Carmakers rethink EV investments amid consumer struggles, sagging demand

While the battery-powered vehicle market is still expanding, the pace of growth has slowed considerably. As a result, Tesla, the world’s EV leader, and legacy automakers that had been spending at breakneck speeds to build their electric car businesses, are now taking a more cautious approach to investments.

Companies have collectively committed about $100 billion across North America to create electric cars that don’t just appeal to luxury buyers and early adopters, but to the mass market. But high inflation and interest rates are making vehicle purchases difficult for everyday people, meaning it’s hard for EV makers to win their business. Auto executives have said they’re worried many consumers have hit their limit.

“A large number of people are living paycheck to paycheck, and with a lot of debt, they have got credit card debt, mortgage debt,” Tesla Chief Executive Officer Elon Musk said on an Oct. 18 third-quarter results call. “We have to make our cars more affordable.”

Consider what consumers are seeing on the dealer lot. A Ford F-150 Lightning starts at about $50,000, before federal tax credits of $7,500. A base model gasoline-powered version starts at less than $37,000. General Motors Co.’s Chevrolet Blazer starts at around $37,000, but the electric version costs a minimum $56,000 before tax credits.

The batteries that power EVs are more expensive than internal combustion engines, and it will be at least another three years before these prices are comparable, according the Bloomberg BNEF research.

This makes it hard for even Tesla, the only US carmaker with a profitable EV business, to make its vehicles cheaper. It cut prices drastically this year, in some cases as much as 30%, to protect its sales volumes, pushing others to try to keep pace. In…