The electric vehicle (EV) landscape took a significant hit with Tesla’s disappointing third-quarter earnings report, resulting in a staggering $28 billion loss for Elon Musk. Now, Toyota’s Chairman and former CEO, Akio Toyoda, a long-time skeptic of the electric vehicle trend, has renewed his skepticism, stating that people are beginning to recognize the uphill battle facing EV adoption.
Akio Toyoda’s apprehension towards the electric vehicle hype was one of the reasons behind his decision to step down from his role as CEO at the Japanese automaker earlier this year. In light of Tesla’s recent struggles, Toyoda feels vindicated, emphasizing that EVs are not a guaranteed path to profitability. “People are finally seeing reality,” Toyoda asserted during a recent statement.
Toyoda has consistently argued that electric vehicles are not the sole means for the automotive industry to attain carbon neutrality, asserting that “there are many ways to climb the mountain.” Interestingly, other major automakers are also slowing down their EV rollout plans. Lucid Motors, for instance, has scaled back production by 30%, while GM has postponed the introduction of the Chevy Silverado EV by a full year.
While President Joe Biden has been ardently promoting electric vehicles as a core component of his efforts to reduce U.S. carbon emissions and combat climate change, the EV market is facing headwinds due to high interest rates that are dampening consumer demand for electric and conventional vehicles alike. Jessica Caldwell, Head of Insights at Edmunds, highlighted how these interest rates are hindering people from entering the EV market.
Despite still witnessing growth, EV sales have experienced a deceleration. In the first half of 2023, EV sales increased by 49% compared to the previous year, a slower pace than the 63% growth recorded in the preceding year, according to the Wall Street Journal.
Caldwell explained that transitioning to a new technology, particularly one as expensive and requiring a different relationship with vehicles that has remained largely unchanged for decades, was bound to encounter challenges. She commented, “So to think that everything was going to roll out smoothly and we follow this nice adoption curve, it was a bit unrealistic.”
Moreover, Elon Musk, the CEO of Tesla, who also owns the social media platform X and is reputedly the world’s wealthiest individual, suffered a staggering $30 billion reduction in his net worth. Tesla, a major proponent of EVs, reported its lowest quarterly earnings per share (EPS) in two years, falling 10% below already pessimistic analyst predictions. Consequently, Tesla’s shares plummeted by over 17%, and the company’s market capitalization contracted by $138 billion within just two trading days.
Jessica Caldwell noted, “This is going to be a large speed bump in the road for automakers that I’m sure that they saw coming.”
Akio Toyoda, Toyota’s Chairman, has long urged the automotive industry to diversify its investment portfolio beyond EVs. He emphasizes the importance of continuing to invest in hybrid vehicles, hydrogen-powered cars, and other alternative eco-friendly transportation options.
Toyota is not the only automaker to adopt this diversified approach. Ford, for instance, has opted to slow down the production of its F-150 Lightning pickup, while General Motors has also announced a deceleration in EV production after initially making ambitious commitments to phase out gas- and diesel-powered vehicles by 2035.
However, industry experts believe that the recent turbulence in the EV market is part of the “growing pains” on the path to the inevitable dominance of electric vehicles in the automotive sector. Jessica Caldwell noted, “The industry is moving towards EVs—to deny that would probably be unwise. It’s what that path looks like—that’s what’s undefined and is causing more confusion.”
As the automotive industry grapples with these challenges, it remains to be seen how EV adoption will evolve in the coming years and how automakers will adapt to the shifting landscape.