Electric Vehicle Market Growth Stalled by Financial Conditions as Elon Musk Suffers $30 Billion Setback

Friday - October 27 2023, 16:33 UTC - 1 year ago

Elon Musk has recently lost a staggering $30 billion from his wealth after Tesla reported disappointing earnings in its third-quarter results. This has sent shockwaves through the financial world causing automakers, such as Lucid Motors and General Motors, to scale back production and delay the introduction of EV models. The financial barrier with high interest rates is also hampering customer demand for electric vehicles. Toyota's Akio Toyoda, who has been skeptical about EV hype, is now advocating for investing in hybrids, hydrogen-powered cars, and other alternatives.

Elon Musk, CEO of Tesla, recently suffered a massive financial blow as the company reported disappointing earnings in its third-quarter results. The consequences of this report sent shockwaves through the financial world, causing Musk to lose a staggering $28 billion (€25.3 billion) from his wealth.

The electric vehicle (EV) industry, previously seen as a beacon of profitability, is now facing questions about its viability, with traditional automakers like Toyota seizing the opportunity to voice their skepticism. Akio Toyoda, Chairman and former CEO of Toyota, has long criticized the EV hype and is now saying, "I told you so." .

EVs: Not the sole path to profit .

Akio Toyoda's skepticism about the exclusive focus on EVs has been vindicated. He has consistently maintained that electric vehicles are not the only means for the automotive industry to achieve carbon neutrality, stating, "There are many ways to climb the mountain." Other major automakers are aligning with this perspective, with Lucid Motors scaling back production by 30 percent and General Motors delaying the introduction of the Chevy Silverado EV by a full year.

Challenges in the EV market .

President Joe Biden has been a staunch advocate of EVs as part of his plan to combat climate change and reduce carbon emissions. However, the EV market is encountering headwinds as high interest rates hamper customer demand for electric and other vehicles. Jessica Caldwell, Head of Insights at Edmunds, told Fortune that this financial barrier is "preventing a lot of people from even getting into the market." .

While EV sales continue to grow, the pace of growth has slowed. In the first half of 2023, EV sales increased by 49 percent, a slower rate than the 63 percent increase experienced in the prior year. Caldwell notes that transitioning to EVs involves significant changes, as it is a "brand new technology" that requires people to have a different relationship with their vehicles. This relationship has remained essentially unchanged for decades. She adds, "So to think that everything was going to roll out smoothly and we follow this nice adoption curve was a bit unrealistic." .

Elon Musk's $30 billion setback .

Elon Musk, widely known as the wealthiest individual globally, incurred substantial financial losses as Tesla's third-quarter earnings report revealed its lowest quarterly earnings per share (EPS) in two years, plummeting 10 percent below analyst forecasts. In response, Tesla's stock prices plummeted by over 17 percent, causing the company's market capitalization to decrease by $138 billion in just over two trading days. Commenting on this setback, Caldwell remarked, "This is going to be a large speed bump in the road for automakers that I’m sure that they saw coming." .

Diverse strategies among automakers .

Toyota's Akio Toyoda, who advocated diversification rather than exclusively focusing on EVs, recommends investing in hybrids, hydrogen-powered cars, and other eco-friendly alternatives. In contrast, Ford has chosen a cautious approach, announcing a slowdown in producing its Mustang Mach-E model to calibrate production to current levels of electric vehicle demand.