Automakers lose about $6,000 on every EV they sell

Automakers are losing thousands of dollars on every EV they sell, and for the most part not meeting consumer expectations for the vehicles, according to Boston Consulting Group.

The group estimates that most automakers lose about $6,000 on each EV they sell for $50,000, after accounting for customer tax credits.

"If [original equipment manufacturers] can't make money in this next generation [of EVs] … something's going to have to change," said Andrew Loh, a senior partner on Boston Consulting Group's automotive leadership team.

Whether automakers have the "stomach" to keep investing "until they get to the level of scale and efficiency where they can actually turn a profit" is a question, Loh said.

Automakers differ in their approaches to EVs, but most have felt the punch of slowing sales growth. Toyota, for example, said it will buy credits if needed to meet emissions regulations, choosing to base its EV plans on customer demand.

Ford, which less than two years ago said it wanted to eventually challenge Tesla in EV sales, has cut production of its electric F-150 Lightning pickup and halted shipments for an undisclosed issue.

Nearly 40 percent of 3,000 U.S. consumers surveyed by Boston Consulting Group in January said they intend to purchase an EV as their next vehicle. But they expressed strict requirements to make the jump.

EV intenders want 20-minute charging times, a 350-mile driving range and a price of $50,000, according to the group's report on the survey.

Only one EV model available today is fulfilling most consumers' checklists, the firm told Automotive News. The Hyundai Ioniq 6 is the only EV that meets those standards, while the Tesla Model 3 is a close second.

EV intenders also want to be able to access a fast charger within 30 minutes, including the time it takes to drive there and the wait time for the charger.

Automakers have the technical know-how to fulfill the thresholds — at least the ones that are within their control — but they're hard-pressed to make money doing it.

Partnerships across automakers and suppliers to split costs are critical for EV profitability, said Brian Collie, global leader for Boston Consulting Group's automotive and mobility practice.

"There's too much upfront investment, and there's too much individual model risk for both vehicle manufacturers and suppliers to incur on their own," he said. "Partnerships and joint ventures are the way to drive greater scale."

Many automakers projected 70 percent EV sales growth for 2023 based on sales nearly doubling annually from 2020 to 2022, Loh said.

Instead, EV sales growth reached about 50 percent last year, a massive increase but below expectations. The dimmer reality paints a picture of weakening EV demand. New EV registrations rose just 15 percent in January, according to S&P Global Mobility.

"This obviously caused a lot of consternation among our OEM clients who are pumping billions of dollars into these next-generation vehicles," Loh said.

Automakers can close half of the cost gap with effective technology choices, such as higher-density batteries, more efficient electric motors and better battery management software. They should also identify efficiencies in EV and internal combustion vehicle production, Boston Consulting Group said.

Even with such improvements, they'd still lose about $3,000 on every $50,000 EV they sell, Loh said. Support from policymakers and continued advancement of public charging infrastructure can help narrow the gap.

Advancements in vehicle, battery and charging technology also would accelerate production of EVs that are affordable for mainstream buyers, "but the question is fundamentally whether they're going to be able to make money," Loh said.

EVs could make up 30 percent of U.S. sales when next-generation models — those that launch within the next 12 to 18 months — are in full production, Boston Consulting Group said. "But there are many reasons to believe this might not happen," Loh added.

Automakers may delay EV launches if the vehicles are unprofitable, and consumers may become more cautious as fluctuating prices make resale values uncertain. Those factors, among others, could put EV share around 20 percent, rather than 30 percent, Loh said.

Consumers who said they plan to purchase an EV are more cost-conscious than early adopters, and they prefer established brands over new entrants, Boston Consulting Group said.

Not all of the 38 percent of consumers who said they planned to purchase an EV will actually buy one, Loh said. Some EV intenders have unrealistic expectations. They want automakers to meet their standards, he said, but they aren't willing to pay for it.

"Those that are looking for very high performance — very long range, ultrafast charging times — should be willing to pay more for it," Loh said, while "those looking for a cheaper vehicle should be willing to compromise on that."

Hybrids may become a more prevalent compromise for consumers hesitant to buy EVs. Fifty-six percent of consumers interested in EVs for their next purchase and 43 percent of long-term EV adopters said they would consider a conventional hybrid or plug-in hybrid if an EV did not meet their standards.

"For the next five years, [hybrids] deserve as much attention as EVs in terms of focus of investment for OEMs," Loh said.