Good Wednesday afternoon, Data Sheet readers, and a happy New Year to all. We’re recharged and ready to take on 2023, and hope you are, too.
If you’re looking for a good primer on what to expect in the New Year, check out today’s Term Sheet from Fortune’s Jessica Mathews, who asked dozens of VCs, private equity investors, and tech executives for their 2023 predictions. Their prophecies covered a wide range of tech ventures, including social media, A.I., the metaverse, and crypto.
For today, though, I’m still looking back at the past three weeks. While this typically dormant period didn’t generate much news, a few developments extended the shadow looming over a once-scorching sector: electric vehicles.
This time last year, the EV industry couldn’t have been hotter. Tesla was coming off a record-breaking year and promising to continue delivering cars at a breakneck speed. Investors were still buzzing about upstarts Rivian and Lucid following their blockbuster IPOs. Legacy automakers were finalizing plans for massive investments in EVs.
Yet in the past few weeks, the prospect of EVs flooding the streets within the next decade has dimmed a bit, a rare blip in the rush to electrify auto fleets.
The pessimism started one week before Christmas, when Toyota president Akio Toyoda declared that a “silent majority” of auto industry leaders are questioning the wisdom of abandoning gas-engine and hybrid models. Toyoda has been a relative grinch when it comes to EVs in recent years, but his late December comments marked the first time he invoked the broader industry’s skepticism about the shift.
“That silent majority is wondering whether EVs are really okay to have as a single option,” Toyoda told reporters on a visit to Thailand, according to the Wall Street Journal. “But they think it’s the trend so they can’t speak out loudly.”
Toyoda’s stance received some support two days later, when KPMG’s annual survey of auto industry executives in developed nations showed declining confidence in EV adoption. On average, the 900-plus executives predicted EVs would account for about 20% of new vehicle sales by 2030 in their countries, a sharp drop from forecasts last year of roughly 45%.
“You can be long-term optimistic, but near term, you’ve got to be very realistic,” Gary Silberg, KPMG’s global head of automotive, told CNBC. “It’s not rainbows and butterflies and euphoria anymore. It’s game on.”
Then, two weeks later, industry leader Tesla released 2022 sales data that disappointed Wall Street and raised more questions about EV demand. The Elon Musk–led company reported delivering about 1.3 million cars last year, a 40% year-over-year increase that fell short of the company’s 50% growth target.
Tesla can attribute some of the miss to a lackluster global economy and high inflation rates, which are causing customers to spurn higher-priced EVs. Still, investors are increasingly worried that rising EV manufacturing costs and growing competition—particularly in Chinese markets—are weighing on demand.
“The Cinderella ride is over for Tesla, and Musk now needs to navigate the company through this Category 5 dark macro storm,” Wedbush Securities analyst and longtime Tesla bull Dan Ives said Tuesday.
Consumer and investment trends still favor EVs. Automakers aren’t pulling back on EV spending, pushing forward with plans to plow tens of billions of dollars into building production capacity. Legislators continue to craft tax credits and other government incentives designed to speed up the transition to electric. Car buyers are slowly but surely ditching their internal combustion engines, with EVs accounting for 5% of all new vehicle sales in the U.S. last year.
The holiday doldrums, however, suggest the road to widespread EV adoption isn’t as bright as it once was.
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Jacob Carpenter
