The Global Car Industry Is in Crisis and The Push For EVs May Be The Reason

We’ve reported multiple stories about the state of the car industry, from the doom and gloom at Volkswagen, to the mass layoffs incoming at major legacy car brands.

Though not 100% to blame, EVs have sparked a kind of space race in the car industry with legacy ICE car makers trying to one-up each other in an ironic race to the bottom.

The Silicon Valley tech disruptor model that has taught companies that investor perception is more important to your bottom line instead of strong fundamentals has been adopted wholesale by automakers to their detriment.

Off the backs of investors, once billion dollar valued EV companies like Fisker, Arrival, WM Motor and many more have filed for bankruptcy. Doomed by a product that’s more hype than practical and by charging infrastructures and customer appetites that just aren’t there.

In a desperate bid to innovate, brands like Mercedes, Volvo, and Volkswagen have pledged to go all EV but have both walked back those promises, while venerable brands like Jaguar grasp at straws promising EVs in the future but advertising only vibes.

These bold declarations come with a cost and it seems that for many in the industry that have chased fads for the sake of investors, it’s time to pay the piper.

Another cost of chasing the trend is the tariffs and subsidies that both help and hinder the sale of EVs. While subsidies in China has allowed brands like BYD to mushroom all over the world, tariffs globally have also hindered those sales.

With many parts for EVs coming from China, these tariffs have taken a toll on the global market. Subsidies in each EV-friendly state have also been gradually phased out and buyers are not willing to spend on expensive EVs that are neither supported by a strong infrastructure, nor very reliable.

Lucid, an EV maker in America loses USD338,000 per car sold in 2023 and the story is the same for every venture backed automaker trying to move fast in the deeply entrenched ICE car industry.

In an industry that loses money for each car sold, legacy car makers are entering a battlefield that is already lost and throwing good money after bad does not seem to be the solution.

The solution seems obvious, drop EVs and put R&D into it until they’re ready. But perhaps there’s some sunk cost fallacy at play here in the minds of CEOs. They probably think, nothing ventured nothing gained, you have crack a few eggs to make an omelette.

But this is an omelette that people have made clear they do not want. People want reliable cars that don’t cost a fortune to fix, doesn’t require proprietary software and hardware to run, and doesn’t take 1 hour to charge.

When you’re paying 12 months of your salary for something, you don’t want to compromise on things like planning excessively for a trip to squeeze in a charge, or trying to find a parking spot that you can charge in.

The move fast, break things philosophy may have worked for tech companies with low capital expenditure and low overheads, but when the same model is used to sell cars with plenty of fixed overheads, well, it’s not hard to see why the industry is collapsing.