Will the EV Industry Regain Momentum?

Microsoft at 10 cents a share in 1986 (it’s $370-plus now), Amazon at eight cents in 1997 (now $147-plus), Tesla at $1.22 in 2010 (now north of $243)—just a few line items in a long list of misses in my investing history.

The evidence is pretty convincing: I am no expert in picking stock winners. I’m not even an amateur. I sure do have an impressive lineup of losers, though.

Consider that the necessary grain of salt to be taken here, but the hair on the back of my neck is starting to stand up when pondering the fate of the electric vehicle industry, especially with the roll of the dice that Kansas made to secure the $4 billion Panasonic EV battery manufacturing plant in De Soto.

Given that the state has backed its bet with an estimated $820 million in incentives, I sincerely hope I’m wrong to worry. But news of late isn’t promising.

Ford, for example, produced a third-quarter earnings report showing that its EV unit racked up a loss of $1.33 billion before interest and taxes. This, after a $1.08 billion loss in the second quarter. How a company withstands $2.41 billion in losses over six months and continues to plow ahead with a failing strategy would be beyond me. And the leadership in Dearborn, as well. In that same report, Ford announced it would scale back about $12 billion in planned investments—including a stay on construction of a second battery plant in Kentucky.

CFO Jim Farley, in his bid for Understatement of the Year, confessed during the third-quarter earnings call that “it’s been a challenging situation, for sure. Matter of fact, our business is never short of challenges, especially right now with the evolution of the EV market and new global competitors from China, as well as the technology disruptions.”

Ford isn’t alone. A few miles away, in Detroit, the folks at General Motors reported that the drag from EV production had cut its third-quarter profit by about $1.5 billion. Along with that news, the automaker said it was scrapping an interim goal to produce 400,000 EVs from 2022 through mid-2024. Rather, officials said, it would remain focused on reaching an aggregate 1 million EVs by the end of 2025.

CEO Mary Barra, undeterred by the fiscal and market realities, declared to investors that GM would “implement engineering efficiency and other improvements that will make our vehicles less expensive to produce and more profitable.”

Right. What the big U.S. makers are experiencing is easy to understand, if not entirely predictable. Remember: electric cars, as the math guy in Jurassic Park said of dinosaurs, “had their shot, and nature selected them for extinction” more than a century ago. Internal combustion was the asteroid that helped kill a fledgling industry, and in this case, “nature” was consumer demand.

You can draw a straight line from the experiences of many EV buyers directly to those earnings calls from Detroit. The complaint list is a killer: unfavorable range compared to gas-powered vehicles (and even worse range in cold weather), higher up-front costs ($64,000, on average, compared to $48,000 for gas-powered new models, before federal subsidies, per carbuzz.com), the significant expense of replacing the battery packs after just a few years, a not-insignificant history of inexplicable vehicle fires, charging-station availability and duration. The latter is becoming a Marx Brothers’ routine in California, which has advised people to scale back on charging their cars after work hours to help the energy grid manage the demand load.

None of those come close to approaching the biggest unspoken problem with EVs: The environmental impact. Fools who think electricity comes from that rectangular outlet on the wall simply have no concept of what it takes to mine millions of tons of lithium and other rare-earth minerals needed to produce batteries. That includes the human toll on people in Third World nations digging out those raw materials under conditions that are often worse than deplorable.

Hey: I could be wrong to worry. Maybe the carmakers are encountering a short-term dip. Maybe advances in EV tech will eliminate the need for subsidies and make the internal combustion engine this century’s buggy whip. Maybe the Kansas City region will blossom with a new pillar of manufacturing strength, creating many thousands of ancillary jobs with solid compensation packages. And maybe EVs will save the planet, even if China and India double their coal burn over the next decade.

All of those would be great things. And something I’d be willing to lay money on—if I’d found my way to Microsoft at a dime a share.