The electric car bubble bursts, costing global carmakers tens of billions
The world’s largest car manufacturers bet heavily on a rapid transition to electric vehicles. Now they are rewriting their strategies at speed.
In the United States alone, the financial hit approaches 50 billion dollars, about 46 billion euros. In Europe, industrial flagships such as Volkswagen and Mercedes-Benz are grappling with cooling demand and relentless competition from China.
For much of the past decade, the industry moved under the banner of electrification. Government subsidies, tightening emissions rules and the rise of Tesla created the sense that the internal combustion engine would fade faster than anyone expected.
By 2024 and 2025, that optimism gave way to a sobering reality. Consumer interest softened. Charging infrastructure lagged behind projections. Early enthusiasm turned into practical concerns about range, resale value and long term ownership costs.
United States, billions written off
According to recent industry figures, American manufacturers led by Ford and General Motors adjusted investments and asset valuations by roughly 50 to 55 billion dollars, around 46 to 51 billion euros.
These are not abstract accounting tweaks. They reflect strategic miscalculations.
Ford admitted that its dedicated EV division, Model e, loses tens of thousands of dollars on every electric vehicle it sells. The company scrapped plans for large electric SUVs and redirected focus towards hybrid technology.
Stellantis, parent to brands such as Jeep, Ram and Chrysler, absorbed one of the heaviest blows. It wrote down more than 26 billion dollars, about 24 billion euros, in EV related projects and assets.
Several battery plants under development were paused. Model launches slipped by years. The electric gold rush suddenly looked expensive.
Europe, a harsher awakening
European carmakers face a double challenge. Weak demand mirrors the US slowdown, but an additional existential threat looms in the form of cheaper Chinese electric cars.
Volkswagen even considered closing factories in Germany for the first time in its history. Demand for the ID series fell short of expectations while fixed costs remained stubbornly high. At the start of 2025, Volkswagen, Mercedes-Benz and BMW reported profit declines of around 46 per cent, as the transition proved slower and costlier than planned.
Strategic retreat followed. Mercedes-Benz, which previously pledged to go all electric by 2030 where market conditions allowed, now confirmed it will continue developing combustion engines and hybrids well into the next decade. Volvo Cars also abandoned its ambition to sell only fully electric cars by 2030.
Government policy played a part. When Germany ended EV purchase subsidies at the close of 2023, sales fell sharply, in some months by as much as 37 per cent. The figures suggested that much of the market relied on financial incentives rather than organic consumer demand.
Why the electric surge stalled
Analysts point to three main causes.
First, price. Electric cars remain too expensive for many mainstream buyers. Early adopters have already switched. The broader market hesitates to pay a premium of 10,000 to 15,000 euros for a greener badge.
Second, residual values. Used EV prices have dropped faster than those of petrol models. Leasing companies and fleet operators recoil from the risk of accelerated depreciation.
Third, infrastructure. Charging networks are expanding, yet fast charging remains inconsistent. For drivers without home charging, particularly those in apartment blocks, range anxiety remains a practical obstacle.
The next phase, realism over ideology
Electric mobility is not dead. Far from it. What is fading is the all or nothing narrative.
Over the next five years, the likely winners will be manufacturers offering flexible solutions, particularly plug in hybrids. They provide electric driving in urban settings while eliminating the fear of running out of charge on long journeys.
Meanwhile, Western carmakers must find a way to compete with Chinese giants such as BYD, which can produce electric vehicles at dramatically lower cost. Without structural reductions in manufacturing expenses, today’s tens of billions in losses may prove only the opening chapter of a deeper industrial reckoning.
For an industry that once believed electrification alone guaranteed salvation, the lesson is blunt. Technology changes quickly. Economics, as ever, moves at its own pace.
