Even auto giants know it: the electric car boom is out of charge

“I think the customer has spoken. That’s the punchline,” said Jim Farley, the chief executive of Ford.

The American boss was speaking last week as his company unveiled a $5bn (£3.7bn) annual loss, barely two months after it had booked a shock $19.5bn write-down.

The cause? An aggressive bet on electric vehicles (EVs) that backfired spectacularly.

In 2025, sales of the Mustang Mach-E crossover and the F-150 Lightning pickup truck – once hailed by Farley as the “truck of the future” – went into reverse.

Worse, the electric Model-E division has booked losses of more than $13bn since 2023.

Now it has consigned the F-150 to the dustbin and has scrapped much of its future EV plans, with the company set to put a greater emphasis on hybrids.

Ford isn’t the only automotive giant counting the costs of a failed bet on electric.

In the past year, the world’s biggest carmakers have written off more than $60bn from their balance sheets as they retreat from an EV boom that never was.

The figure includes a €22bn (£19bn) charge reported by Vauxhall owner Stellantis, along with a $7.6bn hit to General Motors, €5.1bn at Volkswagen Group, $4.5bn at Honda and $1.2bn at Volvo, among others.

“Most of the Western carmakers are now facing big issues,” says Felipe Muñoz, of Car Industry Analysis.

Broadly speaking, EV sales are growing. But a rapid shift to electric that both carmakers and politicians had hoped for has failed to materialise. “Many drivers are still not comfortable making the shift,” says Muñoz.

At the same time, net zero regulations are beginning to bite in the UK and Europe – with companies facing fines if they cannot meet increasingly stretching targets – just as low-price competitors from China have arrived to undercut them.

Many of those Chinese manufacturers are themselves trying to outrun a crisis, as sales at home grind to a halt.

All across the world, a grim reality for carmakers is setting in: drivers simply don’t want EVs in the volume they hoped.

“The plans they set out were too ambitious – and what we’re seeing now is the reality,” says Munoz.

Covid-era subsidies

Much of today’s mess can be traced back to the heady days of the pandemic, when strange things were happening in the car market.

As the spreading coronavirus shut down factories around the world and governments panicked, subsidies were lavished on electric cars to try to support the flagging automotive industry.

This also came as central banks across Europe were slashing interest rates to boost their flagging economies, which made borrowing cheaper.

At one stage, it was so cheap to buy an electric car in Germany that models such as the Renault Zoe or even the Mercedes-Benz EQC crossover could be leased for less than the price of a mobile phone contract.

At the same time, governments were strengthening net zero policies. In Britain, the then prime minister Boris Johnson announced a ban on the sale of new petrol cars by 2030; in America, Joe Biden proposed a $174bn stimulus package for EVs.

Tesla, the electric carmaker founded by Elon Musk, was also being eyed enviously by its more traditional rivals – as sales of its Model 3 and Model Y cars grew rapidly.

EV sales were being supported by a sharp rise in petrol prices that followed the outbreak of the Ukraine war, which made EVs look cheaper relative to internal combustion engine (ICE) cars.

Against this backdrop, things only seemed to be heading in one direction.

In response, many car companies announced ambitious plans to electrify their line-ups.

Jaguar Land Rover announced that Jaguar would become an “all-electric” brand by 2025. Ford pledged to completely electrify by 2030, while VW doubled its end-of-decade target for EV sales from 35pc to 70pc.

But in the years since those announcements, EV sales have slowed as many of the temporary factors that boosted the market have receded.

Petrol prices have fallen from their peaks, interest rates have climbed and governments have reduced grants available to drivers.

In the US, meanwhile, Donald Trump has removed the generous Biden-era subsidies, dismissing the green energy transition is a “scam”.

It has forced manufacturers to walk back or delay most of their pledges – and to announce costly write-downs.

Ben Nelmes, of the New Automotive consultancy, says: “One of the big things that drives car companies is what all their competitors are doing.

“So when Tesla was really taking off in those years, there was this big rush to try and recreate its success.

“But a lot of those targets and [government] regulations have since been either watered down or rolled back.

“The car industry was also really hoping that sales volumes globally would go back to where they were pre-pandemic – and in most cases, that just hasn’t really happened.”

EVs are not ‘good value for money’

Perhaps the biggest reason sales of EVs haven’t been as strong as hoped is price.

In Europe, the EV cost nearly €63,000 in 2024 compared with around €51,000 for an internal combustion engine car, according to analysis by Jato Dynamics. This is despite predictions that falling battery prices would lead to similar price drops for cars.

As a result, European sales of EVs have so far struggled to break past the 20pc mark.

By comparison, EVs in China have reached parity in cost with ICE cars – at about €22,000 on average – and now account for around 50pc of all new car sales. This has been achieved in no small part thanks to generous subsidies from Beijing.

Andy Palmer, a veteran car industry executive known as the “Godfather” of EVs for his role in developing Nissan’s popular Leaf model, blames Western manufacturers for failing to invest in affordable models.

In the US and Europe, too many brands have focused on pricier – and more profitable – SUV models rather than cheaper city cars, he says.

“I think the fundamental issue is that the cars are too expensive and they are being compensated by subsidies, and that ultimately doesn’t work,” he says.

“You’ve got to get parity of cost with ICE cars. And EVs have got to offer more than simply they’re clean.

“They’ve got to offer basically good value for money, they’ve got to offer something different in terms of the user experience, rather than simply being a copy of ICE cars.

“That’s where the Chinese have got it right. The Chinese have pitched their EV prices at parity, if not cheaper, and they are adopting at rates that give huge economies of scale.”

With EV sales failing to take off in the way that was hoped, even the watered-down electric car mandates in Europe are starting to look challenging for manufacturers.

In the UK, for example, the zero-emission vehicle (ZEV) mandate required 28pc of new car sales to be electric last year compared with the 23.9pc actually achieved by the industry.

The target rises again to 33pc this year and gradually ratchets up to 80pc by 2030, when sales of new pure petrol and diesel car sales will be banned outright. By 2035, hybrids are likely to go the same way.

Car companies, led by the Society for Motor Manufacturers and Traders (SMMT), are urging a rethink, arguing that they are having to withdraw petrol cars from sale and discount their EVs heavily just to avoid punishing fines already.

Xavier Martinet, the president of Hyundai’s European business, recently said the Government needed a “reality check”, or risk some carmakers pulling out of the UK altogether.

“If you don’t sell EVs, you might not even do the ICE sales,” he told The Telegraph this month. “So what will customers buy, at the end of the day? That’s a major question.”

Range anxiety

In the UK, there’s another barrier to adoption: infrastructure.

For many drivers, range anxiety remains a worry despite the growing mileage of newer electric cars. This is why the Government has set out targets to boost the number of chargers nationally to more than 300,000 by 2030.

But the charger rollout has been criticised repeatedly for being patchy and too focused on London and the South East, with a House of Lords report in 2024 warning that ministers needed to “turbocharge” the rollout.

Instead, charging companies complain that they have still faced a menagerie of problems that were avoidable and are slowing down the rollout.

Securing planning permission on many sites remains too time-consuming, according to industry body ChargeUK, while funding through local authority-run schemes has been hit by delays.

Most significantly, charging providers have been hit by by high network costs. These are fees charged to businesses to fund the maintenance and expansion of the electricity grid – and they have been rising rapidly in recent years.

The network charges depend on the capacity of a site, or how many chargers it has, meaning that companies are effectively punished for doing what the Government wants and building bigger charging stations.

In one case, a national provider told The Telegraph that its network charges for a single site had rocketed from about £80 a year in 2020 to nearly £40,000 per year today.

This is pushing up the cost of public charging, which is already far more expensive than home charging – increasing the “driveway divide” between households who have their own charger and those that don’t.

According to Zapmap, the cost of charging at home is as little as 8.5 pence per kilowatt hour compared with 54 pence at public chargers.

Some charging companies are responding by cutting investment or building batteries on their sites to reduce reliance on the grid. The Telegraph revealed that the annual number of charger installations fell for the first time in 2025.

Signs of financial pressure are also emerging.

A string of deals was announced last week to combine various EV charging providers, including a merger of Mer with Octopus Energy-backed Be.EV.

That follows takeovers of Trojan Energy and SureCharge by larger providers Connected Kerb and Shell-Unitricity respectively. Industry executives think more such deals are on the way.

The strain on the sector is why charging companies have been urging ministers not to relax the ZEV mandate – even as car manufacturers say the targets are punishing high.

Jarrod Birch, of industry body ChargeUK, says: “Charging businesses have committed £6bn in private investment underpinned by the certainty and confidence offered by the ZEV mandate.

“Weakening or delaying the mandate – reviewed and adjusted less than 12 months ago – would undermine that confidence and the UK’s general ability to attract investment and deliver growth.

“Investors need to know that binding targets will remain binding, not shift in the wind.”

Chinese carmakers race to dominance

All these headwinds are bad enough on their own. But what could have been a significant headache for Western carmakers is fast becoming a full-blown crisis as new Chinese competitors are rapidly expanding in the market.

Brands such as BYD, SAIC, Chery, Geely, XPeng, NIO and Leapmotor have had their research, development and production backed by the state – allowing them to take greater risks and put their foot on the accelerator.

Beijing has also supported a rapid rollout of charging infrastructure, and until recently was lavishing subsidies on consumers at home to buy electric cars.

From an almost standing start, the Chinese carmakers have raced to dominance.

In 2020, Chinese drivers bought 900,000 battery-electric cars and 200,000 plug-in hybrids. In 2024, sales were 6.4 million and 4.9 million, respectively.

EVs now account for more than half of all car sales, and almost every EV sold is a Chinese brand.

Western carmakers haven’t been able to keep up in this race, and it is starting to show. Geely last year became the second Chinese carmaker after BYD to overtake Volkswagen in the Chinese market.

The German carmaker’s joint ventures with state-owned FAW and SAIC had a combined market share of 11pc last year, about half its former peak.

As Chinese buyers become more patriotic – Porsche sales have nosedived there – VW will work with its partner to make China-friendly models.

The likes of General Motors and Toyota are also losing ground in the world’s biggest market. They are either failing to launch EVs quickly enough, or not pricing them cheaply enough.

Boom years are over

It is not just Western brands hurting in China, however. The domestic boom has started to turn sour for local manufacturers too.

Subsidies ensure that the factory lines keep churning, but the queue of buyers is getting shorter. The market’s low-hanging fruit has been picked, just as weak labour and property markets have sapped consumer confidence.

With a glut of unsold cars and a dearth of buyers, the industry has resorted to steep discounting to keep shifting stock.

The China Automobile Dealers Association estimates that this price war wiped more than 471bn yuan (£50bn) from the carmakers’ revenue in the past three years.

The strategy is barely working: BYD’s sales in January were half those a year ago, and previous high-flyer Xpeng reported a third decline.

In February, investors began shedding their holdings in the listed companies, fearing the boom years might be over.

Beijing sat up and took notice. For more than a year, the Chinese authorities used public statements and meetings with executives to criticise the carmakers for their “race to the bottom”, known in China as “involution”.

But their words went unheeded, and last week the state administration for market regulation banned the industry from selling vehicles below production cost.

Cosimo Ries, of analysis firm Trivium China, isn’t convinced that even this will stop the price war. And as losses mount, he says, the smaller players will fight back, and they’ll be backed by local and regional governments who don’t want to see their champion fail.

He Xiaopeng, the boss of XPeng, agrees: “The competition in the auto market in 2026 will be even more brutal and bloody,” he said recently.

The Chinese carmakers’ domestic struggles are not good news for their Western rivals.

With unsold stocks piling up, BYD and its brethren are turning to a familiar option for glut-stricken Chinese firms: pump and dump offshore.

BYD said last week it was planning to boost exports by 25pc this year. In January alone, BYD’s German sales surged more than tenfold, with Dolphin hatchbacks outselling Teslas by two to one.

Britain is fertile ground, as it hasn’t thrown up a tariff wall. BYD quadrupled its sales last year and entered the top 20 brands last year, outselling Mini, Mazda and Tesla.

Greece and Italy are also proving to be attractive markets. One in every seven EVs sold in Europe last year was a Chinese import, when cars made in China by Western companies are included.

“The speed at which the European consumer has adopted Chinese cars is much faster than our adoption of Japanese or Korean cars. That is a bit worrying from the perspective of a Western automotive company,” says Niklas Brundin, a partner at consulting firm Arthur D Little.

One industry veteran says that since the UK and Europe are mature car markets, companies tend to grow only by taking market share from somebody else.

“A few years ago there were about 40 major car brands in the UK, and by the end of the decade there’ll be something like 75. There isn’t enough growth in the market to support that,” he says.

“Those extra 35 brands are going to have to take the share from somebody, and that’s going to result in a lot higher competitive intensity. And none of the Chinese companies are coming here to be a player with a 1pc market share.”

In other words, a fight to the death has begun.

Europe fights back

Faced with an onslaught from agile, cutting-edge Chinese companies backed by state subsidies, the initial response from Europe has been to shelter behind a Brussels tariff wall. But its defences look weak.

Chinese companies have responded by switching to selling more hybrid vehicles and setting up factories within Europe.

Matthias Schmidt, an automotive expert, reckons a fightback is coming. In the next year, he predicts the incumbent Western brands will start bringing cheaper models to market, using the cheaper lithium iron phosphate battery technology that powers the Chinese brands.

“We’re expecting to see prices for consumers fall and price parity be met,” he says.

Because the EVs will then be more commercially viable, “it will be in the manufacturers’ interests to push those vehicles, not just to meet regulatory guidelines but because eventually they will become more profitable”.

But for this strategy to fly, the EV market has to reawaken. And here, industry reckons the Government must work harder – or at least smarter.

The EU and the British Government are trying to force the industry to go all-electric by the mid-2030s. But it is becoming clear that not enough motorists are on board with EVs to keep this target on track.

Governments have had differing responses to this dawning reality.

The Trump administration has executed a volte-face, forcing American carmakers to wear heavy losses on their EV investments.

Brussels is poised to water down its targets and standards. But a reform package outlined late last year was criticised by industry as complex, incomplete and insufficient – and not enough to fend off the Chinese.

Britain is undertaking a lengthy review of its targets that require carmakers to shift an increasing proportion of their sales to EVs. Often, carmakers can only meet these targets by selling unwanted EVs at a loss.

“The regulatory trajectories are really steep. It’s so much ahead of that underlying demand that it’s putting huge financial pressure on the industry,” says Mike Hawes, the chief executive of the Society of Motor Manufacturers and Traders.

“We’re not denying the aspiration, the ambition – but it’s making sure it’s deliverable in a timescale that’s affordable for consumers and affordable for businesses.”

Rather than make it more affordable, Rachel Reeves, the Chancellor, has announced a new tax of 3p a mile for EVs from 2028, or 1.5p for plug-in hybrid drivers.

On the other side of the ledger, the Government introduced a grant for EV buyers, but only about a quarter of models will qualify.

“For the industry and especially for the consumer, it’s mixed messages,” Hawes says. “At a time when you need to be pulling every lever to try and bolster that consumer demand, instead it’s two steps forward, one step back.”

‘Model T moment’

The EV bubble that inflated in the first half of this decade has well and truly burst. But the technology is not going away.

Even Ford, despite its huge losses, remains committed to electric cars. Jim Farley, the company’s boss, has said its back-to-basics “Universal Electric Vehicle” platform – built by engineers from the ground up – is the most important product he has ever worked on.

It will be the basis of a new effort to crack the mass market, with Ford reportedly aiming for cars that can sell in the consumer sweet spot of $30,000 to $35,000.

Andrew Bergbaum, an automotive expert at AlixPartners, says this kind of ground-up overhaul is ultimately needed to bring down the cost of Western-made EVs.

Farley has claimed that cracking EVs could deliver a modern “Model T moment” – a reference to the best-selling car that made the company’s name in the early 1900s.

“This is us going back to our roots,” he told Auto Car in January. “As Wolfgang Puck said, ‘A lot of people could run a four or five-star restaurant; not many people can do a good buffet in Las Vegas.’

“We learned so much being an early mover in EVs and a full-line manufacturer. We learned a lot about where we need to put our capital.”

To critics, it looks like an extremely expensive lesson.

[Source: Daily Telegraph]