U.S. Automobile Exports Soar

America’s new car dealers saw 15.5 million units sold in 2023, compared to 13.7 million in 2022 and14.9 million units in 2021. This is down from the peak of 17.6 million units in 2016 according to the National Automobile Dealers Association (NADA). In addition, U.S. automobile exports have been strong in recent years, reaching an all-time high in 2023 of $163.5 billion, compared to $136.1 billion in 2022 and $122.8 billion in 2021.

Meanwhile, manufacturers in the U.S. and globally are faced with redesigning and retooling for what is forecast to be a booming long-term market for electric vehicles (EVs). The supply chain issues in EVs are very challenging, as massive investment is required in new battery plants and the manufacture of the special electrical controls and systems required for EVs.

A major U.S. infrastructure bill that passed Congress in late 2021 directs $5 billion into expanding EV charging stations on major highways. Another $2.5 billion in grant funding was earmarked for EV charging or other green alternatives such as hydrogen fueling infrastructure. A bill referred to as the Inflation Reduction Act enacted in 2022 extends tax credits of up to $1,000 for installation of charging stations by homeowners, and up to $30,000 per property for commercial stations, but there are several restrictions.

Investment in EV manufacturing plants in the U.S. began skyrocketing. The Center for Automotive Research reported $33 billion in new electric auto factory investment in 2023, including assembly plants and battery plants. This figure is on top of tens of billions of dollars invested in earlier years. Massive federal financial incentives are fueling a rush to build new battery plants in many parts of the U.S.

However, as of mid-2024, America’s manufacturers were scaling back on EV production and manufacturing plant construction due to sales that were falling far below initial expectations. JD Power projected EV sales for all of 2024 of 1.2 million units, or only about 9% of all vehicles sold, down from a previous prediction of 12%. The American market for EVs seems to have matured to some extent. Early adopters have purchased their EVs, but mainstream car buyers have not been convinced to change at the expected rate. One immense cause is range anxiety—car buyers do not want to take the risk on running out of battery power. Many others do not have charging available at home, while others resist the generally high prices of EVs. Yet another problem is insurance and repairs costs. EV collision repairs and insurance can be significantly higher than those of gas-powered vehicles.

From the car manufacturer’s point of view, immense challenges remain. Massive investments are required to scale-up their EV building capacity, but sales aren’t keeping up. Worse still, outside of Tesla (which to-date earns most of its profits by selling carbon offset credits, not from selling cars), auto makers have incurred huge losses on their EV efforts. Ford is expected to lose as much as $5 billion on its EV unit in 2024, and in the quarter ended June 2024, lost a stunning $130,000 on every electric vehicle that it sold (Ford then reported losses of $44,000 per vehicles in the second quarter of 2024). EV plant construction has been deferred or cancelled as well (although new battery manufacturing plants are forging ahead.) In August 2024, Ford announced the cancellation of plans for a large, three seat row electric SUV and would likely take $1.9 billion in special charges and write-downs. General Motors (GM) is delaying production of an electric truck and pushed back the opening of a suburban Detroit EV factory.

Meanwhile, American manufacturers are shifting away from making sedans to focus on better-selling SUVs and pickup trucks, along with a growing number of electric vehicles. Ford ceased producing most sedans in North America in late 2020, focusing instead on crossovers and SUVs, including the Ford Mustang Mach-E model. GM’s 2023 lineup had only three sedans, the Chevy Malibu and the Cadillac CT4 and CT5.

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