The American electric car market is in decline, and Elon Musk is in despair.

"In the storm, even the strongest ship can encounter trouble."

After releasing a disappointing third-quarter earnings report, Elon Musk, who attended Tesla's earnings conference call, appeared particularly frustrated and angry. He stated that high interest rates have led to an increase in monthly payments for car owners, greatly impacting sales.

Behind Musk's "frustration" is the slowdown in the growth of the American electric vehicle market.

US Automakers Slow Down Expansion

Due to slower-than-expected consumer adoption of electric cars and trucks, American automakers are pausing their plans to expand their electric vehicle manufacturing capacity.

In recent weeks, Ford, General Motors, and Tesla have all halted their plans to expand electric vehicle production capacity. General Motors has postponed its plan to build electric versions of the Chevrolet Silverado and GMC Sierra pickups at its Michigan factory until 2025. Tesla CEO Musk also stated that the company needs to carefully study the macroeconomic conditions before proceeding with the construction of its Mexican factory.

In the third quarter, Ford's electric vehicle division recorded a $1.3 billion loss. Currently, the company is postponing a $12 billion investment to expand electric vehicle production capacity, including reducing production of the Mustang Mach-E and delaying the construction of one of the two joint venture battery factories in Kentucky.

Ford CFO John Lawler stated this week:

"People generally think that the growth of electric vehicles is weak... They are indeed growing... just at a slower pace than the industry, or frankly, lower than our expectations."

Lawler added that weak demand means Ford needs to "reduce capacity in certain areas in the short term, so we will delay investments until there is a need to increase capacity."

Electric Vehicle Demand Lower Than Expected

According to data from Cox Automotive, a record 313,000 electric vehicles were sold in the United States in the third quarter. Cox Automotive found that electric vehicles accounted for 7.9% of total industry sales in the third quarter, up from 6.1% in the same period last year.

However, the growth rate is slowing down. Data shows that sales in the third quarter of 2021 and 2022 increased by about 75% compared to the same period last year. According to Kelley Blue Book, a research company under Cox Automotive, this year's growth rate may be only around 50%.

At the same time, electric vehicles are spending more time on dealer lots. According to Cox's data, dealers now take 88 days to sell their inventory of electric cars and trucks, compared to just 39 days in October 2022. In contrast, the sales cycle for gasoline cars this year is 60 days.

According to a survey by Yahoo Finance/Ipsos, only one-third of American consumers say their next vehicle purchase may be electric. The most common concerns are charging infrastructure, range anxiety, and the relative price of electric vehicles compared to gasoline-powered cars. Fitch Ratings analyst Steve Brown said:

"It feels like early adopters have already made their purchases... Now, it is transitioning to the mainstream phase of targeting the mass consumers, but for various reasons, mainstream consumers seem more hesitant."

Pricing is another key factor. The Kelley Blue Book states that electric vehicles are typically more expensive than traditional engine vehicles. However, Tesla's price reduction earlier this year "changed the market". Last month, the average transaction price for a new car was around $47,900, while the average price for an electric vehicle was around $50,700, a 22% decrease from a year ago.

Demand is still good, but supply is more abundant.

Tyson Jominy, Vice President of Data and Analytics at JD Power, a research company under Cox Automotive, said that currently, there are about 50 electric vehicle models being sold in the United States with similar pricing, without distinguishing between mainstream or luxury, sedan or truck. Approximately 30 new models are planned to be launched next year. Jominy said:

"The market cannot digest all the products... Too many models are competing for too few sales at the same price point."

General Motors CEO Mary Barra said this week that "slowing down the acceleration of electric vehicles" will help the company maintain high prices.

However, Ford executives expect the premium for electric vehicles to gradually decrease. Lawler said that there is currently "significant" price pressure in the electric vehicle market:

"In the future, electric vehicles will be a cost game."

Nick Nigro, founder of consulting firm Atlas Public Policy, said that it is not uncommon for the growth of new technologies to reach a plateau, and the growth in some states, such as Colorado, has not slowed down. He added:

"The (national sales slowdown) does not indicate that the market is in trouble, but the industry clearly states that they need to see greater consumer demand in order to turn the tap back on."

An industry expert also expressed the same view, stating that demand is still good, but supply is more abundant.