Interest rates are bruising U.S. auto sales, but the future still looks electric
Data giant Cox Automotive says EV sales in the second quarter, overall, faced headwinds from high rates and Tesla's decline. But the consumer market continues to warm up to the notion of plugging in.
If the attacks against the perceived market strength of Electric Vehicles may have gotten a little quieter lately, it may be because the entire automotive industry is starting to hesitate.
An industrywide mix of high interest rates, high sticker prices and an election year have tamped down car sales across the board, according to analysts at industry data giant Cox Automotive in their review of second-quarter numbers.
“Interest rates are enemy number one,” Cox economist Jonathan Smoke told media yesterday during a briefing in the company’s findings. “According to dealers consumers are cautious and getting more price-sensitive while believing that rates will be lower soon.”
Many Americans are finding their monthly payments stretching to $700 a month and greater for a new car, the result of generationally high interest rates, Cox said.
Cox is forecasting the entire automotive industry will grow sales from 15.5 million last year to 15.7 million this year. Of that, 1.3 million will be EVs, Cox says.
Looking forward, Cox said EV “skeptics” think they will be much less skeptical over the next few years, with most of them surveyed saying they will begin to consider buying an EV over the next 2-3 years - indicating a huge acceleration in U.S. EV adoption by the second half of the 2020s.
In EV sales specifically during the second quarter, the company said Americans bought 11 percent more EVs than the first quarter as the market share of EVs sold remained flat - at about 7 percent.
That doesn’t include, though, 75,000 Electric Vehicles that were leased to Americans during the quarter. It also doesn’t include sales of used EVs, which continue to grow.
A good reason for the flat, new-car sales numbers for electrics: EV market leader Tesla is continuing to tank. The company’s second quarter sales dropped by 15 percent, meaning the company led by Elon Musk is blowing the curve for the rest of the segment.
“I think Tesla definitely is bringing down the overall growth but I think there's some other makes and models that are starting to nibble at that share more post-Tesla for sure,” said Cox EV analyst Stephanie Valdez-Streaty during the briefing. Specifically, she pointed to Hyundai - which leads its EV business with the Ionic 5 and Ionic 6 models - as registering 38 percent growth in a market where Tesla saw double-digit declines.
Price positioning is also becoming more difficult for Tesla. While the EV segment as a whole saw acquisition prices drop, Tesla’s prices increased during the quarter, Cox said. In an environment where high interest rates cause higher monthly payments on car loans, this will place Tesla at an even greater disadvantage in a competitive space.
Valdez-Streaty also noted that GM’s lower-priced Chevrolet Equinox EV and Chevrolet Blazer EV are positioned for stronger growth in the second half of 2024 - placing even more pressure on Tesla.