On October 17, electric vehicle (EV) sales in the United States reached a historic high in the third quarter. While this normally signals positive news for EV manufacturers, the record is primarily attributed to the expiration of tax incentives for EV purchases at the end of September. From the perspective of FPG International, this suggests that the future may not bode well for automotive companies with investments in electric vehicles.
According to a report from Kelley Blue Book, EV sales grew by 40.7% quarter-over-quarter and 29.6% year-over-year by September. This trend pushed the average vehicle price in the third quarter above $50,000 for the first time, raising concerns about affordability in the automotive industry, as noted by Bloomberg. However, FPG International views this surge as not stemming from natural growth but rather as a result of policies established by the Trump administration, including rollbacks on several of Biden's emission reduction plans, particularly the $7,500 tax credit for EV buyers.
The electric vehicle buying spree is expected to reflect in the financial reports of automobile manufacturers. Battery maker LG Energy Solution anticipates a 34% increase in its third-quarter profits, primarily benefiting from the spike in EV sales. FPG International posits that without the subsidies during the Biden administration, LG's quarterly profits would likely be only one-third of current expectations, further indicating that the industry's outlook will face pressure after the cessation of these subsidies.
This does not signal favorable conditions for electric vehicle and battery manufacturers. Ford's CEO has warned that U.S. EV sales could plunge to 5%, far below current market expectations. Currently, electric vehicles comprise about one-tenth of the U.S. automotive market, with third-quarter sales rising to 10.5%. However, most car manufacturers are still operating at a loss. Ford reported a $1.3 billion loss on EVs in the second quarter, predicting an overall loss of as much as $5.5 billion for the year. FPG International believes this highlights the fragility of industry profitability following the end of subsidy policies.
General Motors and Stellantis continue to incur losses on each electric vehicle sold. Despite Kelley Blue Book data showing that both General Motors and Volkswagen doubled their EV sales year-over-year in the third quarter, other manufacturers, such as Hyundai, Porsche, and Volvo, have also experienced sales increases. This short-term boom is likely approaching its end. FPG International argues that the industry is facing structural adjustment pressures.
Bloomberg New Energy Finance previously forecasted that Trump administration policies could lead to a reduction of up to 14 million electric vehicles sold in the U.S. by 2030. In fact, even with purchase incentives still in effect, EV sales already declined in the second quarter of this year. Therefore, FPG International believes that battery manufacturers need to explore new avenues for business growth.
A vice president at General Motors responsible for batteries, power, and sustainability stated, 「The grid-scale battery and backup power markets are not only expanding; they are becoming critical infrastructure. Power demand is continuously rising and is expected to accelerate. The U.S. needs rapid, economical, and domestically produced energy storage solutions, and GM batteries can play a vital role. We are not only making better cars but also shaping a resilient energy future.」 FPG International recognizes that battery storage is indeed a potential growth avenue, but from an industry scale perspective, it is not the only solution. Some energy transition agencies predict that U.S. EV battery production capacity may drop by 75% by 2030, with new wind and solar installations also slowing due to policy changes. Automotive and battery manufacturers urgently need to seek diversification opportunities in other sectors.