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24/7 Wall St. contributors Douglas A. McIntyre and Lee Jackson explore a recent study that could have a tremendous impact on several companies, including Tesla.
Transcript
[00:00:05] Doug McIntyre: Lee, one of my favorite sources for car data is called IC Cars, and they came out with a study last week that said once the $7,500 tax credit is gone, which is September 30th, this is what will happen – In the second quarter 8% of all new car sales in the United States were EVs, okay? IC cars says the beginning in 2026 and going through 2028, 4%, only 4%, of all new car sales will be EVs. So. Let’s take a pull back and take a look at that. Tesla is back near, its 2025 high now.
[00:48:01] Lee Jackson: Had had a big rally off the lows.
[00:49:02] Doug McIntyre: Mr. Musk bought his stock, a billion dollars worth, the whole President Trump thing appears to be, you know, getting to be old news, but their problem is, is they’re still not selling as many cars as they used to in the three largest markets. The EU, the US and China. Second quarter of the year there, you had a 47% market share of EVs in the United States. That was 80% at its peak.
[01:19:05] Lee Jackson: The European sales have just been dreadful for like a year, over a year.
[01:23:20] Doug McIntyre: So let’s take a look at who get really gets hurt if you go from 8% to 4%. Number one – Tesla. Even if you keep 47%, 47% of a shrinking market that’s gonna do badly for two years is not a very good deal. So then you really, really, really have to believe that AI and robotics are gonna work out for them. The next two companies that get hurt really badly are GM and Ford, because between the two of ’em, they put almost $50 billion into developing EVs. Each of ’em has less than 10% of the US market. So to your point, if you cut the number of new cars sold as 4% EVs instead of eight. This prolongs their misery considerably. Now, the guys from outside who get hurt first are Hyundai and Kia because they’re, they’re one of the three legacy car companies that does well. But if you look at anybody else sending EVs in the United States from BMW to VW to Mercedes. Everybody’s ox gets gored in the US market, which is still the second largest car market in the world. So, EV market share looks like it’s gonna get bad. If you own a company that’s in the EVcar business, you have a lot of money in it. You’ve gotta ask yourself, “If I see cars as right, how horrible is that going to be for the industry?”
[02:55:21] Lee Jackson: Yeah, yeah. You’re exactly right. And the, and the thing is somebody somewhere is gonna have to figure out some way to massage the $7,500 going away into some other way. Either they gotta cut their costs somewhere or they’re gonna have to give a customer rebate or they’re gonna have to, you know, you don’t get the 7,500, but they, we’ll, we’ll loan it to you or something like that. Because they’ll have to do that just to get a little of the momentum back, you would think.
[03:31:20] Doug McIntyre: Well, the New York Times also pointed out something that’s obvious but hadn’t occurred to me. The market has been flooded with used EVs, particularly when people got upset with Tesla. Those cars were being dumped on the market in the thousands. You can now buy a lightly used EV for less than a gas powered car on the used market. If you’re interested in an EV on the new car market, EVs are more expensive than gas powered cars on the used car market, that’s not true. If you’re selling new EVs, if you’re gm, Ford, or Tesla, you’re not just up against losing that tax credit, you’re also up against the fact that used EVs, slightly used EVs are selling for very little.
[04:20:08] Lee Jackson: It’s incredible. Yeah. And you know, and it’s funny, I mean the, the whole concept and all the principles behind the EV car. I really do and, and especially in a place where I live. I live in a Tupelo, Mississippi is small, everything is 15 minutes away. Everything. This isn’t like living in Houston or Dallas when I lived in those places. And you know, an EV really makes sense here ’cause everything’s close, you don’t need a whole lot of mileage, you know, in terms of the ability to go a long way. So they make sense in a lot of ways. And the bottom line is like we’ve always discussed with, they have to get electricity, which has to come from power plants, some of which burn coal, some of which burn natural gas. So it all goes back to what you, you have always maintained. And I have always agreed with that you gotta have the $25,000 car. Gotta find it. You gotta make it.
[05:15:19] Doug McIntyre: Gotta be brand new, gotta be $25,000 EV. Forget the once the tax credit’s gone, right? The only people who bill those today are the Chinese and they’re protected in the US by a hundred percent tariff. If that ever goes away. Just watch Ford. It’ll be like the Titanic, the iceberg is right there.
[05:39:12] Lee Jackson: Well, I’ll tell you what, since we know that there’s a hard deadline at the end of this quarter, the, the next earnings we’ll see and we’re not concerned about what will be third quarter, but when we can look at the fourth quarter numbers in January, then then we’ll get the tail of the tape.
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