🤔 Car Dealers Aren't Feeling Great About EVs

Welcome back to Critical Materials, your go-to source for the biggest news driving the future of transportation.

In today’s email:

😅 Car dealer sentiment toward EVs has deteriorated.

💼 Scout Motors faces another lawsuit over its direct-to-consumer plans.

🔌 EV startup Aptera hits a “major operational milestone.”

– Today’s newsletter was written by Tim Levin.

Cox Automotive surveys the country’s car dealers each quarter across a host of categories, asking them to rate the state of things on a scale of zero to 100. According to the survey’s latest edition, sentiment around EV sales has taken a turn for the worse since federal tax credits ended late last year.

“Dealer sentiment toward electric vehicle sales fell to a record low of 33 following the expiration of key incentives, the lowest reading since the index was introduced in Q2 2021,” the company said on Tuesday.

In a lot of ways, that makes perfect sense. Tax credits of $7,500 toward a new-vehicle purchase or lease and up to $4,000 on the hood of a used EV made electric cars easier to sell. Now dealers are reporting that they don’t feel great about the current state of their EV sales, or the outlook for the technology going forward.

Dealers were asked: “Compared to last year, how would you describe your EV sales?” Franchised dealers came in at 25, compared to 51 a year ago and a peak of 61 in late 2022. The 3-month outlook for EV sales was also pessimistic, with dealers overwhelmingly expecting the market to decline in their areas.

The feeling is understandable. But it won’t do much to turn sales around.

Dealers are already proving resistant to selling EVs. Many would much rather direct you to the gas car on their lot than fuss with explaining the ins and outs of charging and range. After all, a gas car comes back for regular oil changes and other maintenance. We’ve heard lots of stories of EV buyers who got bad or incomplete information from salespeople.

If dealers feel worse about the electric future than before, does this mean they’ll only dig their heels in further?

Turns out this is a car dealer-heavy edition of Critical Materials. Scout Motors, a new electric brand under the Volkswagen Group, has roiled the automaker’s dealers with its plans to sell direct-to-consumer, like Tesla, Rivian, and Lucid do.

On Tuesday, dealers in Connecticut and New York launched a class-action lawsuit against Scout and Volkswagen, alleging that Scout’s plans violate VW’s dealership agreement. The dealers claim that Scout is an extension of Volkswagen, and so it should be required to sell through dealerships.

“In truth, Scout is simply an offshoot of Volkswagen, and Volkswagen’s decision to sell the Scout EVs is a blatant breach of its contract with the dealers,” the lawsuit states. “VW dealerships are accordingly being deprived of their right and ability to sell these cutting-edge vehicles, at significant financial cost to the dealers.”

It’s the latest in a series of lawsuits aimed at derailing Scout’s DTC ambitions. A company spokesperson said it would not comment on ongoing litigation. But Scout and its CEO, Scott Keogh, have been clear that selling directly is the way to go.

“Since its inception, Scout Motors and Volkswagen Group of America have both clearly and publicly stated that Scout Motors exists and operates independently of Volkswagen Group of America and its dealers, just as Scout Motors exists independently of all other manufacturers and their respective dealers,” the spokesperson said.

It makes sense that it would take the direct-sales approach. People generally like the upfront pricing and consistent experience of going to a Tesla or Rivian showroom.

The question is whether Scout can navigate this legal minefield. It aims to start selling its fully electric and extended-range trucks and SUVs next year.

Aptera, the California startup trying to bring a spaceship-like, solar-powered EV to market, hit what it’s calling “a major operational milestone.”

On Tuesday, the company announced that it produced the first vehicle off of its validation manufacturing line. In other words, it’s now building vehicles using repeatable processes and actual manufacturing equipment rather than by hand.

“The company’s low-volume validation assembly line represents Aptera’s transition from hand-built validation vehicles to a structured assembly line process. The line consists of 14 dedicated stations, where vehicles are assembled by a team of vehicle line technicians, enabling repeatable builds, process verification, and optimization,” Aptera said in a statement.

Will Aptera be the next Tesla or Rivian? I’m not so sure. Its three-wheeled vehicle is unusual and probably niche. But now it’s one step closer to delivering cars to customers. The company says exact delivery timing still “remains uncertain.”

Here are more stories worth reading, from InsideEVs and around the web:

Last but not least, our question of the day:

Are you jazzed about Aptera? Or skeptical?

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