Car dealers sent a letter urging Biden to "tap the brakes" on an electric vehicle mandate.
Two-thirds of new cars must be EVs by 2032 — but dealers say EV sales are slumping, and hurting them.
Local car dealers have a lot of political influence; Biden could look to expand tax incentives.
Car dealers aren't happy with President Joe Biden's mandate to have two-thirds of all new cars be electric vehicles by 2032. Axios reported that a group of nearly 4,000 local dealerships sent a letter to Biden urging him to "tap the brakes" on his mandate.
The letter from the dealers group described slumping sales for EV, which means more cars languishing on the lot, which is bad for their small businesses. From the letter:
Last year, there was a lot of hope and hype about EVs. Early adopters formed an initial line and were ready to buy these vehicles as soon as we had them to sell. But that enthusiasm has stalled. Today, the supply of unsold BEVs is surging, as they are not selling nearly as fast as they are arriving at our dealerships — even with deep price cuts, manufacturer incentives, and generous government incentives.
To understand what's going on, and how influential this group might actually be, I chatted with Nora Naughton, a Business Insider senior reporter based in Detroit who covers the auto industry, specifically electric vehicles.
The following conversation has been edited for length and clarity.
I was surprised to hear about this letter from car dealers, because I thought that electric vehicles were in hot demand. What's the deal?
There is a really interesting gulf between demand and supply with electric vehicles right now. It's not that demand for these vehicles doesn't exist — it certainly does.
The problem is that we have moved out of this demographic of wealthy early adopters and into average car buyers — people would be not adding an EV to their driveway or own many cars, but trading in their old car for an electric car. But the automotive industry has been building for those wealthy early adopters for so many years.
Where are we right now in terms of manufacturers making EVs more affordable — is it trending that they'll become cheaper soon?
I don't know about soon, but EVs are trending toward becoming more affordable. EV prices have fallen, but we're talking about averages dropping from nearly $70,000 to $50,000, which is still really out of range for a lot of people. They need to get more options down to the $25,000 to $35,000 range to reach the average car buyer.
This letter to President Biden — do you think it's likely that Biden will respond? Presumably there's also pressure going the other way, with groups that want to enforce this mandate to meet the EV goal for 2032.
The way that I think he could react is with more incentives for buyers. The electric vehicle tax credits got a makeover this year — now imported cars don't qualify for the incentives, and there's an income limit for buyers to qualify.
One easy fix is to make those tax credits more accessible for every EV. Government discounts and incentives are really the biggest driver of sales for these cars.
How much political power does a big group of car dealerships have? I know they can be quite wealthy (just this week, videos have been going viral of an extremely lavish — allegedly $59 million — wedding of the daughter of a car dealership owner) How likely is it that Biden is going to listen to what they say because they are an important group?
Dealers have an incredible amount of political sway. You can see that in the last 10 years of fighting with Tesla over direct sales — dealers fended that off in a lot of cases and protected franchise laws.
They're incredibly influential at both the local and state level because they are so wealthy and they often have very close relationships with local and state representatives in Congress. There's also a hugely influential dealer group in Washington, DC, The National Automotive Dealers Association.
Car dealerships are a unique business; is there a reason that they're worried so particularly about this mandate?
Dealers are typically like the canary in the coal mine for the automotive industry because they see demand shifts happen before the manufacturers. The automotive industry is unique in that it takes years between development to production to the person's driveway. It's not a very reactive industry, so, it's the dealers who can say, "You know what, these electric vehicles are piling up, and we need to figure out a different way to do this."
So right now, local dealers are taking losses on these cars?
Oh yeah, no one makes money on an electric vehicle sale right now. Except for Tesla. The hot Mach-E sells at a loss for Ford; the Chevy Bolt has sold at a loss for years. That's also a big driver behind dealers wanting to pump the brakes: if these cars are going to be two-thirds of their sales, then the majority of their sales are not going to make them money. And that's a big problem.
Would you say that this letter means it's actually a good time to get a good deal on an electric vehicle if you're shopping for one?
You can absolutely get a good deal on an EV right now, particularly a Ford Mach-E — those have been piling up on dealer lots for a long time. Or the F-150 Lightning if you want a ginormous electric pickup truck; it sounds like those are starting to pile up as well.
Read the original article on Business Insider