not, qualify for the same amount of tax credit.
Reiner, the political scientist, mostly dismissed the significance of the DeSantis video to the broader policy debate around carbon capture. “Ron DeSantis doesn’t like carbon capture. Well, who cares?” he told me. There’s not much going on with carbon capture in Florida anyway. “The way the Senate works is it vastly over-represents the western, resource-rich states, all of whom have been very enthusiastic supporters of this,” Reiner said. “It’s very easy for Ron DeSantis to posture on this topic. It’s much harder to imagine that would gain a lot of traction in the Senate Republican leadership.”
At the same time, Reiner said the Florida governor’s comments reflect this broader upheaval happening in areas where there once appeared to be consensus. For example, after Trump was elected, there appeared to be relative agreement that the Inflation Reduction Act was safe because of how much money it was sending to Republican districts. But then the Trump administration came in and immediately began trying to shut down many of the law’s grant programs — a course of action few had predicted, mainly because it’s likely illegal for the president to end grant programs without permission from Congress.
Now, Republicans in Congress are considering axing some of the law’s most beneficial clean energy tax credits to pay for Trump’s tax cut package. Billion-dollar mega-projects to capture carbon directly from the air in Texas and Louisiana have shown up on lists floating around the Hill of programs to kill.
Perhaps more striking than the DeSantis video was a re-tweet of it by Wayne Christian, a Republican on the Texas Railroad Commission. The Commission is a state body that regulates the oil and gas industry in Texas, but whose elected members regularly receive the majority of their campaign donations from the companies they regulate. “You’re right [Governor DeSantis]!” Christian wrote. “Carbon Capture & Sequestration is no different than Wind/Solar subsidies. CCUS is Big Oil placating the Left & taking taxpayer dollars to do so. Energy policies should be meritorious & about consumers.”
Apple shares fell 9% Thursday — not surprising, iPhones are largely made in China, puttingthem soon behind a 65% tariff. Nike (down 14.5%) and Lululemon’s (down 9.5%) supply chains are now behind the formidable 46% tariff onVietnam. But why is Vistra, which owns dozens of coal, gas, nuclear and renewable power plants in California, Texas, and along the East Coast, down 15%? Constellation, whose portfolio includes several nuclear plants, down 11%? GE Vernova, whose gas turbines are sold out until almost the end of the decade, down 10%? Some of the best performing stocks of 2024 are now some of the biggest laggards.
The biggest reason isn’t because natural gas or uranium or coal suddenly got more expensive (although uranium imports from Canada do face a 10% tariff). It’s because of anxiety about what the tariffs will do to economic growth — and electricity demand growth as a result.
The tariffs announced on Wednesday will be a major hit to the country’s economic trajectory according to almost every non-White House economist that’s looked at them. The Yale Budget Lab estimated that the April 2 tariffs alone would bring down GDP growth by half a percentage point, while Trump’s tariffs combined would bring down growth by 0.9 percentage points this year. Morgan Stanley economists echoed that finding in a note to clients Thursday. “Policy changes will weigh meaningfully on growth,” they wrote. “Downside risks will be larger if these tariffs remain in place.”
“Economic growth and energy consumption are pretty closely linked,” Aurora Energy Research managing director Oliver Kerr told me. “An economic slowdown tends to result in less demand for power overall. That's what the market is probably reacting to today.”
The downturn in power stocks also indicates that the market is not expecting any reindustrialization of America due to the high tariffs to happen in the near term. If it did, power producers might be in better shape, as factories are major consumers of electricity.
“Tariffs, in theory, could be a part of an economic policy arsenal to boost domestic production,” Kerr said. But without domestic incentives like those included in the Inflation Reduction Act or the Chips and Science Act, “it’s a tough case to make for why all of these factories should start opening all across the Midwest.”
Also lurking in the background is the same force that’s been driving the market performance of any company that owns substantial power capacity — especially if it’s clean firm, like nuclear, or dispatchable, like natural gas: enthusiasm around artificial intelligence. The power producers, the turbine manufacturers, and the chip designers were high flyers throughout 2024 thanks to optimism about a multi-hundred-billion dollar buildout of artificial intelligence infrastructure and data centers.
That optimism has flagged of late thanks to a series of reports from brokerage TD Cowen finding that Microsoft was shaving back some of its data center commitments. Now, Bloomberg is reporting that Microsoft “has pulled back on data center projects around the world, suggesting the company is taking a harder look at its plans to build the server farms powering artificial intelligence and the cloud.” The company has also “halted talks for, or delayed development” for data centers from Wisconsin to Indonesia, the Bloomberg report said.
That’s bad news for the companies like Vistra, GE Vernova, and Constellation that have ridden the wave of expected demand to stock market glory. “The main constraint that we see for AI load growth is power,” Kerr told me. But if there’s less load growth coming, then there’s less power we’ll need. Better start building some factories soon.
Just about every other renewable energy company is taking a beating today.
American solar manufacturer First Solar may be the big winner from the slew of tariffs Donald Trump announced yesterday against the world’s trading partners. Sorry, make that basically the only winner among renewable energy companies.
In a note to clients this morning, Jefferies analyst Julien Dumoulin-Smith wrote that “in this inflationary environment, we expect FSLR's domestic manufacturing to be the clear winner” in the long term.
For everyone else in the renewable industry — for example, an equipment manufacturer like inverter company Enphase, which has been trying to move its activities away from China — “we perceive all costs to head higher, contributing to a wider inflation narrative.”
First Solar’s’s stock is up almost 4% in early trading as the broader market reels from the global tariffs. Throughout the rest of the solar ecosystem, there’s a sea of red. Enphase is down almost 8%. Chinese inverter manufacturer Sungrow is down 7%. Solar installer Sunrun’s shares are down over 10%. The whole S&P 500 is down 4%, while independent power producers such as Vistra and Constellation and turbine manufacturer GE Vernova are down around 10% as expected power demand has fallen.
First Solar “is currently the largest domestic manufacturer of solar panels and is in the midst of expanding its domestic manufacturing footprint, which should serve as a competitive advantage over its peers,” Morgan Stanley analyst Andrew Perocco wrote in a note to clients Thursday morning.
Nor has First Solar been afraid to fight for its position in the global economy. It ispart of a coalition of American solar manufacturers that have been demanding protections against Southeast Asian solar exporters, claiming that they are part of a scheme by Chinese companies to avoid preexisting solar tariffs. In 2023,80% of American solar imports came from Southeast Asia, according to Reuters.
Tariff rates specific to solar components manufactured in those countries will likely be finalized later this month. Those will come in addition to the new tariffs, which will go into effect on April 9.
But the biggest question about First Solar — and the American renewables industry as a whole — remains unanswered: the fate of the Inflation Reduction Act. The company benefits both from tax credits for advanced manufacturing and investment and production tax credits for solar power.
“Government incentive programs, such as the Inflation Reduction Act of 2022 (the “IRA”), have contributed to this momentum by providing solar module manufacturers, project developers, and project owners with various incentives to accelerate the deployment of solar power generation,” the company wrote in a recent securities filing.
If those tax credits are at risk, then First Solar may not be a winner so much as the fastest runner ahead of an advancing tide.