Electric vehicles are piling up in dealer lots. Consumers are by-passing EVs for gas-powered autos and hybrids while unwanted EVs sit at the dealerships for months. Production is being cut at the Big Three auto companies. What happened to the EV boom?

 

The green revolution promised that electric vehicles were the wave of the future. Government incentives were offered to boost purchases in the name of clean energy as a way to fight climate change. Over the last few years, wealthy American consumers waited in long queues for their chance to plunk $75,000 or more down for their vehicular status symbol.

 

Auto producers worldwide scrambled to build their version of EVs. Companies that mined lithium, a critical ingredient in the manufacture of batteries, predicted endless demand for the material. Tesla and its billionaire founder, Elan Musk, could do no wrong. Investors flocked into Tesla stock and other equities in that space. What could go wrong?

 

It turns out that despite the tax breaks and Wall Street hype, electric vehicles are just too expensive for the average American consumer. Automobiles overall have climbed in price since the pandemic supply chain disruptions. Add in that inflation and the average price of a new gas-powered car skyrocketed to $46,077 in 2023.

 

In comparison, a new EV averaged $63,878 in the U.S. The total cost of ownership during the first five years must also be added to the price tag. It costs $2,000 to install an at-home charger. Insurance also costs more for EVs in a world where auto insurance continues to rise dramatically.

 

But price isn't the only pitfall. Consumers continue to have concerns over the EV's battery range. Compared to fossil fuel autos, the EV's range is typically less. And once the battery charge is depleted, it takes longer to recharge a battery than it does to fill up a gas tank. The availability and dependability of charging stations are also an issue. Nearly 21 percent of consumers have reported that they have shown up at a charging station only to find it broken, according to a J.D. Power survey.

 

For many consumers, an EV needs to fit their circumstances. Demand for electric vehicles is concentrated in just a few states. Last year, the best markets for EVs were West Coast cities and metropolitan areas. City living, where typical driving trips are shorter, and chargers are readily available makes more sense than a rural environment where drivers encounter long drives, scarce charging stations, rough terrain, and cold weather. 

 

But even in some metropolitan areas, such as Chicago, sub-zero temperatures can decimate battery life. Media coverage of stranded Tesla's in Windy City parking lots has not encouraged electric vehicles and fence-sitters. Reports that charging stations were also not working and those that took much longer than usual to charge didn't help either. 

 

In the used-car market, EV prices have seen big price drops of as much as 30 percent. Last month, rental firm, Hertz Global Holdings announced they are selling 20,000 electric vehicles from its U.S. fleet. That is just two years after inking a deal with Tesla to offer vehicles for rent. They are reversing their plans to convert 25 percent of their fleet to electric vehicles by the end of this year citing higher expenses related to collusion and damage for EVs.

 

As more and more competitors come to market, competition has heated up. A pricing war of sorts has started. Tesla models were on a pricing roller-coaster ride for most of last year as GM and Ford made a big push into the market. Ford's new vehicle, the F-150 Lightening Pro, for example, was sold out early last year. But by the last three months of 2023, the pace of sales slowed.

 

The Pro was marketed as a rugged entry-level electric truck but when cooler weather hit, so did the buyer's anxiety over range. The expected range dropped significantly in cold climes and so did sales. This year both Ford and General Motors have announced they are curtailing electric vehicle investments. Ford has just announced it will cut its plans for production of the pickup, while GM is delaying some new EV model introductions. It is also switching gears to produce more hybrids instead. 

 

Hybrids seem to have benefited from the slowdown in sales of EVs. Hybrid sales jumped 65 percent versus 46 percent for EVs last year. Ford, Kia and Toyota are offering more hybrid new-car options, while in the used car market the gas-electric versions of BMW, Toyota, and Hyundai are selling well.

 

It appears that while consumers have embraced the concept of electric-powered autos, they are not quite ready to bet the farm on them. Given the price differentials, the hybrid offers the best of both worlds. For now, it seems that is where the consumer is most comfortable. I believe that could change and will when buyers see further price declines in the future. That still does not answer the need for more and better charging stations or improved technology in the battery space. I am sure that day is coming but just not now.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

It was one of those weeks. A gauntlet of data had investors working overtime to figure out where stocks and the economy were going. At the same time, the Fed told investors that a March rate cut was off the table. And then the job data was announced.

 

The non-farm payroll report for January came in at almost double market expectations. Economists were expecting 185,000 gains, but the U.S. economy created 353,999 jobs. That was a blowout number that had traders torn between selling the market (because of the inflation implications) or buying it due to what it might say about future growth.

 

Strength in the job market and wages would mean the Fed will delay cutting interest rates while further growth in the economy could be good for future earnings. The Wednesday FOMC meeting illustrated that dilemma and what the Fed planned to do about it. In one word — nothing — no rate hikes, and no rate cuts either. The outcome was a disappointment.

 

I thought Fed Chairman Jerome Powell did a good job explaining the present state of the economy and the reasons the Federal Reserve wants to wait a little longer to ease monetary policy. He expects the economy to continue to grow and at the same time the progress toward reducing inflation will continue. The Fed has been watching the labor market for signs of weakness but slowing wage growth is more important than the number of unemployed workers. Given the huge gain last month in the payroll data, his decision to wait for the data to confirm the Fed's next move seems correct to me.

 

I had warned readers that those bulls who were expecting a March interest rate cut by the Federal Reserve Bank were roaring up the wrong tree. And yet, going into the meeting, almost half of the market was betting on a cut. The news triggered a wave of selling that sent all three main averages down by more than a percent. Since I was not on the side of any Fed cut until May or even June, the sell-off felt overdone in my opinion. We regained much of those losses by Friday.

 

Beyond the Fed, the most important event was the fourth quarter earnings reports of five of the Mag 7. By Friday's close, the scorecard stood at three wins and two whiffs. Microsoft had decent earnings, but the stock sold off anyway at first, while Google disappointed investors. Meta and Amazon scored, and Apple whiffed.

 

Last week, I warned readers that all these stocks were priced for perfection and only stellar earnings and guidance would be able to justify further gains. Three out of five did just that and the markets reacted by hitting new highs.

 

There was good news on the U.S. Treasury financing front as well. The government announced it will need to raise less money via Treasury auctions this quarter. The mix between short-term notes and bills and longer-term bonds is tilting a little more toward the long end. That should keep the yield on U.S. Ten-year bonds supported. 

 

I expect stocks will continue higher, but the journey will be marred with sharp pullbacks. My target is still 5,000 -plus on the S&P 500 Index. Stepping back, however, I see these gains as part of an interim topping process that will end at some point this month or next in a stiff pullback.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

The economic condition of the country has convinced a minority of the population that the only person who can save the country from economic ruin is Donald Trump. The growing budget deficit and persistent inflation are two areas of growing concern for that bloc of voters.

 

However, more and more Americans are paying attention to those areas as we head into 2024. Last week, I pointed out some areas of economic contention between Trumpers and those against him such as illegal immigration. Inflation is another major gripe for Trumpers. That seems to fly in the face of economic facts.

 

The inflation rate has dropped in half over the last year, according to government statistics, but most voters ignore that data. Their main inflation gauge is how much it costs to feed the family and the price of gas at the pumps. Unfortunately for them, inflation continues to thrive at the check-out counters in the supermarket and gas stations. As we know, inflation hurts those within the lower-income groups, many of whom are Trumpers, far more than it does higher-income earners. 

 

The Federal budget deficit is also a major concern. Trumpers and many hard-right congress members are demanding a 30 percent decline in spending. Notice too that continued support for Ukraine and the Israel wars has also fallen by the wayside. For 40-plus years we have been hearing how important it was to finance unending conflicts around the world in the name of Democracy. Many of those Americans who fought and bled in those wars have had enough. To them, the questions continue to be "What about me and mine." Trump, despite his background, answers that question in ways that many can identify with and support. 

 

Of course, the spending cuts they are demanding are in areas that reflect Republican arguments — some traditional, like reducing the size of government, cutting waste, etc., and others directed at the counterculture. However, with the size of the federal debt continuing to climb, many Americans are also beginning to worry that spending should be reduced as well.

 

The overwhelming support for fossil fuels in the face of the obvious impacts of climate change is another area that stumps Trumper critics. It shouldn't. To me, it is all about jobs. About 8.1 million people are employed directly in the energy industry. Countless more receive ancillary benefits from the fossil fuel sector.

 

The top five energy-producing states are Texas, Wyoming, Pennsylvania, Louisiana, and West Virginia.  Any guess who most of those states support? No matter the impact of drought, floods, hurricanes, tornados, etc., for workers in fossil fuels, there is no contest. Losing one's job will take precedence over climate change.

 

Many are so fearful of losing their livelihood that climate change itself becomes deniable. Any threat to their livelihood will be voted down again and again no matter how many initiatives are tabled, or disasters occur. And yet none of us have come up with a viable plan to transition workers into good-paying alternative jobs in different industries. Sure, there are programs available that can retrain and transition workers, but this takes time. Who feeds the family in the meantime?

 

Do these differences make Trump voters bad people? No, it doesn't. The simple fact is that their career paths and life experiences in America have been radically different from your own. There are some areas that both sides can agree on like our debt load and inflation.

 

But face it: forty years or more of widening inequality in America have left a large segment of the population on the sidelines. They have not been able to share or experience the benefits of democracy, and certainly not capitalism.

 

It is not lost on these voters that President Biden was elected to the U.S. Senate in 1972. He, and many like him, governed through countless wars, the exportation of U.S. jobs to Asia, the creation of the Rust Belt, and the death of manufacturing. To this segment of the population, he is part of the problem and has little creditability no matter what he says or does.

 

Biden, on his part, is doing a lot on the economic front. He has staked his re-election bid on "Bidenomics." His administration is spending billions of dollars in public investments while focusing on assisting middle-income workers, rejuvenating the rustbelt, and hiking investments in manufacturing capacity. Those efforts are being ignored, or worse, ridiculed by those against him. Some may forgive him and politicians like him, but none will forget.

 

Some say that over time our democracy swings like a pendulum from right to left and back again. Sometimes, it swings too far (think the 1930s, and again in the 1960s). Over the last four decades, the pendulum has swung to one of those extremes again creating excesses like billionaires in this country whose wealth rivals several countries' GDP. I expect the swing to the right, and towards populism, is just beginning. How volatile it becomes will be up to all of us and how we handle differences. Economics is a good place to start. 

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.