- EV sales are slowing in the U.S.
- Consumers have anxiety about range and know-how with EVs.
- Mainstream appeal of EVs is still lacking due to high cost and limitations.
- $6.5 billion invested in EVs, with $1.2 trillion expected by 2030.
- Demand for EVs has softened, with luxury brand Lucid experiencing weaker demand.
- EVs tend to be more expensive than gasoline counterparts, impacting sales.
- EV buyer demographic is changing, with more mainstream buyers entering the market.
- There is an oversupply of EVs in the industry, leading to longer selling times and decreased enthusiasm for EVs.

- Automakers are moving to the Tesla charging standard, causing obsolescence for some vehicles
- EV charging is a concern for buyers
- EV adoption rates are affected by regional variations in pump prices and home energy rates
- Tesla's aggressive pricing is dominating the EV market
- Used EV prices are falling, leading to concerns about demand and affordability
- EV demand may be stalling, with new EVs sitting on dealer lots
- The volatility in the used EV market reflects uncertainty about EVs and their resale value

- Used car prices only fell 5.1 percent, while EV prices dropped about 32 percent.
- EVs have the worst depreciation rates, with hybrids holding their value well.
- Tesla's price war drove customers towards new EVs, impacting used EV prices.
- New federal tax credits have also affected the prices of used EVs.
- EV sales are growing, but there are concerns about reaching a natural ceiling for demand.
- EVs need to address cost, range, and refueling concerns to compete with internal combustion engines.

- Hertz planned to buy 100,000 Teslas for its rental fleet, aiming to be a first mover in the EV market
- The EV strategy was meant to appeal to corporate customers and introduce EVs to ordinary consumers
- Despite the investment, expected demand from customers has not materialized due to consumer anxiety about range and EV know-how
- Hertz emerged from bankruptcy with big plans, including the EV strategy and partnerships with American Express and Uber
- The company faced challenges such as pricing troubles, repair costs, and low resale values in the EV market
- Tesla's CEO clarified that Hertz did not have a fleet contract with Tesla, causing stock prices to fluctuate
- Hertz's EV strategy was seen as a way to meet ESG goals for corporate customers and introduce EVs to ordinary consumers
- The company's investment in EVs totaled about $2.5 billion, but the expected demand did not materialize
- Hertz faced challenges in the EV market, including consumer anxiety about range and EV know-how

- Hertz is facing challenges with their EV fleet, with high demand coming from ride share drivers
- Repair costs for EVs are higher, and the value of used EVs has dropped significantly
- The company is considering reducing the share of Teslas in their fleet and investing in infrastructure and charging stations
- Despite these challenges, Hertz is still profitable and generating ample cash flow
- The hope is that their investments in EVs and infrastructure will give them a competitive advantage in the future

- EV sales in the U.S. are slowing due to consumer anxiety about range and know-how
- Mainstream appeal of EVs is limited by high cost and limitations
- $6.5 billion invested in EVs, with $1.2 trillion expected by 2030
- Demand for EVs has softened, with luxury brand Lucid experiencing weaker demand
- Oversupply of EVs in the industry is leading to longer selling times and decreased enthusiasm
- EV charging, regional variations in energy rates, and Tesla's aggressive pricing are affecting EV adoption rates
- Used EV prices are falling, leading to concerns about demand and affordability
- Hertz's plan to buy 100,000 Teslas for its rental fleet did not materialize as expected due to consumer anxiety and other challenges
- Despite challenges, Hertz is still profitable and hopes their EV investments will give them a competitive advantage in the future

CNBC Marathon explores the decline of electric vehicle sales and its implications.

In August 2023, it took about twice as long to sell an EV in the U.S. as it did the previous January. Prices of EVs are down 22% year-over-year and that's mainly driven by Tesla. About two thirds of EVs sold are Elon Musk's brand. Companies like Ford have ramped up hybrid production as demand has leveled off.

Used EV prices are falling. Studies show that used EV prices fell somewhere around 30 percent in September and October 2023 from the same period in 2022. Used overall vehicle prices including internal combustion engines (ICE), hybrid and EVs declined by only around 5 percent.

In October 2021, Hertz publicly announced it intended to buy 100,000 Tesla vehicles. Newly emerged from bankruptcy, Hertz had a bold plan to lead the EV revolution in car rental. Shares of Hertz soared, as did Tesla’s - its market value hit $1 trillion. First mover advantage aside, it would help Hertz distinguish itself in an industry plagued by commoditization. But only a couple of years in, the rental company’s EV strategy is facing some serious challenges: pricing troubles, skyrocketing repair costs and low resale values. Meanwhile big rental rivals are holding back on EVs.

Chapters:
00:00 Introduction
00:34 Why EVs Are Piling Up At Dealerships In The U.S (Published October 2023)
17:21 Why Used EV Prices Are Falling (Published December 2023)
32:29 Why Hertz's Bet On Tesla Isn't Paying Off In The U.S. (Published December 2023)

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Why EV Sales Are Falling | CNBC Marathon

In August 2023, it took about twice as long to sell an EV in the U.S.

Consumers generally still have a little bit of anxiety, both about range and some of the know-how when it comes to EVs.

The mainstream appeal of these cars is still not there.

They're still too expensive and they've got too many limitations in terms of how you use them.

I've been in the auto industry 40 years and I've never seen this kind of investment.

$6.5 billion dollars strictly dedicated to EVs.

Wedbush says spending on commercial EVs should top $1.2 trillion between now and 2030.

We're building the future of the electric vehicle.

In 2022, consumers spent nearly $400 billion on electric cars worldwide.

Is expected to add 1000000 new EVs to its roads in 2023.

And from 2023 to 2027, automotive companies have committed $616 billion in total investments.

Meanwhile, these efforts have hit an unnerving speed bump.

I was a little nervous about going all EV because my husband has an EV as well.

And to have 2 EVs in the house, you know, it's challenging.

I think the main issue is the long distance travel.

Gas burning vehicles were still selling briskly.

While slightly more than half of consumers say EVs are the future and will eventually replace combustion engines, less than a third of dealers say so.

You have a product that almost every automaker has hinged their future on.

The government is really saying, look, we've got to go with electrification.

But when the rubber meets the road, when people have to make that decision and a lot of money's involved, we're starting to see that that's starting to take a bit of a hit.

Sales at some EV startups have disappointed, and companies like Ford have ramped up hybrid production as demand for their EVs has leveled off.

For those who are in combustion, would you suggest taking the step as the bridge, so to speak, to a P-HEV,

Or do you think perhaps going right over that to an electric vehicle?

There is a oversupply of electric vehicles in the industry today that is greater than the demand.

His shop is 1 of 383 Mercedes-Benz dealerships around the U.S.

It pulls in about 40 million dollars a year, employs about 50 people, and at any given time keeps about 70 cars on the lot.

It's not that the customer is not considering it or entertaining the purchase.

It's the reticence to that anxiety that exists relative to the range that the battery can produce and coupled with or compounded by the lack of public charging infrastructure, we're perhaps moving a little bit too fast.

Hawke's Automotive said in July 2023, on average, there's a 52 day supply of ICE vehicles at dealerships.

If they stopped making cars today, a dealer would have enough to last 52 days.

Pickup trucks went from 52 days to turn in January 2023 to just 57 by August.

Meanwhile, the EV supply was closer to 90 to 100 days.

No segment has seen a rise as substantial as EVs.

There's definitely a rise in how long a vehicle is going to sell a lot.

It's just that the EVs are sitting even longer.

And the fact that we're seeing it reflected in the used car market as well.

That tells us this isn't just like an isolated incident.

Numbers elsewhere suggest enthusiasm for EVs has dampened from a pandemic era high.

That number has since fallen to 67 percent in 2023.

In May 2021, Ford opened reservations for its F-150 Lightning, the fully electric version of the most popular vehicle in America.

It closed them by the end of the year because the company said it had enough reservations for 3 years worth of production.

But by September 2023, Ford said it was ramping up production of its hybrid F-150 because sales of the Lightning had slowed.

We literally had people who would follow car carriers to the store, hoping that when it got here, that the car on the carrier that they wanted to buy was available only to learn that it was already sold.

People are rushing to the dealership, they're going bananas paying over MSRP, their bidding wars are going on, people like I hope that guy doesn't buy it.

If it falls off the truck, I'll buy it kind of attitude.

Now, it's just been 1 year and the market for EVs is upside down.

The softening of sales isn't just happening for legacy brands.

The buzzed about luxury EV brand Lucid has seen 2 consecutive quarters of weaker than expected demand.

Most recently, it delivered 600 fewer of its high performance, 500 mile range luxury air sedan than Wall Street had expected in the second quarter of 2023.

Interest rates are up, and so borrowing money is a lot more expensive.

Inflation has reduced purchasing power and supply chains are disrupted.

The inflexible nature of the EV supply chain is pressuring OEMs to make EVs despite consumer pullbacks.

Then there are the pressures of meeting government mandates.

Think of the lens of the manufacturer where it typically takes a cycle time of upwards of 7 or 8 years from inception to showroom floor and wheels rolling, right?

And when you go back to the mandates, the regulatory pressures, when you have to meet those, it's not like you can just throw a switch and convert from combustion to electric.

There is a specific pricing challenge with EVs.

They tend to be more expensive than their gasoline counterparts.

That may explain why the luxury category hasn't slowed down as much as EVs have.

A luxury midsize electric crossover, say, will often have a higher transaction price or even a higher sticker price than a comparable fuel burning 1 in the same class.

The average transaction price for a vehicle in the U.S.

The average transaction price for an EV was somewhere between $53,000 and nearly $60,000, depending on whose data you use.

Drury says about 40 percent of EV shoppers are trading in a vehicle they already own for a new 1.

That is about twice what it was a decade ago.

That suggests that a lot of those EVs purchased a decade ago were supplemental vehicles, an extra car.

Like if you had a 2 car garage, you got a third.

And part of that was because those EVs, They qualified for lots of tax credits.

I know in Southern California, that was such a huge thing, that vehicles with that sticker, they would sell at a premium.

As a Mercedes dealer, Jeff Fiosa still interacts with a lot of well-heeled customers.

The early adopters were very techie and they were very, I want to say, more in the space of luxury.

Last year, we had 30 something models in the marketplace to almost 90 plus models today, a more mainstream buyer.

So these are the chargers for fast charge, DC charging and home charging.

IOSA sells an EQB, a more mainstream priced EV that retails somewhere in the high $50,000 range.

It's not cheap, but it's only slightly above the average vehicle transaction price.

And it's a lot less expensive than the EQE, which can run above $90,000, and the EQS, which can run up to 140,000.

These vehicles won't be worth nearly as much as, say, an ICE equivalent, which has more certainty involved.

You know, there's not going to be leaps and bounds of technology and improvements in ICE vehicles, but we know there will be with EVs.

Batteries on average are warrantied for 10 years to give at least 80% efficiency.

ICE cars, everybody puts out a good car today and they last well over 20 years.

I think there's an evolving sense of buyer remorse.

You see this in televisions where every 6 to 9 months you feel like the same 52 inch TV is cheaper at Best Buy or pick your location for the same functionality.

And especially now that OEMs are lowering prices.

At the end of the second quarter, 2023, several automakers announced that they're moving to the Tesla charging standard, also known as the North American charging standard or NACS.

That means there are vehicles stuck on factory floors with an obsolescing charging outlet.

Charging is a sore spot for all types of buyers, whether current, past or prospective.

This EV will allow you to plot a course and determine and predetermine when you arrive at different charging stations.

There's a fair amount of feedback that we get from customers that say, you know, we just don't like the government telling us what we should buy.

By 2032, 67.5 percent battery electric is aggressive.

I think by 2035, all electric is aspirational.

I don't think that that's going to happen.

EVs sitting on lots does not necessarily equal waning demand.

Vehicle sales through early September 2023.

If we looked at EVs as as our own segment, we took everything and put it together.

It'd be the number 6 segment in the industry.

However, there is a tremendous degree of regional variation.

While there have always been regional stories in auto pickup trucks in Texas, luxury cars in the Northeast, EV adoption rates pretty closely track 2 economic metrics, pump prices and home energy rates.

If gas prices get up to close to 6 dollars like they are in most parts of California, we're going to see a lot of consumers there shifting toward toward EVs.

Meanwhile, in Texas, gasoline prices are almost 2 dollars a gallon cheaper in Texas than they are in California.

But there is another reason why inventories have been building.

Tesla, which dominates the EV market, has been hacking away at its prices.

In August 2023, Cox Automotive data showed the average price paid for an electric vehicle was $53,376, down from $53,633 in July 2023 and down from more than $65,000 a year prior.

Again, that decline is driven almost entirely by Tesla.

In August, Model 3 transaction prices were down 21 percent year over year, while Model S was down 17 percent.

Model Y dropped 16 percent and Model X was down 13 percent.

At the beginning of 2023, the Model S was priced at $104,990 and the Model X was priced at $120,990.

By September 15th, the price was $79,990 for the X and $74,990 for the S.

It's about 2 thirds of all EVs sold are Teslas because their prices are so aggressive.

So not only do we have fewer consumers looking for an EV in Q2, We actually saw that those that were, it's very hard to get beyond Tesla with their prices and certainly with their supercharger network to go buy an alternative.

It's an unlevel playing field when you have a manufacturer that sells in the space of vertical integration, direct to the consumer, and not use the franchise system, it gives some flexibility to that direct seller to be able to adjust their pricing.

And in the case of Tesla, conveniently below the threshold so that you can capture more of the incentive money from the government.

Meanwhile, automakers are releasing EVs that are often selling for above $50,000.

Ford hiked the starting price on its F-150 Lightning in March of 2023 to $60,000, a 50 percent increase over the original $40,000 starting price.

But again, that is still $10,000 higher than the automaker had originally planned.

It's very expensive to bring EVs to market.

And a lot of cases, vehicles that were announced at a certain price point a couple of years ago, the automaker has not been able to hold those prices in this market.

And so those earlier announced prices have have tended to creep higher.

The picture that starts to emerge, the EVs that are on the lots don't match what consumers want and what dealers are selling.

I would like to see the government reassess their regulatory pressures and perhaps revisit the incentives through the IRA.

EV inventory is going to rise at the same time that the auto industry continues to launch more and more EVs at that 50 to $60,000 price point, which is already well saturated.

There's demand for EVs, it's just that they're Teslas and they're a lot lower price than what we see.

If perhaps we could hit the rewind button and do things differently than we have, I would like to think that maybe we would have slowed things down, maybe been more in the space of hybrid as a bridge to a more perfected battery technology.

We have been in the space of combustion ice for over a century, So we have a lot of experience with it.

We don't know what we don't know and we're still kind of cutting our teeth with it.

Clearly, I believe that we've moved a little bit too much and too fast.

The S&P study showed that people were willing to accept charging times of up to an hour and less range on an EV than on an ICE vehicle.

That's another shining light for EVs is, again, this understanding that they're not necessarily going to get what they get with their typical ICE vehicle, but they are actually willing to accept something less than what they're getting with their ICE vehicle.

And while the number of buyers considering an EV did fall from 2021 to 2023, it is still higher than it was in 2019.

The analogy that I like to use is we all have smartphones today and most of us had flip phones and if I said to you give me your smartphone and I'm going to give you back a flip phone it would be like saying give me your EV I'm gonna give you back a combustion And I would say that 90 plus percent of people, including myself, would say, I'm good.

Buyers can get some great deals, but some say it is yet another sign that demand is faltering.

Low resale value could also be a major deterrent to EV purchases and EV adoption more broadly.

Others say it is just a blip and fears of an EV slowdown are overblown.

Studies show that used EV prices fell somewhere around 30 percent in September and October 2023 from the same period in 2022.

Used vehicle prices overall saw declines in the mid single digits for that time period.

Some research indicates what many EV supporters insist.

EVs are cheaper to own than gasoline burning cars.

You don't have to shell out for gas and maintenance costs are lower.

But a car's residual or resale value is a big factor in determining the total cost of owning it.

The volatility in the used EV market shows how much isn't yet known about EVs, including how to predict what 1 will be worth in a few years.

A single change to policy, battery technology, even a single manufacturer's prices can upset the whole market.

These price drops come at a time when many other data points suggest EV demand is stalling.

New EVs are collecting dust on dealer lots.

Tesla, which controls nearly 2 thirds of the EV market, has been aggressively cutting prices and its third quarter deliveries fell short of investor expectations.

Let me give you this general thought that I hear from everybody in this business, including people at Tesla.

CNBC looked at data and talked to insiders to determine whether used EV prices are a sign of a larger slowdown in the EV market or a bad investment altogether.

1 study showed that all used vehicles up to 3 years old lost 4.8 percent in value from September 2022 to September 2023.

Another showed that from October 22 to October 23, the average price for 1 to 5 year old used EVs dropped 33.7 percent.

Meanwhile, used car prices only fell 5.1 percent in the same period.

A third showed they had fallen about 32 percent from September 22 to September 23.

That study said the average price as of October 18th was 27863 dollars, roughly the same as what it was in early 2021.

Some research indicates EVs have the worst depreciation rates of any vehicle type, including by a narrow margin, big value losers like luxury vehicles.

Hybrids are doing extremely well in holding their value and EVs are doing extremely poor.

Because when you buy a hybrid, what do you get?

You get much higher fuel efficiency and a higher fuel priced world we live in and 0 range anxiety.

That's a powerful, desirable combination.

The trouble is not limited to the used market.

In January 2023, new car dealers had about 52 days worth of EVs and internal combustion cars.

But internal combustion inventory held pretty steady between 52 days and 58 days throughout the year, while EV inventory soared to 111 days in early July, then settled at 97 days by October.

These numbers have fueled concerns that demand for EVs is waning.

There has been a fierce debate over what's actually happening.

There's been this wave of what I would call pretty misleading headlines over the last few weeks.

Like you would think that EVs were dead and buried if you paid attention just to what the news headlines were.

Scott Case is CEO of Recurrent, which creates vehicle history reports specifically designed to measure EV battery life.

It also publishes the Recurrent Price Index, which tracks used EV sales.

That index is among those showing prices have fallen dramatically.

If you wanted to say what's the single biggest cause of used EV price drops, it's Elon Musk.

Tesla controls about 60 percent of the new EV car market.

And in 2023, the company started a price war that drove a lot of customers who would buy used EVs toward new ones, especially Tesla's.

It also forced a lot of other manufacturers to lower their prices as well.

And the timing corresponds pretty tightly with the Tesla price drops.

Many of the 2022 models recurrent tracks depreciated 20 to 40 percent over 2023.

Nobody's going to pay the same for a used car as they would for the new alternative.

So you saw an immediate drop in used Tesla prices, which then was followed by a like a time delay drop in the used prices for Tesla competitors.

In other words, plummeting EV values don't reflect some kind of inherent problem with EVs, just the fact that consumers who might otherwise buy used are opting for new Teslas instead.

In addition, 2023 is the 3 year anniversary of the Tesla Model Y, which in the third quarter of the year was the best selling EV in the U.S.

Leased vehicles are often held for a period of 3 years and a large share of the cars on the used market are vehicles coming off lease.

Recurrent has found that on average, new EV owners hold on to their cars for about 3 to 4 years before selling.

That means a lot of 2020 Model Y's are entering the used market, driving up inventory.

2018, 2019 was just an incredible step up in new EV production in the U.S., Tesla, but other manufacturers as well.

And so that's what we're now seeing kind of come onto the used market at scale.

Used EV sales now outpace the sales of all new EV models except the Model Y and dwarf the sales of most of them.

They do, however, make up only a tiny share of total used sales, about 1 percent.

Finally, new federal tax credits kicked in in 2023.

These replaced the EV credits that had been in place since 2009.

The original plan offered buyers a $7,500 credit for each of the first 200,000 EVs a manufacturer sold.

The new credits offered the same amount of money but introduced a few new conditions centering on the price of the vehicle, the buyer's income, battery capacity and where the car is assembled, among other things.

January 1st of 2023, the $7,500 tax credit appeared on the scene for new cars.

So the immediate impact was essentially dollar for dollar, $7,500 decreases in used prices, like right at January 1st for any car that was sort of getting eligibility for this new credit.

In April 2021, there were about 11,000 used vehicles on U.S.

Dealer lots and on dealer or manufacturer websites.

By October 2023, there were 3 times that.

Residual value is what a car is expected to be worth at the end of some term, a lease, financing period, subscription, rental or something else.

It is often based on the price the car would be expected to fetch on a wholesale market, like a dealer auction.

Resale value is what a car is likely to be worth once you sell it on the retail market.

Used EV prices matter because residual value and resale value are factors in determining the total cost of owning a vehicle.

Tesla has long argued that its cars have a lower cost of ownership than comparably priced internal combustion vehicles.

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Why EV Sales Are Falling | CNBC Marathon