What? A complete ceasefire? Now what are we supposed to watch? Oh yeah right. Other stuff.
Sadly, for a car nut, the current auto scene is in need of a ceasefire, if you’ve looked at new car prices lately. Or, even used autos – demand is ridiculously high for even those, because new car prices are almost unattainable for many people.
The reasons for that are complex and many – supply chain issues, for example, that began during the Covid years, have never been recovered from, it seems. Prices leapt up and stayed there. But there are other factors at work, and a big one is the impact that government EV policies have had.
About five years ago, when groups like GFANZ – the Global Financial Alliance For Net Zero – roamed the earth freely and without challenge, many of the world’s western economies declared that internal combustion engine – ICE – vehicles would be banned from new car markets sometime before 2040. Canada, California, and the EU all went this route, and in the US, although not federal policy, many states follow California’s lead.
Auto manufacturers then found themselves in a bit of a pickle. It takes something like five years of planning to unveil a new model, so manufacturers have to sort of guess where consumers will be at at that time. It’s not an easy task, and it’s one reason we tend to see relative conformity of style and options and performance – no one wants to risk being a true outlier and unveiling something totally out of step with the market.
So abandoning ICE vehicles and designing nothing but EVs was a huge and uncomfortable risk for manufacturers; they would not have done so without the insistence of governments that that was where the world was heading, and that those same governments would not just force the conversion but that the rest of the world’s governments would follow suit. Therefore, the logic went, everyone will be in the same boat, and your investments will be fine, because consumers will simply be picking from a range of EVs. So go ahead and pump tens of billions into new designs and auto plants, we’ll take care of the rest, governments cooed.
Too bad someone forgot to check in with consumers.
Here’s a concrete example of how this train wreck is unfolding, with a Volvo case study. The oddball Swedish manufacturer might be a strange place to analyze the auto industry from, but in some ways easier because they are more focused than, say, a company like Ford or Volkswagen, and those companies have a lot of piles to hide corpses in. Someone like Volvo, not so much.
This Volvo tale begins in Ridgeland, South Carolina, which also might seem odd in that the American south is a weird locale for a story about a Swedish auto maker with legendary Scandinavian design skills but then remember that Volvo is actually owned by a Chinese company (Geely) so geographically and culturally this story makes no sense at all anyway. But bear with me.
In 2015, Volvo broke ground on a $1.2 billion, 2.3 million sq. ft. manufacturing facility in Ridgeland. Production began in 2018 with a conventional sedan but, with the global writing on the wall, the facility switched over to EV production in 2024 on the back of two EV models: The full size Volvo EX90 and the Polestar 3 EV (Polestar was Volvo’s performance subsidiary a la Mercedes’ AMG, or BMW’s M-series, but they changed course and made Polestar their EV posterchild – an all-EV brand, sullied not at all by the odour of gasoline, ever). The Polestar 3 is the brand’s first real SUV, so aimed directly at a bigger target market than the 1 and 2.
The Ridgeland facility has the capacity to build 150,000 autos per year, or 12,500 per month. I’m sure it takes a lot of skill and knowledge to run such a facility, and while I can’t claim to have run anything more complex than a barbecue, I think we can safely make a few assumptions. A primary one would be that such a facility has high fixed costs, plus a desired return on that capital investment, and so a high capacity utilization/throughput number is a very good idea. An article about European auto plant capacity suggests that 80-85 percent is necessary for automakers to run profitably. In the case of the Ridgeland facility, that would be 10,000-10,600 autos per month.
Turning to Volvo’s sales data, there is a very annoying peculiarity happening these days whereby auto manufacturers choose not to break out sales numbers of individual models. Sometimes they do, and sometimes they don’t, and long-time auto junkies have figured out the pattern, pretty much: If sales are great, that fact will be screamed in your ear. If they’re the opposite…hey, look over there! Squirrel!
So, it’s fairly easy to ascertain why Polestar keeps quiet about certain sales EV sales numbers: They are brutal.
With a bit effort, the challenge facing Ridgeback, North Carolina becomes obvious. We can back in to Polestar 3 numbers with a reasonable degree of precision by patchwork analysis of cryptic sales reports: In Q1 2025, Polestar loudly announced that EV sales had grown by 76 percent compared to the same quarter last year. Yippee! Oh wait: in that quarter, the entire company sold 12,304 EVs, the total of all 3 of their models. That is 4,101 per month. But we’re interested in those produced at Ridgeland, which is only the Polestar 3, and they don’t have much to say about that specifically, so some extrapolation is required. In announcing Q4 2024 results, Polestar, in a deliberately obtuse manner, disclosed that total quarterly sales were 12,256 (virtually similar to Q1 2025) and that “Polestar 3 and Polestar 4 represent 56% of the order intake in q4 2024.” For crying out loud. Why not simply give us the numbers? Anyway, let’s say the Polestar 3 snagged ¾ of the sales of that grouping of Polestar 3 and Polestar 4 because it is a more conventional SUV, and let’s apply that same percentage to Q1 2025. We would then get 75 percent of 56 percent of 12,304, or 5,168 models for the quarter. That works out to 1,723 units per month.
To their credit, Volvo The Parent does break out it’s sales figures: Through May 2025, Volvo has sold 5,661 EX 90s, or 1,132 per month. Adding Polestar 3 and EX90 sales together, and assuming production is similar to sales, we get a total production number of about 2,855 per month.
Again, I don’t own an auto manufacturing plant, but producing 2,855 units per month out of a capacity of 12,500 doesn’t seem all that great to me – particularly if 10,000/month is a profitable number.
Volvo agrees, and in their most recent quarterly conference all suggested they might add another car to the production line “as soon as possible” and it won’t be an all-electric vehicle. The most likely new addition would be…a hybrid, which is what the majority of people really want. Sales of those are booming, which is good for both fans of electrification and for consumers, who may just be interested in the great mileage of modern hybrids, or in the green theme, or lord knows what, consumers are anything but homogeneous. Whatever the reason, consumers are veering to hybrids. In China, the world’s largest EV market, sales of hybrid EVs (largely plug-in hybrids) as a percentage of total electric sales has risen from 15 percent in 2020 to 30 percent in 2024. In the US, the Energy Information Agency notes that pure battery electric sales have flatlined while hybrid share has risen sharply.
An additional interesting data point from SP Global: In the US, shopping migration has shown that the percentage of hybrid owners shifting to EVs is falling, and actually even the percentage of EV owners switching to another EV is falling – meaning a decent percentage of EV owners are going to hybrids or even straight ICE.
None of this would be or should be surprising, at all. Had the market formed organically, certain pockets of EV penetration would have accelerated and become mainstream where they work best, and there are definitely areas where they work best. Consumers understand this. Households that can afford multiple vehicles might love an EV as an urban runabout. People in Vancouver or California might love them because the climate is friendly to EVs there. People in Winnipeg, not so much. Some delivery routes are probably perfectly suited to EVs, others not at all. Just like some plumbers and tradespeople would never dream of getting rid of their battery-driven tools and going back to cords, other sectors view it the opposite. That is how progress could have happened.
But governments decided a brute force mandate was needed, and in jurisdictions like Canada, the EU, and California they laid down the law: no more ICE sales past a certain date, with rising requirements for EV sales. The only problem: consumers think and vote differently. The forced conversion just isn’t going to happen, because it is not demand-pull, it is regulatory-push, and the regulations don’t line up with people’s realities. Even in the ultra-green EU, Forbes notes: “Forecasters still expect a healthy overall increase in the European EV market in 2025, although longer-term targets based on European Union CO2 emissions rules still look impossibly high.”)
Automakers have thusly been hung out to dry by politicians the world over, who assured auto makers that there would be no market for ICE vehicles soon. So auto makers dumped hundreds of billions into EV plants and designs that consumers don’t want, models that sell in such pathetically low numbers that there is not even a slight chance that the investment in them can ever be recovered. Beyond a few Tesla models, most fail to crack even 10,000 units per quarter. A mass market global EV like the VW ID.4 sold only 7,663 units in the US in Q1/25, or under 2,600 per month. Hyundai’s Ioniq5, of which a Hyundai dealer told me on a plane 3 years ago that was in such demand that I’d never get one for 6-8 months, now only sold 8,611 units in the first quarter of the year in the US, and I can now find a pile of them wherever I want. These volume levels hardly warrant the cost of certifying, never mind generating a profit.
So where do auto makers generate profits from? Not hard to find out; just go try to buy one and get ready to bleed. Pretty much any of them. Here’s an example of a popular small SUV. A 2026 Honda CR-V, a modest little number, has a base price of $40,110 from where I sit, today, on Honda’s website. That’s with 2WD. A Sport model with AWD starts at $46,610. Lease the mid level LX at only $146.75 per week, at an eye-watering 7.29 percent. Monthly that works out to a staggering $654 to lease a new vehicle. No wonder leasing is popular, even at those interest rates – If you want to buy it with no money down, you’ll be paying $205/week for 5 years, or $888 per month.
What would that CR-V, or any competitor, cost if Honda had not had to spend a bundle on forced EV development for a market that hardly exists? Hard to say, but those ICE profits have to pay for the EV debacle, there is no way around that. Maybe, tinfoil hat on here, that was the whole point: drive up the cost of ICE vehicles so that dazed consumers would look at the lonely EV in the corner and see that ti costs similar, and that the government will give you a fat wad of cash to drive off in it, and they simply cave. But that isn’t working so well.
And now Canada is in never-never land. The US is seeking to force California to roll back those ICE sales bans. Even the EU is recognizing they’ve gone to far too fast. And Canada? Still sticking to Mission Incomprehensible. For the time being. If they continue to do so for another few years, something will give, and I suspect it won’t be in the way of everyone buying an EV.
Explore the lighter side of energy, and think of it as you never have before in The End of Fossil Fuel Insanity – the energy story for those that don’t live in the energy world, but want to find out. And laugh. Available at Amazon.ca, Indigo.ca, or Amazon.com.
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