Electric vehicle EV sales continue to grow despite most auto manufacturers experiencing a secular decline in sales for internal combustion engines ICE.
2024, Q3 has been a challenging quarter for business marketing to households, which is particularly the case if the sale requires financing
Darren Winters points out; the fallout of seven Fed fund rate hikes in 2022, the most aggressive tightening in decades, followed by another four Fed rate hikes in 2023, has translated into a challenging 2024 quarter for auto manufacturers.
The Fed’s 50 basis point rate cut in September could not come sooner for auto manufacturers as nearly all legacy global auto brands are posting year-on-year sales declines for their ICEs.
Despite a gloomy year for ICE sales, EV sales continue to buck this depressed auto market trend, which could be in a secular decline
Indeed, nearly all the major automakers experienced sales declines for their ICEs.
Some believe the decline in ICE sales in 2024 was due to automakers being too slow to cut prices from the post-lockdown highs.
So here is what challenging ICE sales look like in Q3 2024 for the major automakers.
General Motors sales were -2.2% year-over-year, all brands combined, to 696,086 vehicles in Q3.
ICE vehicle sales, including hybrids, fell 4.1% year-over-year.
Toyota sales were –8.0% year-over-year, Toyota and Lexus brands combined, to 542,872 vehicles in Q3.
Nissan sales were -2.2% year-over-year, Nissan and Infiniti combined, to 212,068 vehicles.
Chrysler sales were also -47% year-over-year.
Dodge sales also experienced a buyers strike in 2024 at -43% year-over-year.
Jeep sales also posted slumping year-over-year sales at -6%;
Just a few automakers posted positive ICE sales with Ford, sales +0.7% year-over-year, Ford and Lincoln brands combined, to 504,039 vehicles in Q3.
Honda, ICE sales outperformed the market, posting +8.0% year-over-year, Honda and Accura brands combined, to 366,214 vehicles in Q3.
EV sales for the legacy manufacturers indicate a sunny landscape, a booming sales market
Toyota is leading the surge in EV sales, which also makes hybrid powertrains, but its first battery-electric vehicle, the bZ4X, sold only 4,109 bZ4Xs in Q3, but that was up 45% year-over-year.
Last year, Toyota announced major production plans of 1.5 million EVs by 2026, trying to spur EV enthusiasm.
However, that turned out to be more fiction than fact, as ramping up production of EVs from zero to 1.5 million units in three years is a tall order for even the likes of Toyota because the supply chains are not there.
So in September, Toyota was forced to scale back those ambitious production plans for 2026 to 1.0 million EVs, and even that will be a challenge.
Supply chain constraints in 2024 continue to be a headwind on EV sales
Nissan posted booming EV sales with its Leaf and Ariya all-electric powertrains sales soaring +65.7% year-over-year to 10,066 vehicles.
Meanwhile, GM discontinued its Bolt EV and Bolt EUV at the end of 2023.
But it has several new EV models now on the market, including a full-size truck.
Similar to most automakers, GM is finding it challenging to ramp up production of EVs, which require new supply chains with lots of kinks to be figured out.
So, GM’s EV sales are still small but are fast expanding with its new range of models.
Ford EV sales rose by 12.2%; ICE vehicle sales, including hybrids, inched up 0.2%. Ford is finding it enormously challenging to produce EVs, believing EVs would be a high-dollar premium product.
But fierce cost-cutting competition from Tesla has been trashing Ford’s EV strategy.
Honda has been late to enter the EV space.
The Prologue, its first and only pure EV, is new this year. Honda sold 3,785 Prologue in September, up from zero last year.
Exclusive EV makers are experiencing booming sales.
Little known outside China, Nio delivered 21,181 vehicles in September 2024, representing an increase of 35.4% year-over-year.
Tesla sold 1.3 million EVs in 2024, and if sales in the last quarter are similar to the first three quarters, Tesla would end up with around 1.7 million cars, which implies Tesla would have to take a step backwards compared to 2023 when 1.8 million EVs were sold last year.
Here is the takeaway, EV sales are no fad, bearing in mind if consumers are buying EVs in tight financial conditions, the market could have tremendous growth in a looser financial environment
The two major central banks, The People’s Bank of China and the Federal Reserve are both moving towards implementing a loosening of monetary policy.
EVs are in a secular growth market, with ICEs in a long-term decline and auto manufacturers not tuned into the trend could be walking dinosaurs.
EVs to ICE makers could be like what digital photography was to Kodak.
The Kodak moment was synonymous with taking a photo, which is foreign to the smartphone generation.
EVs are the most disruptive macro trend impacting mass transport since the invention of the ICE last century.
How to invest in EVs?
Darren Winters cautions that with so many factors to consider and the many unknowns, it is risky to predict which company will emerge as the winner in emerging trends.
So, EV ETFs are a wise vehicle for investors to gain exposure to the potential upside of EV adoption without the risk of betting it all on one company.
Here are the top five EV ETFs which also provide supply chain exposure
1)Global X Autonomous & Electric Vehicles ETF (NASDAQ: DRIV) Broadly focused with a portfolio that includes tech giants, automakers, semiconductor companies, and other EV suppliers.
2) KraneShares Electric Vehicles & Future Mobility ETF (NYSEMKT:KARS) focused on companies directly involved in EV and EV component production.
3) SPDR S&P Kensho Smart Mobility ETF (NYSEMKT:HAIL) Invests in EVs, autonomous vehicles, transport systems, and drone companies.
4) iShares Self-Driving EV and Tech ETF (NYSEMKT:IDRV) Broadly focused ETF weighted toward big tech and semiconductor companies.
5) Global X Lithium & Battery Tech ETF (NYSEMKT:LIT) Invests in companies in the lithium industry, including miners and battery manufacturers.