At the end of February, Apple reportedlycanceled the electric vehicle projectit had been working on for a decade. For those already skeptical of the EV transition, it was another data point among the naysayers hungry to feed the narrative that EVs are dead, and that mass adoption will never truly take place.Mercedes,Ford, andGeneral Motorshave all delayed their target dates for full electrification, andAston Martinrecently delayed their first fully electric car.
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Despite recent reports, Elon Musk insists that Project Redwood, Tesla’s effort to build its most affordable EV yet, is still on track.
While these recent developments may, in a vacuum, spell doom for the electric transition, in reality it’s a much more complex story of pricing power, macroeconomics (namely interest rates), and auto manufacturers who found themselves playing catch up, coupled with the bad luck of terrible timing.
First mover advantage
In 2023, Tesla deliverednearly 1.81 million vehicles, representing 18% of all battery electric vehicles (BEV) sold worldwide, and the Model Y was the best-selling vehicle on the planet. The company has invested billions and spent well over a decade building its assembly and manufacturing capacity to where it is today. The efficiency of Tesla’s manufacturing, limited SKU’s, sparse customization options, and streamlined supply chain afford it quite a profitable set of vehicles. In 2023, Tesla achieved a 14% net profit margin, while Ford, inarguably a major automaker, was hovering at 2%.
This gives Tesla enormous pricing power, something that took years of unprofitability and billions invested to achieve. For automakers, or Apple for that matter, to catch up in terms of pricing power and profitability would take years, and a level of investment that not every company has the stomach for in a higher interest rate environment like the one we live in today.
Far and away from being the only advantage in Tesla’s arsenal, the company has also spent years working on its software anddriver assistance features. While these same features have landed Tesla in someregulatory hot water, they are years ahead of the pack. It also represents another area where it would cost a fortune for competitors to catch up.
While Tesla still hold the lion’s share of the market share for EVs, competing manufacturers are slowly catching up. Teslastarted off 2024 on a sour note, having delivered 8.5% fewer vehicles in Q1 2024 than in Q1 2023. Meanwhile, competitors likeToyotaand China’sBYDreported substantial increases in deliveries over the same period, with Toyota EV deliveries surging 74% year over year, and BYD deliveries rising 13.4% from the same quarter last year. Slowly but surely, the market share dominance that Tesla holds will be chipped away at, but competitors have a long way to go.
The demand picture
Regarding demand, let’s lay down some facts.According to EV Volumes, now part of J.D. Power, global sales of new battery electric vehicles (BEV) and plug-in hybrids (PHEV) totaled 14.2 million units in 2023, representing a 35% increase over 2022 sales. EV sales in Europe, China, and the US and Canada grew 17%, 36%, and 46% year-over-year respectively. As for what slice of the total pie these sales represent, 15.8% of global light vehicle sales were EVs, up from 13% in 2022.
EV Volumes projects that car dealers will sell 17.8 million EV units in 2024, which would be a 25% increase from 2023. Anybody spelling disaster in EV demand and adoption going forward is simply exaggerating or downright spreading misinformation. What is entirely possible is the adoption curve looking a bit less steep in these next few years as higher interest rates make consumers think twice about purchasing a (typically) pricey electric vehicle, though tax credits and other incentives have helped grease the wheels of consumer adoption.
Consumer trends and where the wind is blowing
Data from thePew Research Centershows that about four in 10 Americans say they are “very or somewhat likely to seriously consider an electric vehicle (EV) for their next vehicle purchase.” Moreover, almost 50% of adults aged 18-29 gave the same answer. The largest group of those currently unwilling to consider an EV for their next vehicle are the 50 and older crowd.
These numbers are likely to only improve as general consumer education and awareness of electric vehicles improves and the cultural perspective in some circles shifts from seeing these vehicles as a statement of a driver’s eco-friendly attitude, towards a greater understanding of the instant torque, industry leading acceleration, and drastically decreased maintenance needs that an EV can bring to the table.
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One concern standing in the way of adoption is consumer concerns around charging infrastructure, which grows each and every day. Pew found that only 17% of respondents were “very confident” that the U.S would build enough EV charging infrastructure to support mass adoption. More acutely, 53% of respondents were “not too/not at all” confident that this would happen. But despite the perceived hurdles, a generous portion of the current driving population would consider an EV as their next vehicle.
What Apple’s canceled project means for the future of EVs
True believers and skeptics alike should see Apple’s move for what it is, which is a recognition that it would take far too much investment, and far too much time, to seriously compete in the EV space any time soon with the likes of Tesla and BYD engaging in price wars around the world.
Apple does best when it can focus on an evolving technology, innovate and push the boundaries of what it can accomplish, then package it in a user-friendly design made for the masses, which is exactlywhat they intend to do with artificial intelligence. Apple is looking to invest heavily in spatial computing, starting first with theApple Vision Pro, as well as make its way into the AI game with future software integrations. Taking its eye off the ball to compete in the EV space just doesn’t make sense, at least not right now.
Anybody spelling disaster in EV demand and adoption going forward is simply exaggerating or downright spreading misinformation.
EV adoption will continue growing in the United States and abroad, as more and more automakers release electric models, and more consumers take the plunge, albeit at a more moderate pace, perhaps in the short to medium term. The future of the electric vehicle is a bright one, and true adoption will eventually, if slowly, take hold. It might just happen without Apple in the mix.
