The hype is gone from the electric-vehicle industry. EVs are becoming boring appliances

   2024-03-02 09:03

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A vehicle charges at a Tesla Supercharger station, in Detroit, Mich., on Nov. 16, 2022.Paul Sancya/The Associated Press

Until about five years ago, the hype machine propelling electric and autonomous vehicles was compelling, dreamy, full of Jetsons-style promise of transportation’s new world. EVs and versions that could drive you to the office while you sipped a cappuccino in the back seat inhabited the same razzle-dazzle universe as bitcoin, the metaverse, artificial intelligence and defi – bro talk for decentralized finance. Fortunes were made as the tech dream lured astonishing numbers of believers, most of whom had no idea what they were buying into. What was the Internet of Things?

The hype machine has since moved on, as it always does when a rude reality check collides with overpromotion. Did we really need “smart” fridges that doubled as computers that could talk to us? Did we really need autonomous cars? Actually, they were a cool idea (though never as cool as mass public transportation). But they are not coming, at least not quickly.

This week, Apple AAPL-Q rolled its plans to create a self-driving iPhone on wheels into the ditch. The company started the project, known as Titan, about a decade ago and it was certainly ambitious, though news rarely leaked out about its progress – or lack thereof.

At first, according to various reports, the idea was to build a fully autonomous car. Later, when it became apparent that the inadequate technology, the safety concerns and the missing legislation that would allow driverless cars on the roads would prevent the cars from hitting the market any time soon, Apple concentrated on EVs with only some self-driving capabilities.

By then, the market was already cluttered with EVs of various degrees of sophistication and Apple apparently realized it could never turn itself into a profitable car maker. The 2,000 employees in its car division are being redeployed into generative AI. Is Amazon’s Zoox autonomous car subsidiary the next to call it quits?

The obvious beneficiary of Apple’s no-show in the EV game is Tesla TLSA-Q, which is by far the biggest American producer of EVs and the world’s most valuable car company. No competition from Apple, which is routinely ranked as the world’s best-known brand, must have come as a relief for Tesla boss Elon Musk.

Maybe, but the hype machine has moved on from Tesla, too. In mid-2023, Tesla was a US$1-trillion company. Its market value today is about US$640-billion as dozens of competing EV brands hit the showrooms and buyer enthusiasm for the machines waned. EVs are still gaining market share, globally speaking, but at much slower rates than they were a few years ago. In a few big markets, such as the United Kingdom, their share is declining as drivers get put off by high prices, lack of charging points, expensive repairs and batteries that could run out of juice before you get home. Hertz is shrinking its EV rental fleet for all of those reasons.

Tesla propelled the EV and autonomous-car hype for years. No longer. With autonomous cars off the agenda for a while, and robo-taxis almost entirely absent in spite of endless predictions they would be the norm by now (Waymo and Baidu run small fleets of them in a few American and Chinese cities), Tesla is left making upscale battery-powered appliances that already seem so … yesterday. It’s easy to forget the first Tesla car, the Roadster, came out 16 years ago. Revolutionary then, commonplace now.

Today, the EVs are a glut on the market. The German car industry has penetrated sales for luxury, high-performance EVs and the Chinese are virtually dominating the cheap end. China’s BYD, backed by Warren Buffett, has displaced Tesla as the world’s biggest maker of battery cars.

With BYD’s prices coming down fast – the newest version of its Dolphin hatchback model costs about US$14,000 – its market share will undoubtedly rise. That will leave Tesla having to decide whether to try to dethrone Porsche and Ferrari, or do the opposite and compete with the cheapie Chinese EV brands. Either way, the effort will be a slog as building EVs becomes just another business, like pumping out so many furnaces or air conditioners.

If there is an iota of excitement left in the automotive industry, it is not in EVs, and certainly not in regular gasoline and diesel cars. It’s in another aging technology – hybrids. Hybrids combine batteries with regular gas engines. The batteries kick in only part of the time, though enough to improve fuel economy and reduce emissions by a fairly big amount; the regular engine eliminates range anxiety.

The Toyota Prius, introduced way back in 1997, is the standout example of this seemingly awkward technology. Toyota resisted going big on EVs and stuck with hybrids even as pure-electric Teslas stole the limelight. With enthusiasm for EVs waning, hybrids are taking off. Toyota built 3.4 million of them last year, up by one million over 2022. The hype is gone from EVs. Maybe what little enthusiasm remains for the industry should be spared for hybrids.

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