The Electric-Vehicle Bubble Bursts: Carmakers Reverse Plans, Leaving Governments in the Lurch

Strategic Insights -

Governments and taxpayers around the world, including Ontario's, have made massive bets on the electric-vehicle (EV) revolution, but it appears the industry is losing steam. Porsche and Ferrari, two luxury carmakers, are the latest to reverse their EV strategies, citing high costs and declining demand. As the market for EVs stagnates, governments are left facing significant losses, having lavished incentives and subsidies on an industry that is not delivering as promised.

Key Takeaways:

  • Porsche is killing plans for a new electric SUV and booked an impairment charge of $1.8 billion related to development costs.
  • Ferrari has reduced its goal for electric models to 20% of its lineup by 2030, down from 40% previously.
  • The Porsche Cayman EV starts at $101,000 and tops out at $232,000 for the fanciest versions.
  • EVs are $6,000 to $10,000 more expensive than comparable gas cars in the United States, with sticker prices rising due to the end of the federal $7,500 tax credit.
  • EVs depreciate at a faster rate than regular cars, with the Tesla Model Y losing 42% of its value over two years, compared to 20% for the Ford F-150 pickup truck.
  • EV insurance costs are higher, with Kelley Blue Book estimating that a Tesla loses significantly more value than a Ford over the same period.
  • The sales of battery cars are growing more slowly than expected, flatlining or going into reverse in Canada, France, and Germany.
  • AlixPartners has halved its EV forecast, calling for the cars to make up only 7% of U.S. sales in 2026.
  • Ontario is likely to be a significant victim of the EV industry's flagging fortunes, having reaped only $46 billion in investments, despite predictions of up to $52 billion in government support.
  • Honda is postponing a $15 billion EV investment in Alliston, Ont., by at least two years, while construction of Umicore's $2.7 billion battery plant near Kingston has stopped.

Statistics:

  • $1.8 billion: Porsche's impairment charge related to development costs of a new electric SUV.
  • 20%: Ferrari's revised goal for electric models by 2030, down from 40% previously.
  • $101,000: Starting price for the Porsche Cayman EV.
  • $232,000: Top price for the fanciest Porsche Cayman EV versions.
  • 6,000 to 10,000: Additional cost of EVs compared to comparable gas cars in the United States.
  • 42%: Depreciation rate of the Tesla Model Y over two years.
  • 20%: Depreciation rate of the Ford F-150 pickup truck over the same period.
  • 7%: AlixPartners' revised forecast for EV sales in the U.S. by 2026.
  • $46 billion: Investments attracted to the EV supply chain in Canada, mostly Ontario, since 2020.
  • $52 billion: Estimated government support for the EV supply chain, including capital and operating expenses.
  • 2-3 years: Timeframe for EV leases, which can lead to higher monthly costs due to rapid depreciation and battery decay.

Sources:

  • Porsche press release, announcing the killing of plans for a new electric SUV and impairment charge of $1.8 billion.
  • Ferrari press release, discussing reduced EV goals and 20% electric line-up by 2030.
  • Car and Driver magazine, citing prices for the Porsche Cayman EV.
  • Kelley Blue Book, comparing depreciation rates of the Tesla Model Y and Ford F-150 pickup truck.
  • AlixPartners report, halving its EV forecast and predicting 7% market share by 2026.
  • Office of the Parliamentary Budget Officer, estimating government support for the EV supply chain at up to $52 billion.
  • Various news reports, citing Honda's postponement of a $15 billion EV investment and Umicore's halted construction of a $2.7 billion battery plant.