While electric vehicles (EVs) have been celebrated for their potential to revolutionize transportation and accelerate the path toward a greener future, recent moves by original equipment manufacturers (OEMs) to scale down production, divest and cut funding have cast a shadow over this once-optimistic narrative.
On Thursday (Feb. 1), Swedish car manufacturer Volvo announced that it will no longer provide further funding to its affiliate, Swedish electric car brand Polestar, which it created with Volvo’s majority shareholder Geely through a special-purpose acquisition company merger in 2022.
“As we move into the next phase of our transformation, including deploying large-scale investments in the creation and adoption of new technologies and future-fit production facilities, our focus is on developing Volvo Cars and concentrating our resources on our own ambitious journey,” the OEM said in a press release on its website, as part of its fourth quarter and full year 2023 earnings results.
This news comes on the heels of French automaker Renault recently announcing the cancellation of an initial public offering (IPO) for its electric-car unit Ampere, originally slated for the first half of 2024.
According to the automaker, the decision was partly rooted in its assessment of “current equity market conditions” and it will now redirect its efforts toward reducing EV costs by 40% as well as developing a “sound tech plan” to differentiate its software and artificial intelligence (AI) solutions in the competitive market landscape.
Meanwhile, Ford has opted to scale down production of its widely acclaimed battery-electric pickup truck, the F-150 Lightning, in response to the increasing costs in the EV sector which led to a Q3 2023 loss of over $1 billion for Model e, its electric car division.
Tesla, the most valuable carmaker in the world, also issued a warning earlier this week about lower growth prospects for the year, The Wall Street Journal reported on Thursday (Feb. 1), fueled by a slowdown in the growth of EV sales in the U.S.
The ripple effects extend to car rental firms like Hertz, which, in a strategic move earlier this month, disclosed plans to divest 20,000 EVs from its U.S. fleet, — one-third of its global fleet — replacing them with gas-engine vehicles.
“The company expects this action to better balance supply against expected demand of EVs,” Hertz said, per a PYMNTS Jan. 11 report. “This will position the company to eliminate a disproportionate number of lower margin rentals and reduce damage expenses associated with EVs.”
This shift in dynamics is causing a growing concern among auto dealers, prompting a reevaluation of the industry’s journey toward an EV future and raising questions about the challenges ahead.
In a Jan. 8 article, PYMNTS’ Karen Webster highlighted the “growing EV ambivalence” among consumers toward EVs due to concerns about limited range and lengthy recharge times.
This, per Webster, has prompted innovators and manufacturers to explore solutions, including making charging stations more engaging and improving battery technology.
“In the meantime, OEMs should shift their focus from getting people to buy EVs to getting people to buy their cars, making them smarter, safer and more fun to drive,” Webster wrote, “and then their EV models, once the fundamental problem of battery life can be solved.”
On the upside, Munich-based car subscription provider Finn recently secured €100 million (about $110 million) in a Series C equity funding round. The funds are aimed at increasing the share of EVs in its fleet from 40% to 80% by 2028, the company said in a Thursday (Jan. 11) press release emailed to PYMNTS.
This financial boost for Finn may serve as a potential silver lining, offering optimism amid investor concerns regarding the transition to an EV future.