Automakers lose money on every EV they sell — a lot of it, report says

Changes to the federal EV tax credit rules have made it easier to get a discount on a new vehicle, but automakers aren’t basking in the glow of increased profitability. In fact, a recent Boston Consulting Group (BCG) study found the opposite: Companies lose money on every EV they sell, and increasing profits will take a concerted effort from multiple angles.

BCG found that automakers lose an average of $6,000 on every EV they sell for $50,000 after tax credits. The firm’s research also suggests that the companies will only be able to make up for half of that number on their own through streamlining technologies and increased scale. And, while lawmakers may impose tariffs, it’s only a matter of time before U.S. car buyers can access affordable Chinese EVs made in Mexico.

Automakers will need help from the government to close the rest of that profit gap. BCG noted that incentivizing companies to improve EV range and efficiency along with other public support could be a way for them to overcome some of the financial challenges. And, while the demand for fast chargers may decrease as EV range numbers grow, the study suggests that it will be challenging for companies to expand their charging networks profitably.

BCG sees more uncertainty going forward, pointing to concerns about range, resale values, and battery degradation as hurdles automakers will have to overcome. There’s also the question of general demand, as the study found that today’s EV technology and pricing are only good enough to meet the wants and needs of 12% of potential buyers. Those wants and needs include: 20-minute charging times; 30-minute detour and wait times for fast-charging stations; a 350-mile driving range; and a price of $50,000. They’ll also need to offer greater vehicle variety.

BCG’s most optimistic analysis suggests that next-generation vehicles would only grow that to 30% of buyers, with demand of around 4.5 million units per year. The firm noted that more conservative estimates put demand at around 20% but also said that hybrids could see significant growth as most buyers are willing to look outside of EVs to get the features they want.

For a much deeper dive into the issues facing EV adoption, go to the full BCC study.