Don’t Bank on the Death of EVs Yet...

What Happened?

The transition to electric vehicles (EVs) seemed inevitable.

Tesla [TSLA] was the market leader.

It had competition from Lucid [LCID]. And Chinese EV maker, BYD [BYD] was taking a market-leading position in China.

Not to mention the bold claims from European carmakers about ending production of gas-powered cars within a few years.

But then it started going wrong. Apple [AAPL] (yes, Apple) pulled the pin on its self-driving EV project. Then Volvo announced it would scrap plans to go all-EV.

Now it seems as though it’s nothing but bad news. This past weekend, Goldman Sachs [GS] announced a $900 million loss on a Swedish battery investment.

So, what’s the deal with EVs?

Surely, this big trend can’t all be over already!

Why it Matters

According to Kelley Blue Book, new EV car sales accounted for 8.9% of all U.S. car sales in the third quarter of this year. That’s around one in every 11 new cars sold.

That’s reasonably impressive. It’s an increase on the third quarter of 2023, when U.S. EV car sales accounted for 7.8% of the market — one in every 12 new cars sold.

Now compare those numbers to the situation globally.

The International Energy Agency (IEA) noted earlier this year that globally, one in five cars sold in 2023 was electric. To be specific, that number represents a combination of battery electric vehicles (BEV) and plug-in hybrid vehicles (PHEV).

Hybrids made up around a quarter of those electric vehicle sales.

So, it seems it’s not all bad news. The market is growing. And people still want EVs.

But…

Any new market will always have growing pains. It’s rare for the genuine first mover in any industry to be the company that maintains dominance over time. Companies come and companies go.

Technologies come and go.

In fact, one of our favorite statistics is the fact that between 1890 and 1940, something like 1,200 automobile manufacturers came into existence in the U.S.

Companies such as:

- American Simplex from (1906–1913)

- Davis Cyclecar Company (1914)

- Keene Steamobile (1900–1901)

- Playboy Motor Car Corporation (1947–1951) [Ed note: No connection to Hugh Hefner!]

- Scripps-Booth Corporation (1913–1923)

- And many more!

By the time we get to the 1950s, there were fewer than two dozen large-scale manufacturers. And by the time we get to 2000, the number had mostly shrunk to the Detroit ‘Big 3’.

While we don’t expect to see 1,200 U.S.-based EV manufacturers — heck, we don’t expect to see that number globally — we do expect to see a similar patten of emergence, growth, and contraction.

And we expect to see that in a regular cycle… perhaps even with all three happening at once. For instance, right now you’re seeing new technologies emerge…

You’re seeing a growth in sales…

And you’re seeing a contraction (or consolidation) in the number of manufacturers.

These are all part of the growing pains. So, are electric cars going away or are they here to stay?

How it Affects You

The simple answer is that EVs aren’t about to disappear.

Instead, we’re likely now entering the period where the free market is taking over from the government-distorted market.

That’s where governments have provided subsidies and tried to force the development of the EV market when most consumers didn’t want them.

There’s only so much a government can push people to do something against their will.

So right now, the EV makers have realized they can’t rely on government propaganda and subsidies to ‘guilt’ people into buying an EV. Now the EV makers will realize they need to answer the demands of the consumer.

They need to address the issue of range anxiety, and help people understand that for the most part, range won’t be a problem.

If they get that right, this is where you’ll see EVs enter the mass-adoption phase. Where growth will pop higher.

Bottom line, while things look bad for EVs right now, the reality is that once the free market truly takes over to help boost market growth, you’ll see the industry’s best years are still ahead of it.

And if you haven’t bought an EV yet, that’s probably a good thing. Within two or three years, the next generation of EVs will be more innovative, and better quality, due to genuine market competition.

Things will have moved so quickly, it will be the equivalent of you buying an iPhone 16, while the early adopters are driving the equivalent of the first-generation iPhone.