EVs have proven to be popular in Canada, which may have taken some automakers by surprise. Meanwhile, some automakers may have been too optimistic about EV demand in the United States and they increased production of some models to the point where they have overwhelmed dealer inventories.Illustration by Glenn Harvey
When I ordered my Hyundai Ioniq 5, in late 2021, I was warned it would take about eight months to get my electric vehicle, given the high demand and disrupted supply-chain networks.
I was delighted when it took a mere four months. Turns out, I was lucky.
Today, my local Hyundai dealership in Toronto isn’t even taking orders for EVs, because wait times have stretched beyond two years. Models have disappeared from the showroom.
No wonder I instinctively acknowledge every other Ioniq 5 owner I encounter with a nod or wave – sometimes subtle, sometimes not – as though we belong to an elite club of Model T owners.
But wait a minute: I’m also reading about unsold EVs piling up on the lots of car dealerships in the United States.
According to Cox Automotive, U.S. dealers have more than 100 days of unsold EVs – almost 91,000 vehicles at the end of June, excluding Teslas – which is about double the days’ supply of new vehicles overall.
The startling figure has pushed some EV skeptics to conclude that the market for EVs has stalled.
Can there really be a shortage of EVs in Canada and a glut to the south? The answer, it turns out, is yes – but for reasons that are unlikely to persist.
In Canada, a Hyundai HYMTF salesman blamed the dearth of new electric vehicles here on lithium shortages. It sounds plausible, since the element is a key component in the large batteries that power the vehicles and observers are warning that shortages could emerge.
But not now. Albemarle Corp. ALB-N, the world’s largest lithium producer, expects demand will outstrip supply in 2030. Boston Consulting Group is using a similar timeline and warns that the supply gap could grow acute by 2035.
What’s more, a lithium shortage doesn’t explain why the U.S. has loads of unsold vehicles.
More likely, EVs are simply more popular in Canada – perhaps because of our cleaner electricity sources, including vast hydroelectric capacity – which may have taken some automakers by surprise.
“With its smaller market than the United States, it was believed that the EV market in Canada would be proportionately smaller as well. In many cases, EV sales are proportionately stronger in Canada,” Sam Fiorani, vice-president of global vehicle forecasting at AutoForecast Solutions LLC, told me via e-mail.
He mentioned several examples.
The Canadian car market is one-ninth the size of its U.S. counterpart, due largely to population differences, yet Canadian sales of the Chevrolet Bolt are about double that ratio. Sales of the new Toyota bZ4X are almost four times higher. And Mazda MX-30 sales this year are almost five times the total volume sold in the U.S., where sales were recently halted.
Conversely, some automakers may have been too optimistic about EV demand in the United States.
They increased production of some models to the point where they have overwhelmed dealer inventories – at a time when some consumers remain sidelined by concerns about battery range and hopped-up horror stories about charging, in addition to higher borrowing costs.
According to a July report from Juniper Research, a lack of public charging infrastructure is severely limiting EV adoption in urban environments, particularly among consumers living in apartments where home charging is not an option.
Despite these wrinkles, Ford Motor Co. F-N has sharply increased output of its Mustang Mach-E, but sales haven’t followed suit. That led to higher U.S. inventories that may be skewing the overall number of unsold vehicles this year, according to Mr. Fiorani.
“This current situation is temporary as the industry struggles with growing pains in the electric vehicle market,” he said, adding that the industry is “balancing production, sales and pricing, all of which are unknown quantities.”
There is also the issue of vehicle profitability to consider.
Tesla Inc. TSLA-Q has figured out how to make money on EV sales. It reported a profit of US$2.7-billion in the second quarter, up 20 per cent year-over-year, despite slashing prices on some of its models.
Other automakers, though, are losing money on their EV sales, offering little incentive to boost output to satisfy consumer demand in Canada.
After Ford released its latest quarterly financial numbers, on July 27, it raised its full-year outlook for overall earnings before interest and taxes to between US$11-billion and US$12-billion in 2023.
But its EV division is now expected to lose US$4.5-billion this year – much deeper than the US$3-billion loss the automaker had projected.
Given these hiccups, Ford is now scaling back plans to expand its EV output. Previously, it said it would produce 600,000 EVs annually by the end of 2023, but the company has now pushed that production threshold back by a year.
The takeaway? Consumers buying EVs today may feel like early adopters. But automakers are also facing uncertainty, leading to the current challenge of feeding the right number of cars into the right markets.
For some consumers, though, there may be an opportunity here. After visiting the Toronto Hyundai dealership, I popped into the Ford dealership next door, where I kicked the tires on a fine-looking Mustang Mach-E in the showroom.
The wait time? None.
David Berman