Rough road ahead for U.S. EVs despite upbeat quarterly sales

Better-than-expected U.S. electric-vehicle (EVs) sales in the second quarter brought relief to investors after a sharp slowdown in demand

Better-than-expected U.S. electric-vehicle (EVs) sales in the second quarter brought relief to investors after a sharp slowdown in demand triggered by high interest rates, but EV makers still face obstacles ahead. General Motors, Rivian and Toyota posted upbeat EV deliveries on Tuesday, while Tesla reported a smaller-than-expected decline. Investors responded by driving up shares of several of the companies.

Demand for EVs has grown slower than expected due to high borrowing costs, economic uncertainty and consumer preference for gasoline-electric hybrids, leading Tesla and other EV brands to slash prices or offer more incentives to lure consumers to showrooms.

Analysts said pressure to continue cutting costs in manufacturing and batteries will not go away.

EV sales globally are expected to rise to 16.6 million vehicles annually, from 13.7 million in 2023, according to the International Energy Agency, with China’s growth outpacing other regions.

Analysts caution, however, that Tuesday’s sales figures are insufficient to forecast a re-acceleration of EV sales growth.

“We’re expecting this period of time to have bumps along the way for the next few years as the transition goes from early adopters to mainstream buyers and we’re going to see this happen for a long time,” said Sam Fiorani, VP at research firm AutoForecast Solutions.

“Some quarters will be up, some will be down, but all in all, it won’t be as strong a growth as we saw over the last few years,” he added.