Why have expensive ICE been selling better than EV recently when EV prices have dropped further?
When non-Tesla EV manufacturers slow down production, we should Tesla to sell more EV especially when Tesla reduce prices and improve their offering significantly.
A global slow down in auto sales should favor new entrants with high margin and low price, not expensive, low-margin incumbents with poor EV offering.
Tesla has trouble reaching prospects outside the early-adopters' customers segment. And their main action plan is to lower prices when people cearly don't know about the affordability of Tesla.
The market discrepancies are largely explained by income distributions, taking the US example:
This report presents data on income, earnings, & income inequality in the United States based on information collected in the 2023 and earlier CPS ASEC.
www.census.gov
Even though that 2022 data should a modest decrease in income inequality;
The effects of the income stability at the top 5% with increased pressure on the middle 40% or so is visible in market changes in 2023/2024, even though the historical published data has not yet displayed that. To be sure, unemployment data and inflation numbers are factors, but are indirect ones.
In nearly all categories reflecting the highest income and wealth categories there is clear evidence that sector is not suffering:
Montreal, 14 February 2024 – Airports Council International (ACI) World has published its first bi-annual air travel demand update of 2024, pulling data from
aci.aero
Business jet demand is usually a good indicator of the “
Overall, in my opinion, global evidence in luxury hotels, air travel etc clearly shows high disposable income for the top income class.
People who fly frequently have all observed overbooked flights packed premium classes almost everywhere here.
So what about auto sales? Elon Musk saw the decline coming and said it well before it happened. Why was this surprising to anyone is a different question. First, through Covid-19 and supply dhortsges TSLA proved superior logistics, outstanding supply chain management and highly flexible manufacturing allow simply powering through while others suffered.
Then 2023 delivered multiple very difficult situations from, in US alone NHTSA, formal EV conference excluding Tesla. Elsewhere repeated Terrorist threats, IG Metall began… and…The equanimity-shattering political situations exacerbated by the Feb 2024 Delaware Chancery Court infamous decision.
All of that partly explains EV pressures, explains distraction at Tesla, but is not the global loser-range vehicle sales issues.
Those all are more nearly the result of abnormal pent-up demand almost globally in late 2022-2023 and post-pandemic demands drove demand . The missing link, in my opinion, is the effects of COVID-19:
- every aspect of home delivery has, almost around the globe, had lasting impact on purchasing, as people simply drive less, using delivery for food, consumer goods, even many medical services. That in turn has the direct effect of reducing personal vehicle demand.
- ride sharing (Uber etc) has vastly reduced usage of personal vehicles while not having direct measurable effect on owning them.
These are all cumulative and each might have negligible effects, but the aggregate of these is huge.
Those who are convinced of Robotaxi see almost all of these as evidence for mass adoption. They are all evidence of gradually weakening demand for less affluent people to buy cars.
None of the markets are disappearing. The traditional new vehicle sales among less affluent people are, unquestionably, reducing in size and purchasing capacity.
Just glance at the progression of incentives in Automotive News both US and Europe, and a national data elsewhere. The developments are clear.
Then think about how distracted Tesla CEO may have been last year.
