Despite the recent doom and gloom surrounding the electric vehicle (EV) industry, the vehicles continue to make slight gains. It's just that the growth never exploded higher as many analysts and investors had hoped or expected. However, the recent gains, while the broader industry declined, per registration data, came at a significant and unsustainable cost. Here are the details.
Why registration data
We're going to take a look at May registration data that was just released. Registration data gives us a little more insight into specific models as a proxy for sales. It's useful because many automakers don't break out monthly sales period, and if they do some don't break it down to individual models. The cost of this more specific data is that it's delayed by a few weeks -- but the insights are worthwhile.
What the data showed
New U.S. EV registrations rose nearly 10% in May, even as registrations for industry leader Tesla (NASDAQ: TSLA) fell for the fourth consecutive month, according to registration data from S&P Global Mobility. New May EV registrations totaled nearly 105,000 vehicles and accounted for 7.5% of the U.S. light vehicle market -- an increase from the 6.8% a year earlier.
The EV registration gains even outpaced the overall light vehicle market, which was down 0.7%. However, there's a dark side to the recent EV gains: promotions, discounts, and lease deals.
"In terms of pure sales performance, EVs are making progress, but underneath the sales are huge incentives," said Tom Libby, associate director of industry analysis at S&P Global Mobility, according to Autonews. "They are not sustainable, and they are causing losses on the part of automakers."
The dark side
Tesla, which was responsible for initiating price wars in the industry, has since pulled back on such incentives, and you can see the impact it's currently having. While Tesla is still the industry leader by a massive margin, its May registrations fell 15% to just over 48,000 vehicles, and its share of the EV market dropped to 46% from the prior year's 60% level.
On the flip side, Kia 's registrations rose 146%, Rivian 's (NASDAQ: RIVN) registrations grew a healthy 87%, and Nissan grew the same 87%, all compared to the prior year. But when you look at the dark side of incentives, you can see what's driving these gains and losses.
May incentives on Kia's EV6 reached nearly $17,000, per Motor Intelligence, and Kia's EV9 topped $18,000. That certainly helps explain why Kia's registrations shot up 146%. Again, on the flip side, Tesla's much more modest incentives of $5,570 in May certainly explain its recent declines.
Perhaps the one bright spot and intriguing data point was Rivian. The company offered incentives of only $4,060 on its R1T but still managed a very healthy 87% gain in overall registrations. Another example of how drastically incentives have changed over the past year can be found with General Motors ' Cadillac Lyriq. In May 2023, the Lyriq had incentives of $761 per vehicle, and in May 2024, that figure skyrocketed to an astounding $17,732 per vehicle.
What it all means
This data suggests that while we're seeing EV gains right now, automakers remain between a rock and a hard place. They can choose to offer massive incentives, cut production, let inventory stack up and age on dealership lots, or simply stay on the sidelines as Toyota has done by focusing on hybrids rather than EVs.
It's important for investors to understand that there's much more to monthly or quarterly sales gains than just that figure alone. It's critical to understand what's driving that figure, and whether it's strong consumer demand or if it's massive incentive deals that ultimately destroy profitability.
Daniel Miller has positions in General Motors. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy .
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