More Bad News for Electric Car Enthusiasts

13 mins. to read
More Bad News for Electric Car Enthusiasts

Sales Of EVs Slump

Sales of electric vehicles (EVs) in the USA are running at well below the Federal Government’s target, despite all the various subsidies offered by the ineptly named Inflation Reduction Act. And in the UK sales have plateaued. Mind you, sales of cars of all kinds in the UK, while up last year, were still about 18 percent down on their pre-Covid peak of 2.69 million in 2016.

But given that in the UK and the EU (as well as California) plan to outlaw the sale of new petrol and diesel-powered cars in 2035 it is extraordinary that fewer than two percent of vehicles on Europe’s roads are electric. EV zealots are thus calling for even more state-funded subsidies to accelerate the transition from internal combustion engine (ICE) powered vehicles to electric-powered ones.

The biggest problem that EVs have in selling themselves is that they are about 30-40 percent more expensive to buy new than their petrol-powered analogues. The leading car rental company, Hertz, announced recently that it is selling one third of its fleet of EVs (20,000 vehicles) because they are too expensive to repair. It will replace these vehicles with petrol-powered cars. The company has taken a $245 million hit as a result. Uber has also admitted it is struggling to get drivers to adopt EVs in the numbers it expected. Addison Lee, which runs a fleet of electric-powered cabs in London amongst other things, has abandoned “the dream” of going all-electric.

Then there is the charging challenge. People with home garages can install car chargers but for people who live in flats that option is not available. They have to find public charging stations on city streets or at service centres. The more people who own EVs, the more demand there will be to use public charging stations. And while petrol cars can be refuelled within minutes EVs often take thirty minutes to an hour to charge – meaning that queues can form, thus further lengthening the time required to recharge a battery. Moreover, the cost differential as between electricity and petrol has moved in petrol’s favour over the last year.

Another issue is that EVs depreciate faster than their petrol and diesel-powered analogues. It turns out that the second-hand market for EVs is even worse than that for ICE-powered cars. Used electric car prices in Britain have fallen by 23 percent in the last year alone, according to AutoTrader, as thousands of EVs bought using car finance schemes were resold. This rapid depreciation arises because people worry about the lifespan of batteries – and replacing a battery is almost as expensive as buying a new car. They also expect continued improvements in battery technology such that EVs which are just a few years old are regarded as already obsolete.

Electric cars are also becoming even more expensive to insure. The typical insurance premium for EVs has increased to £1,344, a rise of 50 percent compared with a year earlier, according to UK broker Howden Group. That is double the cost of cover for petrol-powered cars. Howden blames this on a higher frequency of claims from EV drivers and a higher average cost per claim. The average cost per claim for accidental damage is typically 35 percent higher for EVs.

The evidence is also accumulating that, far from being the solution to the challenge of net zero carbon emissions, electric cars emit more carbon over their entire life cycle than almost any other form of transportation. This is when the CO2 emitted in the extraction of raw materials, including rare Earth metals used in EV batteries, is taken into consideration.

HM King Charles is an EV enthusiast. Last year he purchased an Audi Q8 which has a range of about 333 miles on a single charge and which can accelerate to 60 miles per hour in 5.6 seconds. It sells in the UK for around £80,000. He also owns a Jaguar I-Pace. But while nobody questions the King’s dedication to preserving the environment, his choice of vehicle reinforces the perception that EVs are mostly bought by well-off people who already own petrol and diesel-powered cars. EVs are increasingly seen as the playthings of the wealthy who can still afford to drive.

Made In China

When the government of Boris Johnson in its wisdom determined that all new cars must be electric by 2030 (a deadline subsequently moved by Rishi Sunak to 2035) nobody seemed to consider that most affordable EVs will be manufactured in China by the end of this decade. The EU is naturally considering whether cheap imported Chinese EVs should be subject to tariffs sufficient to cancel out their price advantage. In her State of the Union address to the European parliament last year, EU Commission President Ursula von der Leyen stated that Chinese EV prices were “artificially low” as a result of state subsidies. Chinese manufactured EVs already attract a 25 percent tariff in the USA.

Last year, China overtook Japan as the world’s biggest exporter of cars. Chinese auto exports have increased five-fold since 2020 to about five million units last year, about one quarter of which were electric. Chinese automotive giants have captured new markets across Latin America, South East Asia and the Middle East. China’s domestic car market has also remained strong despite the economic challenges the country faces – in 2023 new car sales hit a new record.

In the last quarter of 2023, Shenzhen-based EV producer BYD outsold Tesla to become the world’s largest producer of electric cars. (526,000 to 484,000 units, to be precise). Warren Buffett’s Berkshire Hathaway has been a shareholder in BYD since 2008. The firm’s remaining eight percent shareholding is currently worth around $2.3 billion.

BYD’s key competitive advantage is that it can manufacture high energy-density lithium-ion batteries more cheaply than its western competitors. In fact, BYD started life as a cell phone battery maker in the late 1990s for the likes of Nokia, Motorola and Siemens, having been founded in 1995. An electric car is, after all, essentially an electric motor and battery on wheels.

Its Atto 3 model sells for just €38,000 in Europe – as compared to the Tesla Model 3 which is priced at around €43,000 in Germany and France. Once BYD’s proposed factory in Hungary is completed it will be able to circumvent any forthcoming European tariffs on cars manufactured outside the EU. The company is also thought to be looking for a site for an equivalent manufacturing facility in Mexico to supply the North American market. Reportedly, the Biden administration has already cautioned Mexico about the consequences of accepting Chinese investment. In 2021, the then CEO of Volkswagen, Herbert Diess, said that BYD was the competitor that VW feared most.

China sells and buys more EVs than the rest of the world combined. But some Chinese producers are trying to position themselves as global players. Wiliam Li, the founder and CEO of EV producer Nio, told the Financial Times last year that 80 percent of the company’s shareholders were from outside China.

It is curious however, that these Chinese automotive players have not delivered decent returns to investors of late. Over the past year, Dongfeng Motor, SAIC and Nio have generated negative returns for shareholders while Xpeng and BYD have delivered only marginally positive returns. It seems that they have all been trying to gain additional market share at home and abroad by slashing prices and therefore margins. Moreover, domestic demand for new EVs may have peaked. Few Chinese city dwellers have designated parking spaces where their cars can be charged.

Virtually all Chinese exports of EVs are shipped in containers. As I reported here last November, ships carrying EVs have been struck by a series of fires which are almost impossible to extinguish. This has increased the cost of freight insurance. Now, with a low-burn war going on in the Strait of Bab-al-Mandab (where the Red Sea meets the Indian Ocean – about which I shall have more to say shortly) shipping freight charges are soaring. These additional costs will further erode margins for Chinese EV manufacturers. The BYD Seagull sells for around US$11,000 in Latin America. If the shipping costs for an individual car double or triple, BYD would probably prefer to sell these vehicles at home.

Tesla Versus Toyota

In 2023, Tesla was hailed as one of the “Magnificent Seven” which propelled the Nasdaq to record levels. But so far this year, its share price is down from just under $250 to close at $182.63 yesterday. This reflects a slow-down in sales. Europe’s biggest car rental company, Sixt, announced in December that it would be phasing out the purchase of Tesla vehicles altogether. Profits are down too.

This week the big boss of Toyota, Akio Toyoda, stated once again that battery electric cars will never account for more than 30 percent of the global market and that consumers should not be forced to buy them by ideologically driven governments. The other 70 percent will consist of fuel cell EVs, hybrids and hydrogen-powered cars. Reading between the lines, I suspect that he would also favour the retention of ultra-high efficiency ICE-powered cars.

As I have discussed here before, Toyoda and many others think that there should be a “multi-pathway approach” to the challenge of global warming and that solely backing lithium-ion EVs is a strategic error. Customers, not governments, should ultimately decide which technology wins out. Toyota manufactured around ten million cars last year against 1.8 million deliveries from Tesla. And yet Toyota’s market capitalisation at $271 billion is still less than half of Tesla’s $570 billion or so. I would expect those valuations to converge going forward.

Alternatives To EVs

Many people, faced with the costs associated with buying and maintaining electric cars may decide to change their mode of transport altogether. Young people in particular are not buying cars as their parents’ generation did. Instead, they are opting for e-bikes, e-mopeds and e-scooters. E-bikes, which can be ridden as conventional bicycles or with assisted power are attractive to fitness enthusiasts. All of these can be ridden in the cycle lane networks that are characteristic of modern European cities. (Though it is true that the Mayor of Paris, Anne Hidalgo, banned e-scooters in the French capital last year further to a referendum. I related in these pages how dangerous they had become when I was in Paris last April. But if they had their own designated lanes risks could be reduced).

About 5.5 million e-bikes were sold in the EU in 2022 as compared with just two million electric cars. They are even becoming a status symbol, some bearing the Lamborghini and Maserati emblems. The iconic German automotive giant Porsche (part of Volkswagen AG) is developing bike motors, batteries and software. Studies show that e-bikes move around urban areas more rapidly than cars.

European car mileage (all right, kilometrage) has been falling since the beginning of the century. According to the consultancy Field Dynamics, in Britain 57 percent of all cars are driven less than 57 miles a week. This trend mirrors the rise of hail and ride apps, most obviously Uber, which once again are most popular amongst the young. The next step in hail and ride will be in the direction of flying taxis which I have discussed here in the past. Jeremy Hunt is reportedly about to boost their development in the forthcoming 6th March budget.

Car ownership is no longer the status symbol it once was. In Paris, only one household in three owns a car. Moreover, the commodity markets might be trying to tell us something. The fall in the price of nickel and the flat-lining of the price of lithium and the volatility of the price of copper might suggest that the boom in demand for these metals to manufacture EV batteries may have run its course.

Thinking Outside The Box

It is quite possible that it is not just the internal combustion engine which is about to be unceremoniously ditched – but the motor car itself. People don’t want to travel by car as much as before; and increasingly, with working from home (WFH) and ubiquitous home delivery, don’t need to. We need to start think about the post-motor car world.

The decline of the motor car is partly driven by the environmental lobby which aims to make motoring more expensive and less convenient. In Wales and in Greater London there are extensive 20 miles per hour zones and low traffic neighbourhoods. Cities like London are rolling out net zero neighbourhoods where cars are effectively banned. The cost of parking in urban areas is soaring – not least at hospitals. There will be a referendum in Paris on 04 February on whether to impose a punitive parking tax on SUVs. The Tony Blair Institute is calling for universal road pricing.

The world’s great historic cities were not designed for motor cars and will adapt well to their demise. Victorian London was the most dynamic city in the world without a single motor car, though with the most advanced underground railway of any city by 1900. And yet, if we were to dispense with the motor car the public transport system as is – especially in the UK – would be entirely inadequate to the task of getting people around. Currently, around 60 percent of all journeys in the UK are undertaken by car. Trains would surely take more of the strain if they were more reliable, less expensive and more easily accessible. The Beeching cuts of 1963-65, designed “to rationalise” the British railway network, now look like an act of vandalism.

The model of the city as we now know it would have to change without cars. The modern inner city, with its business district surrounded by extensive suburbs, was a model propelled by the rise of the motor car. The modern discipline of urban planning (you can get an honours university degree in it from the University of Loughborough) has always been much more about traffic management than architecture. Without cars, people will wish to live closer to the city centre and the suburbs will become depopulated. More people will live in flats and fewer in houses. House prices will be skewed accordingly. The out-of-town megastores will flounder – but that will be no surprise about that. Evolving demographics and shopping habits already favour inner city small surface supermarkets (hence the meteoric rise of ALDI and LIDL).

Many schools and hospitals will find themselves in the wrong locations. I was a child of the last generation of kids who were expected to walk to school. (About six miles there and back – and I am so grateful because it inspired my life-long love of hiking). Modern kids are ferried to school in vehicles negotiating traffic jams – and they are fatter and less adventurous than we were.

But what would the one million or more people in the UK who work in the automotive industry and its suppliers do for a living post-motor car? (The figure in Germany is more like four million). No doubt some could be redeployed to work on the design and construction of VTOL flying taxis (basically drones with a cockpit, piloted by artificial intelligence). But the honest answer is that we don’t know – just as our forebears 150 years ago had no idea what the country’s huge population of blacksmiths might do post-horse power.

I don’t think the ownership of cars will ever be proscribed in democratic countries; but both culture and economics are militating against them. They will go the same way as the chariot.


A week is a long time in politics, said Harold Wilson nearly sixty years ago. This last week has been one of the longest. I’ll give you three reasons why.

First, the US presidential election is almost certain to be a re-run of 2020: Trump versus Biden. Only this time, Trump Two Point Zero will most probably win. Chanceries across Europe (London not least) are already in a state of trepidation. Second, the military top brass – whose instinct is to bite their lips – have started to talk openly about the high probability of war within a ten-year timeframe with the Russia-China-Iran-North Korea axis. This comes at a time when the British military is in dire straits due to lack of funding and the triumph of wokeism. Third, the UK Conservative government has passed beyond the point of no return. Its defeat in the forthcoming general election is now certain – the most recent YouGov poll puts the Tories on 20 percent. The question now is whether the party – which has endured for nearly 200 years – will survive at all.

There will be much to reflect upon this year.

Listed companies cited in this article which merit analysis:

  • Hertz Global Holdings Inc. (NASDAQ:HTZ)
  • Uber (NYSE:UBER)
  • BYD (HKG:1211)
  • NIO (HKG:9866)
  • Dongfeng Motor Corp. (HKG:0489)
  • Xpeng (HKG:9868)
  • Berkshire Hathaway (NYSE:BRK)
  • Tesla (NASDAQ:TSLA)
  • Toyota (LON:TYT)
  • Volkswagen AG (ETR:VOW)

Comments (7)

  • carl moggridge says:

    ‘instal car chargers in the garage’ have you looked at recommended safe distances to charge vehicles from your home? (in case of fire)
    If a re-charging car caught fire and took out your house will the car insurance cover it?
    Or your home insurance?
    If you live in a semi-detached a terrace or heaven forbid a small block of flats, and took out the neighbours?
    This happened to a friend whose neighbours camper van cooker caught fire and destroyed, the van, his house and my friends house.
    From memory Tesla originally advised approx 4m from property. (not very practical in the UK)

  • Paul Bennett says:

    There is no evidence that electric cars emit more carbon over their life cycle, the latest research that I read shows that EVs only need to be driven 12,000 miles to be more environmentally friendly than ICE cars. If EVs are slumping how come the Tesla model Y is the best selling car on the world in 2023?

  • anthony john axon says:

    Further to Mr Moggeridge comment ,and you touching on your increased insurance costs.
    There have been several tragic charging accidents reported with e- scooter/bikes in hallways .SW BBC news recently reported a very, e- car nasty, fire [fortunately outside ,on the drive] a Vauxhall I believe. Which left the car burnt out[as currently no way to put these battery fires out] and the front of the property severely ‘scorched’ .How long before insurers ban EV’s from being garaged in integral house garages ,especially with charging point indoors , or make house insurance unaffordable ?? s

  • roger bennett says:

    I wonder what Klaus Schwab meant when he reportedly said “you will have nothing and you will be happy” No identity, no nationality, no power and no choice seems to be the future in our brave new world for the proles. The lucky few can have their private jets whatever cars they wish and their underground bunkers just in case as their reward for making our lives hardly worth living. Life under Putin may be an improvement sadly I can’t imagine he has any interest in invading the West just a desire to negate threats.

  • Robert James Walker says:

    “The Beeching cuts of 1963-65, designed “to rationalise” the British railway network, now look like an act of vandalism” … be careful not to rewrite history here Victor. Beeching saw that 40% of railway traffic travelled on the West Coast Main Line routes, and that some 80% of the network carried less than 1% of all journeys, whether passenger or freight. This in the context of the rise of the motor car, the motorways themselves and the novelty of being able to travel independently. This was underscored by a railway that was crippled by still using steam traction owing to a pact between the Coal Board and the Railways Board as part of Clement Attlee’s post war social experiment. Perhaps bizarrely, the current road network almost mirrors the existing railway infrastructure – the main roads with the exception of the M5 lead to London (where the road building decision making is done) and the east west UK road network makes do with upgraded A roads with plenty of roundabouts.

  • Andrew Bennett says:

    I sold my hybrid car, not because of the electric battery v ICE debate but because I found the touch screen infotainment system positively dangerous to use. I now have an older model deisel car that gives much better overall fuel economy, a control system that demands less attention when in use and emits an audible click when you select any of its features. Also it does not try to force me stay in the lane am currently in should I forget to indicate before overtaking a bike, or after overtaking a parked vehicle! Almost everyone I know turns off Lane Assist as soon as they get into their car. The sooner that feature becomes an option you have to turn on if you want it, the better.

  • Bob Mackintosh says:

    Rich trove of topics in an excellent article again Victor. Further to Paul Bennett’s comment, I doubt whether the break-even mileage calculation for EV’s takes into account the fact that until we are at least 110% (approx., using present figures) renewables and nuclear for electricity generation, all the electricity used to charge EV’s will be generated by burning natural gas. That is probably 20 years ahead at the earliest. Also, everyone takes as a given that CO2 is the primary cause of global warming. Have you ever seen quoted the research paper that establishes this fact?

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