A looming crisis is brewing in China, as hundreds of thousands of unsold, polluting gas-powered vehicles may be rendered unsellable due to incoming emissions rules. It’s another sign that the global auto industry isn’t ready for the shift to EVs and will be caught unawares if it doesn’t ramp EV production fast enough.
The new Chinese emissions rules were announced all the way back in 2016 and are set to go into effect in July. This gave automakers almost seven full years of notice to get it together and prepare to produce and sell less-polluting vehicles, more than enough time to bring a new model fully from original conception to production.
The rules don’t ban all gas cars, but they do set stricter emissions standards on several pollutants released by internal combustion vehicles. Carbon monoxide, Nitrogen oxide, particulates, and other pollutants must all be reduced by a half or a third.
Automakers seem to have planned to continue selling polluting vehicles up until the deadline, but then COVID hit. This affected the production of vehicles but also affected purchases. Auto sales dropped, and while sales have started to recover somewhat, most of that recovery has been in EV sales, while ICE sales are still depressed.
Dealership foot traffic is high, but customers simply aren’t buying. This has left dealers with a huge glut of polluting vehicles and a ticking clock that will make them unsellable in July.
China was originally somewhat slow to adopt EVs – in 2015, EV market share was less than .84%, similar to the US market share of .66% and well below California at 3.1% at the time. But in 2022, US market share had risen to only 7.2% and California to 18.7%, whereas China’s EV market share is now a whopping 30%, leapfrogging several countries in the process. So China was a little late at the start but has advanced much more quickly in recent years, catching companies by surprise.
As a result, dealers have been offering massive discounts on polluting inventory vehicles, but this hasn’t been enough. Even the government has stepped in, with provincial governments adding additional subsidies to reduce the price of locally-produced vehicles.
Rapidly dropping prices have resulted in a “wait-and-see” attitude among Chinese buyers. Given that prices are already falling, customers think that they can wait longer and that these prices will fall even further.
Given the dealers and manufacturers are confronted with a situation where their cars will soon become valueless and that there simply aren’t enough customers interested in buying the number of cars they have in inventory, any price they can get for the cars that’s greater than zero may be worthwhile come July.
But the problem most harshly affects foreign automakers in China. Chinese companies have been faster to adopt EVs than foreign ones, so automakers from Europe, Japan, and the US will be most affected by this glut of vehicles. Sales from Chinese brands are flat year-over-year, but sales from US brands are down 12%. German and Korean brands are down 22%, and Japanese and French brands are down more than 40%.
China’s car dealership associations are scrambling for a fix. The China Auto Dealers Chamber of Commerce (CADCC) asked that the emissions rules be delayed six months, until January 1, to help clear the backlog. This is not an unexpected request from a Chamber of Commerce – organizations which so often take the side of polluters over people – but the CADCC also requested that automakers stop production of new cars that don’t meet the upcoming standards immediately, rather than continuing their production plans up until July.
But that’s just China – the same will happen around the globe
China’s turnaround on EV adoption may be an exceptional case. It has gone from a relative laggard to one of the global leaders and now stands only behind Northern Europe in current EV market share. The timing of COVID, the rapid shift to EVs, and new emissions rules have created somewhat of a perfect storm in the country.
But make no mistake – similar trends will play out elsewhere in the world in the coming years, and many automakers simply are not ready.
It takes time to design, build, and distribute vehicles, as these companies know well. But the inability to project trends seven years into the future will prove to be the downfall of laggard companies that don’t take EVs seriously.
I don’t say this in an attempt to function as some sort of oracle of the automotive industry, but from simple observation of events happening now.
We’ve seen other regions shift to EVs faster than expected. Even Norway, long known to be a standout in EV adoption, has taken many by surprise. The country planned to end gas car sales in 2025, but it’s already basically there. This has resulted in some brands hastily withdrawing their gas cars from the Norwegian market – Hyundai only gave a few days of notice that they would stop selling gas cars in the country at the start of this year.
This sort of thing is possible in a country that’s part of a large economic bloc where cars can be shifted around to other nations, but when the entire bloc goes electric, what then? We get a situation like China’s, with stranded vehicles that may end up being worth nothing or close to it.
We’ve also seen some drivers, not even high-mileage ones, realize that renting, fueling, and maintaining an EV is cheaper than the continued running costs of using a paid-for gas car. When that happens, the value of the gas car is effectively zero – it’s worse to continue driving it than it is to get a whole new EV.
It doesn’t take much to see that these trends could result in a full-on “bank run” to abandon gas cars and buy EVs, depending on how unbalanced the supply-demand equation becomes.
Tesla as a case study
Tesla started selling cars in 2008, and 100% of those cars were electric. But it only really got into “mass production” in 2012-2014 with the Model S. At the time, one could look at a chart of sales trends of the Model S versus competing models like the BMW 7-series, Mercedes E- and S-class, Lexus and Audi offerings, etc., and see a strange dip in all of them which coincided with the rise of Model S sales. Tesla wasn’t creating a new market, it was eating the market that existed – and fast.
And these trends continued with other models. It was clear that EVs – as long as they were designed to take advantage of the inherent benefits of electric drive and sold with purpose rather than as compliance vehicles – were going to take market share from gas cars.
The company making these moves loudly proclaimed that in order to make EVs work, one needed to ensure that they had enough batteries to manufacture these cars, enough dealers who cared to sell and knew how to sell these cars, and a suitable charging network for owners to get around in a transparent manner. So it did those things. All around a decade ago.
This wasn’t a secret; other automakers could see it happening. I had this discussion with executives from various automakers around the mid-2010s, many of whom saw it happening but couldn’t get their organizations to act with proper urgency. Meanwhile, most of them thought that they would easily overtake the newcomer with their superior manufacturing expertise – with VW famously claiming they’d reach that point by 2018 (spoiler alert: they still haven’t).
And now, we’re still hearing CEOs say that “batteries are the constraint,” while Tesla outsells every other brand’s EVs combined, twice over, in its home country. Tesla also happens to have a battery factory that broke ground nearly ten years ago now, while some manufacturers are just starting to break ground or announce investments this year.
This is not even a case of Tesla being uniquely right in these prognostications. It is the pure EV company that started first (which is to say, the only one that started at the right time), had enough funding to get off the ground in time (a difficult task), and was confronted with a blue ocean, a market that refused to build EVs in any significant number.
Tesla thus became essentially the only game in town. People want EVs, and everyone else just isn’t bothering to make them yet. This didn’t need to be inevitable. This happened due to intransigence from the major players in the industry. And this case study shows that it was not impossible to see these signs coming, nor impossible to act on them. Other automakers just…. didn’t.
The signs were there from the start
We, the EV faithful, have been trying to shout this from the mountaintops since the beginning. In fact, Electrek exists largely because of this tweet from our publisher Seth Weintraub, ten years ago this year:
Cars will change more in the next 10 years than they have in the last 100.
Almost every car on the street right now will be valueless.
We’re a few months out from Seth’s deadline, and look at what’s happening in China. In the next three months, potentially hundreds of thousands of cars are under threat of becoming valueless because they don’t meet the emissions guidelines that were announced long ago. Buyers could buy them now for a song but still aren’t interested.
In 2018, we saw the same thought make its way into “mainstream” car media when WSJ’s Dan Neil said the same. That was five years ago now, and even then he said that he would be stupid to buy a gas car at the time, because by the time he was ready to sell that car, ICE car values would likely drop to zero.
Meanwhile, the EV deals of the past (which we catalog here on Electrek) have largely dried up (well, except for the Chevy Bolt, which is a screaming deal). Automakers don’t need to give deals on EVs – everyone wants them. They’re going to sell out regardless. Heck, you can barely even find one for MSRP these days.
This mismatch of supply and demand is because automakers have consistently underestimated EV demand for a decade now. We heard for so long that the demand wasn’t there, and all of a sudden, now we’re hearing the opposite. But if you wait to react until after the demand is too high for you to fulfill, you’ll still have years worth of prep to do before being able to meet that demand.
At this point, it could be too late already for some automakers. Even the largest on Earth, Toyota, seems likely to suffer from their obstinacy (along with other Japanese automakers and perhaps the entire country of Japan). Toyota’s new CEO, Koji Sato, has given some indications that he wants to turn things around, but it’s very late in the game already.
And going back to China, this is part of what the China Automobile Circulation Association warned about in a March 24 note. It recognized that auto manufacturers got demand drastically wrong and that those companies’ underestimation of EV popularity is what has led to this situation. It called on all levels of the auto industry – government, manufacturing, and dealerships – to shape up and embrace change in a way that these entities have not yet done.
We need to see the same in the rest of the world, lest the same fate happen elsewhere. You’ve been warned.
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Senate Republicans are threatening to hike taxes on clean energy projects and abruptly phase out credits that have supported the industry’s expansion in the latest version of President Donald Trump‘s big spending bill.
The measures, if enacted, would jeopardize hundreds of thousands of construction jobs, hurt the electric grid, and potentially raise electricity prices for consumers, trade groups warn.
The Senate GOP released a draft of the massive domestic spending bill over the weekend that imposes a new tax on renewable energy projects if they source components from foreign entities of concern, which basically means China. The bill also phases out the two most important tax credits for wind and solar power projects that enter service after 2027.
Republicans are racing to pass Trump’s domestic spending legislation by a self-imposed Friday deadline. The Senate is voting Monday on amendments to the latest version of the bill.
The tax on wind and solar projects surprised the renewable energy industry and feels punitive, said John Hensley, senior vice president for market analysis at the American Clean Power Association. It would increase the industry’s burden by an estimated $4 billion to $7 billion, he said.
“At the end of the day, it’s a new tax in a package that is designed to reduce the tax burden of companies across the American economy,” Hensley said. The tax hits any wind and solar project that enters service after 2027 and exceeds certain thresholds for how many components are sourced from China.
This combined with the abrupt elimination of the investment tax credit and electricity production tax credit after 2027 threatens to eliminate 300 gigawatts of wind and solar projects over the next 10 years, which is equivalent to about $450 billion worth of infrastructure investment, Hensley said.
“It is going to take a huge chunk of the development pipeline and either eliminate it completely or certainly push it down the road,” Hensley said. This will increase electricity prices for consumers and potentially strain the electric grid, he said.
The construction industry has warned that nearly 2 million jobs in the building trades are at risk if the energy tax credits are terminated and other measures in budget bill are implemented. Those credits have supported a boom in clean power installations and clean technology manufacturing.
“If enacted, this stands to be the biggest job-killing bill in the history of this country,” said Sean McGarvey, president of North America’s Building Trades Unions, in a statement. “Simply put, it is the equivalent of terminating more than 1,000 Keystone XL pipeline projects.”
The Senate legislation is moving toward a “worst case outcome for solar and wind,” Morgan Stanley analyst Andrew Percoco told clients in a Sunday note.
Trump’s former advisor Elon Musk slammed the Senate legislation over the weekend.
“The latest Senate draft bill will destroy millions of jobs in America and cause immense strategic harm to our country,” The Tesla CEO posted on X. “Utterly insane and destructive. It gives handouts to industries of the past while severely damaging industries of the future.”
Is Nissan raising the red flag? Nissan is cutting about 15% of its workforce and is now asking suppliers for more time to make payments.
Nissan starts job cuts, asks supplier to delay payments
As part of its recovery plan, Nissan announced in May that it plans to cut 20,000 jobs, or around 15% of its global workforce. It’s also closing several factories to free up cash and reduce costs.
Nissan said it will begin talks with employees at its Sunderland plant in the UK this week about voluntary retirement opportunities. The company is aiming to lay off around 250 workers.
The Sunderland plant is the largest employer in the city with around 6,000 workers and is critical piece to Nissan’s comeback. Nissan will build its next-gen electric vehicles at the facility, including the new LEAF, Juke, and Qashqai.
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According to several emails and company documents (via Reuters), Nissan is also working with its suppliers to for more time to make payments.
The new Nissan LEAF (Source: Nissan)
“They could choose to be paid immediately or opt for a later payment,” Nissan said. The company explained in a statement to Reuters that it had incentivized some of its suppliers in Europe and the UK to accept more flexible payment terms, at no extra cost.
The emails show that the move would free up cash for the first quarter (April to June), similar to its request before the end of the financial year.
Nissan N7 electric sedan (Source: Dongfeng Nissan)
One employee said in an email to co-workers that Nissan was asking suppliers “again” to delay payments. The emails, viewed by Reuters, were exchanged between Nissan workers in Europe and the United Kingdom.
Nissan is taking immediate action as part of its recovery plan, aiming to turn things around, the company said in a statement.
The new Nissan Micra EV (Source: Nissan)
“While we are taking these actions, we aim for sufficient liquidity to weather the costs of the turnaround actions and redeem bond maturities,” the company said.
Nissan didn’t comment on the internal discussions, but the emails did reveal it gave suppliers two options. They could either delay payments at a higher interest rate, or HSBC would make the payment, and Nissan would repay the bank with interest.
Nissan’s upcoming lineup for the US, including the new LEAF EV and “Adventure Focused” SUV (Source: Nissan)
The company had 2.2 trillion yen ($15.2 billion) in cash and equivalents at the end of March, but it has around 700 billion yen ($4.9 billion) in debt that’s due later this year.
As part of Re:Nissan, the Japanese automaker’s recovery plan, Nissan looks to cut costs by 250 billion yen. By fiscal year 2026, it plans to return to profitability.
Electrek’s Take
With an aging vehicle lineup and a wave of new low-cost rivals from China, like BYD, Nissan is quickly falling behind.
Nissan is launching several new electric and hybrid vehicles over the next few years, including the next-gen LEAF, which is expected to help boost sales.
In China, the world’s largest EV market, Nissan’s first dedicated electric sedan, the N7, is off to a hot start with over 20,000 orders in 50 days.
The N7 will play a role in Nissan’s recovery efforts as it plans to export it to overseas markets. It will be one of nine new energy vehicles, including EVs and PHEVs, that Nissan plans to launch in China.
Can Nissan turn things around? Or will it continue falling behind the pack? Let us know your thoughts in the comments below.
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Elon Musk said just a few weeks ago that betting on Tesla delivering its promised Robotaxi in June is a “money-making opportunity,” and yet, those who listened to him just lost big.
A fan of Musk lost $50,000 betting on Tesla Robotaxi.
With the rise in prediction markets, you can bet on virtually everything these days.
Sites like Polymarket have about a dozen prediction markets related to Tesla, where anyone can bet on events such as Tesla delivering its robotaxi service.
Less than two weeks ago, the market gave Tesla only a 14% chance of launching the service, and Musk called it a “money-making opportunity.”
At the time, less than $500,000 was traded on this market, but Musk made it way more popular.
Now, over $7 million has been traded on this market, and while Tesla claims to have launched its Robotaxi service on June 22nd, the market currently gives Tesla less than 1% chance today, with less than a day left in June.
Each prediction market has clear “resolution” rules and Musk evidently didn’t read them before suggesting there was money to be made betting “yes”:
This market will resolve to “Yes” if Tesla publicly launches a fully driverless taxi service by June 30, 11:59 PM ET. Otherwise, it will resolve to “No.”
Any service that allows a member of the general public to summon and ride in a Tesla vehicle operating without any human—onboard or remote—actively controlling the vehicle will count. A human may be present in the vehicle or monitoring remotely for emergency intervention, but they must not be physically positioned to take control (for example, no safety driver in the driver’s seat) and must not actively steer, brake, accelerate, or otherwise drive the car under normal operation.
A program that is restricted to Tesla employees, invite-only testers, closed-beta participants, factory self-delivery features, or the mere release of Full Self-Driving software for private owner-drivers will not qualify. Regulatory permits or approvals, press demonstrations, and prototype unveilings without live public ridership likewise will not count toward resolution.
This market’s resolution source will be a consensus of credible reporting.
There are a few things in the resolution that disqualify what Tesla launched on June 22nd. First off, there’s a human inside the vehicle ready to take control with their finger on a kill switch. We have already seen interventions from the in-car Tesla supervisor, who are still very much necessary.
Secondly, the resolution requires a launch that is not restricted to an invite-only basis, which is currently the case.
The level of remote operations could also prove challenging to confirm, and it is part of the resolution.
Electrek found someone who lost $50,000 following Musk’s “money-making opportunity”:
Someone else has lost $28,000 and is now betting another $27,000 that Tesla will achieve this by the end of July.
Currently, Polymarket‘s odds only put a 21% chance of Tesla delivering on the service based on the previously mentioned resolution before August:
With Polymarket, users are not really “betting” on an outcome, but they are trying to beat the current odds by buying shares in “yes” or “no”, which they can sell to other users before the end of the timeline.
Electrek’s Take
It’s quite amusing that Musk was so confident people would believe in his Robotaxi that he didn’t bother to investigate what other people think an actual robotaxi service would entail, like in the Polymarket resolution.
Historically speaking, you are way better off betting against whatever timeline Musk claims about self-driving. He has been consistently wrong about it for a decade now.
Polymarket even has a market about Tesla launching unsupervised self-driving in California this year. I threw some money in that one because California has much stricter regulations when it comes to self-driving, and it requires a lot of testing before being deployed, as described in the resolution.
I doubt Tesla can go through that this year, but it’s not impossible.
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