Where does the global car market go after a record year for electric vehicle sales across the board, but one also marked with a lot more ups and downs than most people expected—and a lingering deal of economic uncertainty ahead? Car dealers are skeptical, regulators like the European Union seem to be getting skittish about phasing out internal combustion engines, and even Tesla has warned of a slower growth year until it can ramp up its future models. 

Now that the rest of 2024 is coming into focus, a few big questions about EVs are taking shape: how soon, how fast and how ready are we? Today’s entry of our Critical Materials news roundup looks ahead to the major trends we’re set to see this year in the ongoing zero-emission transformation of the car business. 

30%: If You Want Peace, Prepare For War

If you only look at the factors I listed in my introduction, you’d think that car companies and their dealers would have every reason in the world to slow-walk an EV transition. They could trickle out new models over time, mostly focus on the wealthy urban areas, or even set a Toyota-esque 30% target for EV sales and coast on internal combustion sales as they’ve always done. (Granted, that would have a profoundly negative impact on our climate, but that argument tends to not be a convincing one, unfortunately.)

There’s just one problem with that, and it happens to be a huge one: China. The automakers from that country are rapidly seizing market share on the European car companies’ home turf, so much so that they’re eyeing protective tariffs of their own; the ones that keep Chinese cars out of the U.S. feel like a temporary band-aid at most.

Writing for Automotive News, longtime auto analyst Michael Dunne sounds the alarm in a clearer way than I’ve heard from just about anybody. I don’t agree with every single part of his analysis here, but overall, he nails what’s about to happen.

The story is worth a read in full, but here are some highlights:

China’s auto industry is a modern-day Godzilla, the likes of which Detroit has never seen. In 2023, China blew past Japan to become the world’s No. 1 automotive exporter, shipping almost 5 million vehicles to more than 120 markets worldwide.

[…] Detroit, in contrast to China, is turning inward. In the last decade, GM, Ford and Jeep have retreated from markets worldwide.

General Sun Tzu would make the following observations: Chinese automakers know themselves, and they know their enemy. Detroit does not know Chinese automakers. And Detroit’s own identity seems stuck between the grandeur of yesteryear and the raw vulnerabilities of today. For Detroit to compete with the Chinese will require monumental effort, guts, tenacity, innovation, daring and, yes, lots of luck. But the starting point will be to look in the mirror. Who are we, Detroit?

GM, Ford and Jeep-Dodge are very good at building quality large pickups and SUVs for Americans at a profit. Period. Detroit is not competitive anywhere else. The Chinese are better on costs. The Japanese are better at quality. The Koreans are better in value. The Germans are better at luxury. And Tesla is better in just about every facet.

I’m not sure I consider Tesla yet to be the best at “luxury” or “trucks,” but broadly, this is all correct. China’s automakers required Western and other Asian brands to work with them via joint ventures for decades, and so they fully understand who they’re up against. 

Meanwhile, the U.S. automakers in particular have gotten addicted to selling one type of vehicle: large trucks and SUVs, and the profit margins they bring. They have largely retreated from Europe, they don’t own countless global brands anymore, Stellantis’ U.S. footprint is far from its Chrysler heyday, and they have all but given up on making smaller and more affordable vehicles.

I tend to think that even if you put aside “uneven” EV adoption, the fact that 2023 was a record year for hybrid sales proves that people want to break up with gasoline and will if you give them a chance. So is Detroit really ready for that kind of future? 

I think Ford is trying hard on the battery and software fronts, but those efforts lately aren’t being reflected in sales; General Motors, on the other hand, seems to be failing at almost all of its future bets.  

So what prescriptions does Dunne offer? He doesn’t mince words: “Detroit must dig deep to rediscover the determination to win—whatever it takes.” Maybe that means acquiring more stakes in Chinese automakers like Volkswagen did with XPeng, or set up operations alongside Tesla, or more importantly, beat the Chinese newcomers at their own game:

Fortify strengths in the home market. No one can match Detroit when it comes to large pickups and SUVs. Ford F-150, Chevrolet Silverado, Ram and Jeep customers are among the most loyal in the world. Detroit should work closely with dealers, suppliers and finance companies to deepen those intense emotional bonds to American car brands. Profits from the truck business are Detroit’s oxygen and lifeline to tomorrow.

Detroit also needs to develop more offerings under $30,000. This will block a point of entry for the Chinese. The Ford Maverick or the Chevrolet Trax are excellent examples.

Basically, the $65,000 gas-powered pickup truck game that has sustained Detroit since the bailouts and the Great Recession won’t keep the lights on forever. What’s next? So far, I don’t think we have a great answer to that question. 

60%: Even Hyundai Has A Warning About The Near-Term Future

In his analysis, Dunne says “When the goals appear too daunting, remember this: Hyundai and Kia, based in a country smaller than Michigan, compete and win in markets worldwide. Why not Detroit?”

It’s true that Korea’s Hyundai Motor Group is getting it right on the EV front—its big bets are largely working, though it’s unclear how profitable individual models are. Hyundai itself, of course, is profitable, but it missed analysts’ projections thanks to a strong Korean won and the high costs of peacing out of the Russian market. 

But Hyundai is joining Tesla in predicting a more cautious road ahead, the Korea Times reports. And believe it or not, like GM, Hyundai’s stock price is flatter than executives would like:

But Hyundai Motor’s share price is moving within a band of around 170,000 won ($127) and 200,000 won, which is not in tandem with its earnings growth, as the figure is still far lower than three years earlier. The carmaker’s stock price has not shown any drastic rallies over the past decade, hitting a decade high of merely around 260,000 won per share in January 2021.

“We cut the carmaker’s target stock price down to 250,000 won per share from an earlier forecast of 290,000 won, taking into consideration the lingering market uncertainty stemming from the outlook for the global car sales slowdown this year,” IBK Investment & Securities analyst Lee Sang-hyun said.

According to data from U.S.-based market tracker Cox Automotive, the new-vehicle inventory there came in at 2.66 million as of Jan. 1 this year, up more than 50 percent from a year earlier. The figure is unlikely to decline rapidly anytime soon due to the overall industry slump amid long-lasting high interest rates.

[…] Hyundai Motor has not been exempt from the negative market outlook. Hyundai Motor Group is the second-largest EV player in the U.S., accounting for a 7.9 percent market share. But it remains unclear whether it will be able to continue expanding its EV presence throughout this year in the face of the toughening market competition and macroeconomic uncertainties, according to other analysts.

In other words, as good as Hyundai is at the moment, this is not easy for them, either. Nonetheless, Hyundai’s investor relations chief remains bullish on electrification plans: “If we realize the plan accordingly, our sales for EVs and hybrid cars will account for half of total car sales by the timeline.”

90%: The Next-Wave Adopter Problem 

Finally, there’s a huge challenge facing the automakers this year around who is buying EVs. Last year’s sales were powered by a lot of first- and second-wave adopters, people comfortable taking risks and being early to the game, even if it means public charging headaches on occasion. 

The Wall Street Journal points out several potential bumps in the EV market ahead, but reaching the people who don’t want to deal with any of those headaches—understandably!—is going to be a major problem to overcome: 

While EV sales increased 47% in the U.S. last year—outpacing the broader car market—the rate of growth slowed from the prior year, according to research firm Motor Intelligence.

Elizabeth Krear, an EV analyst at J.D. Power, said the first three weeks of 2024 have also started slowly for EV retail share, in part because of restrictions introduced on Jan. 1 that narrowed the number of battery-powered models eligible for a $7,500 tax credit.

Still, the firm forecasts EV share in the U.S. could grow this year to reach an average of 12.4% of the retail car market. Car executives are also optimistic as prices for EVs come down and the range of options expands that sales growth will pick up again. 

“There’s still buzz, but I’m not seeing people ready to replace their Kia Telluride or Chevy Tahoe—that big SUV they use to take kids to hockey—with an EV,” said St. Louis-area car dealer Brad Sowers. 

Many of the passionate EV buyers, who were willing to pay a premium for a battery-powered car, are now gone, he said. They have been replaced by more discerning customers, asking a lot more questions about charging times and battery life and range, Sowers added. 

I’d argue one way for automakers to win over the “drive my kids to hockey” crowd is to focus more on free home charger installations, rather than this overly aggressive push for public fast-charging. I bet a lot of those folks would be more into EVs if the automakers worked harder to show them they can be at a 100% charge every morning when they wake up. 

100%: How Does Detroit Turn The Tide Against China? 

Let’s say BYD builds a factory in Mexico—which it almost certainly will do soon—and that allows it to circumvent the steep U.S. tariffs on Chinese-made cars. And then it sells high-range EVs in the U.S. for, say, $25,000 on average.

How does Detroit fight back against that? How does it prevent that outcome in the first place? I think plenty of American buyers will be skeptical of buying a car from a Chinese company, but many more will just be won over by a great deal. So how can Ford, GM and the U.S. arm of Stellantis keep that from happening? 

Contact the author: [email protected]