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Electric car manufacturers are changing their strategy – because sales are falling

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Electric car manufacturers are changing their strategy – because sales are falling

In recent years, the automotive industry has been divided into two camps when it comes to electric car strategies. Bill Pugliano/Getty Images

The demand for luxury electric cars is falling. The market for hybrid vehicles, however, is growing.

Buyers are much less willing to tolerate the quirks of charging, range anxiety, or other lifestyle changes.

Tesla had launched a price war and began to undercut the competition with cheaper prices.

This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by a real editor.

A new era of the electric vehicle market – also known as Electric Vehicles (EV) – is emerging. And car manufacturers are already preparing for it. Actually, high-priced, luxurious electric cars could help the segment achieve profitability more quickly. But among customers with purchasing power, trust in such cars has collapsed in recent months. They basically got out of the market.

But demand for electric vehicles has not completely collapsed. Instead, new buyers looking for more affordable and practical electric cars entered the market. But they prefer hybrids to purely electric cars. After putting the brakes on electric vehicles at the end of last year, new strategies are now being developed.

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Market upheaval in electric car production

Earlier this week, General Motors CEO Mary Barra said the company would begin betting on hybrid sales in North America. The company launched its high-profile “All-In” EV campaign during the Superbowl.

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Meanwhile, the Swedish Volvo Group announced that it would withdraw future funding from its EV company Polestar. These strategy changes follow other signs of trouble in EV plans, such as Hertz abandoning a third of its EV fleet.

In recent years, the automotive industry has been divided into two camps when it comes to electric car strategies.

Hybrid pays off

Some, including General Motors (GM) and Volkswagen, have tried to skip hybrids and go straight to an all-electric lineup. Others, including Toyota and Jeep owner Stellantis, are focusing on plug-in hybrids for the near future.

Until recently, it was unclear which strategy would prevail, but GM’s move this week is the first sign that industry executives recognize a need for hybrid vehicles, at least in the near term.

“The use of plug-in technology in strategic segments will provide some of the environmental benefits of electric vehicles as the nation continues to build its charging infrastructure,” Barra said. GM’s ultimate goal is still to eliminate emissions by 2035. “We are planning the launch so that we can meet the proposed stricter standards for fuel economy and tailpipe emissions.”

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Barra’s statement reflects how the EV landscape is changing. The new wave of EV buyers are much less willing to tolerate the quirks of charging, range anxiety, or other lifestyle changes.

Tesla’s price war has forced change

The changing demand from customers for electric vehicles is an important factor in the recent upheaval in the industry. But there’s another culprit: Elon Musk’s company Tesla.

Musk started a price war last year. Because he used Tesla’s extremely high profit margins to reduce the prices of his electric cars while remaining profitable. Tesla’s competitors can’t do that. As Musk’s price war drives down the average price of electric vehicles, incumbent automakers are being forced to rethink their paths to battery-powered vehicle profitability.

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“This is a pretty brutal area,” said Harald Wilhelm, Mercedes-Benz’s chief financial officer, on an analyst call at the end of 2023. “I find it hard to imagine that the current status quo is sustainable for everyone.”

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The solution seems to lie in hybrids for now, which is good news for customers. Demand for hybrid vehicles has recently exceeded the supply of these vehicles, driving up prices. This is also good news for dealers, who are keen to add more hybrid models to their showrooms as demand for pure electric cars has waned.

Read the original article Business Insider.

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