The volatility of the electric-vehicle transition has been on full display recently, as Ford Motor Co. announced it is pausing construction on the joint-venture active cathode material plant it is building in Quebec just days after Honda Motor Co. Ltd. announced a $15-billion EV and battery complex in Ontario.

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On the one hand, the multibillion-dollar investments demonstrate that automakers continue to see EVs as the future of the industry, but construction pauses show questions about their viability remain.

EV sales grew by 49 per cent in Canada in 2023, grabbing 10.8 per cent of the total marketplace, and yet industry leaders are also talking about the challenges of moving out of the early adoption stage, which includes pressure to bring costs down and increase performance.

“It’s clear that when the EV craze started … the early adopters … were willing to pay a higher price,” John Lawler, chief financial officer of Ford, said on an earnings call on April 24. “What we’re finding (now) … is that … customers are not willing to pay a premium.”

Such evaluations of the marketplace link up with what some consumer sentiment surveys are showing.

The percentage of consumers who said they would consider an EV for their next purchase has declined to 46 per cent, compared to 56 per cent in 2023 and 68 per cent in 2022, according to a survey conducted in March by Autotrader.ca, an online marketplace for new and used cars.

Consumers who said they would not consider an EV cited affordability, range anxiety and a lack of charging infrastructure as their top three reasons.

“Consumers are financially squeezed,” Baris Akyurek, vice-president of insights and intelligence at Autotrader.ca, said. “It makes sense that they’re concerned about higher purchase prices.”

But these concerns might dissipate in the coming years, especially if automakers introduce more affordable vehicles and the charging infrastructure fills in.

Ford chief executive James Farley in the same earnings call last month said his company is betting on “affordability” and will likely make smaller cars. He said Ford in February dropped the price of the Mustang Mach-E by 17 per cent and sales increased by 141 per cent.

“That’s telling us that the more affordable we can make a great product, the more attractive it is to these mainstream EV adopters,” he said.

Akyurek said making sense of what’s happening with EVs is tough because the marketplace for automobiles is still in a unique place. There were a number of unusual disruptions in the past few years, including supply-and-demand mismatches stemming from the pandemic era and a shortage of semiconductor chips that stymied auto production.

He estimates automakers sold 1.5 million fewer vehicles between 2020 and 2023 than they would have under more normal conditions.

Andrew King, managing partner of Desrosiers Automotive Consultants Inc., described the auto market as “unstable” in a recent newsletter.

He said there have been 18 consecutive months of gains in sales, but “momentum appears to be dissipating.”

As consumer interest in EVs slows, it seems many automakers see hybrids as a way to hedge their bets. Such vehicles offer some of the benefits of EVs, including lower fuel costs, but may not provoke the same anxiety about range performance or charging infrastructure.

Farley said sales of hybrids grew 36 per cent in the first quarter.

At Stellantis NV, chief financial officer Natalie Knight on an April 30 earnings call said the company’s first-quarter revenue declined 15 per cent, but there was one bright spot.

“A special call out for Q1 is our strong performance in the (plug-in hybrid electric) segment, where sales increased nearly 80 per cent,” she said.

One thing is certain: there’s a lot depending on an increased pace of EV sales. In December, the federal government published final regulations that mandate all new vehicles must be zero-emission vehicles by 2035. It also set interim targets that zero-emission vehicles must reach 20 per cent of all new sales by 2026 and 60 per cent by 2030.

The Autotrader.ca survey in March said 78 per cent of consumers were aware of the mandates, but only 75 per cent believed the targets were achievable.

Within that group, consumers cited a lack of charging infrastructure and the potential change in the political landscape as top reasons for skepticism.

Brian Kingston, chief executive of the Canadian Vehicle Manufacturers’ Association, a lobbying group, has long said the lack of charging infrastructure will slow the pace of adoption.

“At the current rate of the charging rollout, there is no way to close that gap,” he said.

The federal government projects that 442,000 chargers will be needed to support its 2035 mandate and there are currently only 28,000 chargers. Although the government is spending hundreds of millions of dollars on new chargers, some still see a gap.

“What we see is that a lot of people are interested in an EV, but have concerns about charging availability,” Kingston said.

• Email: gfriedman@postmedia.com

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