Tesla’s strategy of building an upmarket luxury sports sedan while it figured out how to actually mass-produce cars was pretty smart, huh? Think of all those Mercedes S-Class, Audi A7, and BMW M5 owners that ended up in a Model S. I bring this up because Lucid is dropping prices on its very good Air sedans and it’s a reminder that, in a higher interest rate environment, it’s gonna be tough for new entrants into the EV market.

In related news, Rivian’s about to announce Q2 earnings and investors/analysts have some important questions about how that’s all going to work. Almost every major automaker is dramatically increasing the number of electric vehicles its producing, but in the interim these companies still make their actual money from gas cars and so, ahem, they’re not exactly pumped about the impending fuel economy regulations.

And speaking of pumps, let’s have a recall! Because it’s been a while since we’ve had a good recall.

Lucid Drops Prices On The Air By As Much As $12,400

If you go to the Lucid Motors offers page, like I do every morning, you’ll see some interesting price drops. The base Air Pure AWD is now just $82,400 before a $1,500 destination charge, down $5,000 from before. The Air Touring is down to $95,000, and the Air Grand Touring, like the one I just drove, now starts at $125,600, which is a $12,400 improvement (thanks, Saudi Arabia!).

It’s here that I need to be careful. Lucid has, like other companies, variously raised and lowered prices throughout its short existence. It has adjusted its big Grand Touring model so it doesn’t have to have all of the fancy optional features, which allowed for a lower price at one point. This seems to be a special offer and it’s not clear how long it’ll last.

While Tesla has seemingly dramatically altered the prices of its vehicles on a whim, traditional automakers also do this. The difference is that traditional automakers have dealerships, so they can keep the price of your Wrangler at $54k and then offer ’employee pricing’ at the dealership level and essentially knock $5-6k off a vehicle overnight. Direct-to-consumer companies don’t have that option.

All that being said, I do think there’s an inherent softness in the startup luxury EV market. For a while, all Tesla Model S sales were conquests (i.e., taking a buyer from another brand). Now automakers are fighting back with their own versions of luxury EVs and, while you may think the Lucid Air is better than the EQS (it is), some people want a Mercedes. Brand loyalty still exists.

Here’s an important series of words from a Reuters report on the price drop:

But rising interest rates to curb inflation and fears of recession have dampened consumer demand, prompting market leader Tesla to slash prices this year.

That has sent ripples through the industry, making it difficult for money-losing startups such as Lucid, which also face competition from traditional automakers launching electric models, to grab market share.

Helping some lower-priced models woo customers is a $7,500 federal tax credit under the Inflation Reduction Act, but more expensive cars such as Lucid’s Air are not eligible.

BMW, Audi, Ford, GM, et cetera are not going away. They will be here for a lot longer and have pickup trucks/crossovers to keep the balance sheet healthy. The big question is: Can startups like Lucid and Faraday Future last long enough to build enough manufacturing capacity to eventually offer a more mainstream and affordable EV?

(Editor’s Note: I’ve said this before and I’ll say it again: the next great EV is a cheap one. I understand the realities of the Tesla Playbook by going upmarket first, but the market has moved on. The first automaker in the U.S. than can make a truly great, modern EV starting around $25,000-$30,000 will have a genuine hit on its hands. —PG)

What Can We Expect From Rivian’s Q2 Earnings Report?

Hey, funny that, in addition to Lucid, we should be getting a Q2 earnings report from EV truck/suv/vanmaker Rivian tomorrow. The company had a great Q2, delivering 12,640 vehicles and building nearly 14,000 vehicles, both records.

Here’s what everyone wants to know, via Automotive News:

But competition is picking up in the EV pickup market, with Ford cutting prices on the F-150 Lightning last month and Tesla set to launch its Cybertruck pickup by year’s end. Rising EV inventories are pushing sales incentives higher.

“As pricing becomes more and more important because of rising interest rates, because of more competition, this is going to be something that everybody’s going to want to keep an eye on,” said Travis Hoium, an analyst at The Motley Fool, a stock-focused website.

“There’s a limited amount of demand right now for electric vehicles, so every increase in supply means that companies are fighting for the same customers,” Hoium said in a video.

At $74,800, the R1T, as they note, is way more expensive than a base F-150 Lightning, but I’m not entirely convinced those are aggressively cross-shopped. If you want a Rivian I think you want a Rivian. The same is true for an F-150.

As for the bolded point above, I do think that the $70k+ EV market probably has a real hard cap in this borrowing environment, but there’s probably a decent amount of demand for EVs in the $30-60k range… if more companies can actually build vehicles at that price.

Automakers Don’t Think They Can Reach Goal Of 67% EV Sales In A Decade

For all this talk of automakers aggressively switching over to EVs, the best way to understand what their real projections are is to look at how they’re reacting to upcoming EPA fuel economy regulations.

The Associated Press has a well-reported feature that sums up the various issues involved and you should read all of it. I think climate change is real and I think we’re running out of time to address it, so I’m sympathetic to this administration’s plan to finally address it. I also think it’s going to be extremely hard.

Here’s how the EPA, in that article, frames it:

The EPA says the industry could meet the [new strict emissions limits] if 67% of new-vehicle sales are electric by 2032, a pace the auto industry calls unrealistic. However, the new rule would not require automakers to boost electric vehicle sales directly. Instead, it sets emissions limits and allows automakers to choose how to meet them.

The AP goes on to note that even if 67% of new sales are EVs by 2032, it might not actually be enough to lower emissions since so many gas- or diesel-burning cars will still be on the road then—or still in production. Green groups agree, and several are demanding even stricter emissions rules. And what do automakers say?

The Alliance for Automotive Innovation, a trade group that represents companies such as General Motors, Ford and Toyota that make most new vehicles sold in the United States, argues the EPA standards are “neither reasonable nor achievable in the time frame covered.”

The alliance says the agency is underestimating the cost and difficulty of making EV batteries, including short supplies of critical minerals that also are used in laptops, cellphones and other items. Sizable gaps in the charging network for long-distance travel and for people living in apartments pose another obstacle.

This is one place where Chinese automakers, consumers, and policymakers are ahead of us. Not only is China the world’s best mass builder of car batteries, it also has a populace that’s ok with smaller vehicles and automakers willing to sell them things like the BYD Seagull.

Hyundai-Kia Recalling Vehicles Over Fire Risk, Ask Owners To Park Outside

Both Hyundai and Kia are having to recall vehicles over a faulty oil pump assembly that could cause the pump controller to overheat and melt. This recall impacts certain 2023-2024 Palisade, 2023 Tucson, Sonata, Elantra, and Kona models. For Kia, the models include certain 2023 Soul, Sportage, and 2023-2024 Seltos vehicles.

Here’s the description from the National Highway Traffic Safety Administration’s report:

The Multi-Layer Ceramic Capacitor (MLCC) located on the printed circuit board in the controller of the Idle Stop & Go (ISG) electric oil pump assembly for the transmission may have been damaged by the supplier during the
manufacturing process. A damaged capacitor can cause an electrical short
circuit while driving and may result in thermal damage isolated to the ISG
electric oil pump circuit board, electrical connector and wiring harness.
Thermal damage at the electric oil pump increases the risk of a fire.

It’s estimated that 1% or fewer of vehicles actually have the defect, but just to be safe maybe don’t park close to your house if you have one of the impacted cars until a dealer can look at your Kia.

The Big Question

What percentage of the U.S. auto market will EVs make up by 2032? I’m looking for a number here. The number was about 5.6% last year. Through the first half of 2023, we’re at about 7.2%. What does the next decade look like?