The electric car market’s apparently smoothly accelerating journey along the global sales highway has hit a speed bump. The industry is running out of wealthy, green-conscious buyers and is shocked to find that the broad middle class of consumers owning just one cheap car that they need to get to work or take the kids to school is showing little interest in expensive electric vehicles.

Although it is thought that the market has a way to grow yet, and there are plenty of orders for still-pricey models, a distinct slowing in sales has resulted in a slew of announcements by major car makers re-considering EV production.

Ford was the first to fold, after dealers proved unenthusiastic about the company’s electric Mustang, the Mach-E. In July, the company extended its self-imposed deadline to hit annual electric vehicle production of 600,000 by a year and abandoned a 2026 target to build 2 million EVs.

As reported in the publication Drive in October Ford now considers the Mach-E, priced at $79,990 and up plus on-road costs when it turns up in Australian showrooms at the end of this year, as a niche item unlikely to challenge the Tesla Model Y (starting at $65,400 plus on-road costs). Ford has also postponed a $US12 billion investment in EV production, including a planned battery factory in Kentucky, and estimates that it will lose $4 billion for the year on its electric car business.

Over at General Motors CEO Mary Barra, a major champion of electric vehicles, announced with GM’s quarterly results released in October that the company was abandoning its targets to build 100,000 EVs in the second half of this year and another 400,000 by the first six months of 2024. GM does not know when it will hit those targets.

At the about the same time Honda scrapped plans with GM to co-develop EVs worth less than $US30,000 and Toyota Motor Chairman Akio Toyoda, a long-term sceptic of pure-electric cars declared that, ‘People are finally seeing reality.’

Mercedes-Benz has revealed that it has to discount its EVs by several thousand dollars just to get them in customers’ hands and chief financial officer Harald Wilhelm had declared that the EV sector was ‘a pretty brutal space’. Ford is considering cutting shifts at its F-150 Lightning plant and Nissan is switching resources from EVs to hybrids.

All of those developments and others in the electric car space have the same root cause, the upward march of e-car sales which the car industry had managed to convince itself would last until all new car sales were electric has slowed to the point where even EV market darling Tesla has raised red flags, with sales slowing in the September quarter.

That the market would hit a sales speed bump should have been obvious to car industry analysts before this year. When Tesla founders Martin Eberhard and Marc Tarpenning did market research for their nascent company in 2003 (Musk provided much of the seed funding and initially served as chairman before taking full control), by touring the streets of wealthy suburbs they realised that the hybrid Prius, the badge of environmental honour of the day, was often the second car. Households would have a Porsche and a Prius, or a BMW and a Prius.

Economists have since given this phenomenon the label ‘conspicuous conservation’, a twist on the long-standing theory of conspicuous consumption. Instead of spending big to show that they are wealthy, and so better than everyone else, consumers are spending to show that they are both wealthy and have green virtue.

The insight of the Tesla founders was to sell e-cars to the wealthy rather than follow the first instinct of car companies of aiming for the mass of consumers. They assumed that the enthusiasm for e-cars would eventually trickle down to the larger markets, but this process has proved far slower than expected. As matters stand the mass of car buyers do not have the budget for a pricey car with limited range and tied to a recharging network that remains rudimentary in many countries. The widespread cost of living crisis has not helped.

A closer look at some of the sales figures shows the problem may be even worse than the automotive industry fears. Car sales for the UK in September by the Society of Motor Manufacturers and Traders showed a 21 per cent increase in the market mostly thanks to a 40.8 increase in fleet registrations. Full-electric battery-powered cars sales also increased, albeit at a more modest 19 per cent, but that increase was driven entirely by sales to company and organisation fleets, where those purchases would have been dictated by corporate environmental targets. Industry body SMMT estimates that less than one in 10 private buyers opted for an electric car.

As the government has decreed that 22 per cent of each manufacturer’s sales must be ‘zero-emission’ from January, that lack of private buyer interest has caused some concern.

In Australia, where there were no significant EV sales until perhaps the end of last decade due to lack of supply, there are still plenty of wealthy consumers ready to signal their green virtue. At about the time of the Albanese government election in 2022, electric cars accounted for about 3 per cent of the light vehicle market (this includes vans and utilities which have no electric models in Australia). With plenty of EVs now reaching Australia they account for 7.7 per cent of the light vehicle market; hybrids take another 10 per cent. An analysis of sales data by the Federal Chamber of Automotive Industries also shows that in 2022 the bulk of Australia EV buyers were individuals.

When those wealthy buyers run out, however, the government will face an uphill battle in getting the bulk of the market interested in cars with limited range, especially if they want to tow a caravan or boat or use the air conditioner. In Norway, sales of all electric vehicles have reached an astonishing 90 per cent plus of new car sales but only by the government forgoing more than $US4 billion in various taxes, tunnel tolls and parking fees in 2022 alone. As the Norwegian passenger car market is about one-fifth the size of the Australian market that works out to $A30.8 billion a year for this country plus incidentals such as having enough charging stations in a huge and often sparsely populated continent.

Like the rest of the net-zero targets switching the car market over to EVs involves a bill far higher than taxpayers will allow a democratically elected government to pay.

Get 10 issues for just $10

Subscribe to The Spectator Australia today for the next 10 magazine issues, plus full online access, for just $10.

SUBSCRIBE 10 issues for $10 REGISTER 3 articles a month

Already a subscriber? Log in