Global auto industry faces EV sale crisis

The global EV industry is facing a significant mismatch between production and demand, which could lead to a surplus of zero-emission vehicles remaining unsold in the coming years. According to a report by a private research firm, the industry's output may exceed consumer demand by millions of units over the next two years, potentially sparking price wars.

This overproduction is occurring at a time when consumer demand for EVs is stagnating. While this scenario could lead to more affordable prices for consumers, it might also plunge parts of the automotive industry into a crisis. Additionally, this situation could prompt regulators and lawmakers to reconsider their aggressive carbon emission reduction goals that have spurred the rapid increase in EV production.

Last year, industry expectations, seen by The Times, were to produce over 15 million battery electric vehicles by 2024. However, projections have since been adjusted down by two million, to just over 13 million, due to declining consumer interest. Despite this reduction, production is still anticipated to outstrip demand by about 50%, as forecasts suggest only around 9.3 million EVs will be sold globally in 2024.

The disparity is even more pronounced in China, the world's largest EV market, where sales are expected to drop by 10%. Major manufacturers like Tesla and BYD have already reduced prices on their most popular models by up to 20% in response to the slowing demand.

Looking forward, industry data suggests that by 2025, global electric car production could reach 18 million units, significantly above the anticipated demand of less than 10 million units. This trend is expected to continue into 2026, with demand possibly increasing to 11 million units—still less than half of the projected production of 22 million units.

If these forecasts hold, the industry is on track to produce over 20 million more electric vehicles than the market can absorb from 2024 to 2026. While this could benefit consumers priced out of the EV market, the implications for manufacturers could be severe, underscoring the need for strategic adjustments in production planning and market forecasting.

An anonymous automotive analyst told The Times: “The industry is going to get a very rude awakening. They are pumping billions of dollars into production facilities that just aren’t going to be required, at least in the near to medium term. It’s a misallocation of capital similar to the dotcom bubble.”

Chinese market stagnation and rampant overproduction likely mean that manufacturers in China will switch focus to Western markets.

“While this might be good in the short term for consumers outside China as prices fall,” the analyst said, “longer term we could see the automotive industry in the West driven into the ground by the flood of vehicles from Chinese manufacturers who can produce electric cars in far greater numbers and more cheaply.

“Politicians [in the West] may find themselves having to act to protect their domestic car manufacturers and their supply chains.”

Reduced consumer purchasing power, heightened prices of EVs, concerns over battery range, and inadequate public charging facilities are contributing to a sluggish uptake of EVs, exacerbating the supply-demand imbalance. This issue is beginning to manifest within the industry.

Recently, Tesla announced plans to reduce its workforce by 14,000 employees, which accounts for 10% of its total staff. In Germany, the termination of government subsidies for EV purchases has led to a 30% decline in sales. Similarly, in Norway, which is recognised as a leader in electric car registrations, sales have plummeted by 50%.

European automakers, even in the wake of competition from China, continue to find themselves in a challenging position. They are under strict regulatory pressure to increase the production of zero-emission vehicles. Reducing production to match the lower demand could result in substantial fines. For instance, Volkswagen, with its brands Audi, Skoda, and Seat, is reportedly facing potential annual fines exceeding €4 billion for not meeting CO₂ emission targets.