Ford Motor Co's (F) decision to halt plans to build a $3.5 billion battery plant in Michigan may mean Tesla (TSLA) is pushing most of its rivals into unprofitable, low-volume niche markets. Global automakers are launching dozens of new electric vehicles in the United States and investing billions of dollars in new electric vehicle and battery factories.
But according to an analysis of U.S. electric vehicle sales data for the first six months of 2023, with the exception of Tesla's Model Y and Model 3, few electric vehicles have sold enough to support a full-scale assembly plant.
According to data from S&P Global Mobility, Tesla's sales in the first half of the year were 10 times or more higher than those of the next 19 competitors across brands.
Figure 1
Specifically, from January to June this year, Tesla sold 325,291 vehicles in the United States, ranking first in terms of sales. General Motors' (GM.US) Chevrolet brand's Bolt EV sold 34,943 units, ranking second, followed by Ford, Hyundai and Rivian.
From a brand perspective, Tesla’s four models have all entered the top 12, with Model Y and Model 3 ranking first and second with sales of 200,000 and 160,000 vehicles respectively in the first half of the year.
By comparison, Bolt sales were 35,000 and Ford's electric Mach-E was 13,600 - far less than the capacity of a typical assembly plant, which needs to operate at 80% capacity or more to be profitable.
Figure 2
Will EV growth be fast enough to support new battery plant business?
According to data compiled by the Alliance for Automotive Innovation, an industry group, sales of electric vehicles, including plug-in hybrids and fuel cell vehicles, accounted for 8.9% of the U.S. market in the first half of 2023, an increase of 2.6 percentage points from the same period a year earlier.
But according to the alliance's latest quarterly report on the electric vehicle market, this market share is divided among 103 different models.
Ford's decision to pause construction of a $3.5 billion electric vehicle battery plant in Michigan comes as some analysts question whether the U.S. electric vehicle market is growing fast enough to support all the new battery and assembly operations that have been launched or are being built.
In July, Ford forecast a full-year loss of $4.5 billion for its electric vehicle division, 50% higher than forecast earlier this year, and said it was slowing the growth of electric vehicle production.
Like several rivals, the U.S. automaker has pledged to build billions of dollars in electric vehicle and battery factories in the United States.
In this regard, Cox Automotive pointed out in a media speech on Tuesday that Tesla's share of U.S. electric vehicle sales has declined this year as more and more new entrants enter the U.S. market, but it still accounts for nearly two-thirds of electric vehicle sales, compared with other brands. The share does not exceed 10%.
Cox expects electric vehicle sales to account for 8% of total U.S. auto sales in the third quarter of this year, up from about 6.5% in the same period last year, with some of that growth likely to be driven by lower prices.
It is understood that Tesla is using its superior profit margins to lower prices and expand sales. Cox said the average retail price of electric vehicles fell to $53,376 in July 2023 from a high of nearly $70,000 a year ago.