Surging Electric Vehicle Inventories
Ford, Stellantis, and GM—aka the Detroit Three—appear to be living out their version of Field of Dreams following the whispers that if they build up the inventory, consumers will come.
What happened: A new market insight from Cox Automotive showed a growing mismatch between the supply and demand of electric vehicles in the US. EV inventories, which hit 103 days worth of supply in June, was nearly double the overall industry average of 53 days for conventional combustion cars.
- Cox Automotive reports days’ supply is based on the daily sales rate for the most recent 30-day period.
The details: It was the lower-price segments—selling for less than $50,000—of small-to-midsize cars that had the smallest inventories, while the EV inventories came second only to high-end luxury cars.
The growing supply has shown that the Inflation Reduction Act has helped incentivized companies to grow their EV production.
But consumers have not yet responded
Despite more incentives to buy Made in America EVs than a Black Friday sale, non-luxury imports like Toyota and Honda were bestsellers that made up 11 of the 12 smallest inventories in June.
In response: What better way to address weak demand than to lower prices? Automakers in both China and the US continue to engage in an EV price war to muscle each other out of the growing market and incentivize consumers to buy their vehicles.
Ford announced yesterday that it would once again be dropping the price of their F-150 Lightning while Chinese companies backtracked on a truce with Tesla to avoid “abnormal pricing”.
Other factors: Between 2017 to 2022, roughly 80 percent of new vehicles bought in the US were financed. With rising interest rates, that financing has become much costlier. Despite Toyota and Ford having similar production volumes, the size and price of the new EV models from Ford appear to be deterrents to consumers, unlike Toyota with their smaller hybrid models.
The price war seems likely to continue if companies like Ford hope to draw in customers to purchase the inventory they have built up.