Market commentary by Bogdan Maioreanu, eToro analyst and markets commentator. Bogdan Maioreanu has over 20 years of experience in financial services and investments.

After Tesla shares dropped over 20% in the last month over profitability concerns, we are seeing automotive companies deciding to scale down on some investments in expanding EV production, waiting for demand to catch up.

Overall, the EU car market concluded 2023 with a solid 13.9% expansion compared to 2022, reaching a full-year volume of 10.5 million units. All EU markets grew in the past year except for Hungary (-3.4%). Double-digit gains were recorded in most markets, including three of the largest: Italy (+18.9%), Spain (+16.7%), and France (+16.1%). Romania had a solid growth of 11.8%, according to data from the European Automobile Manufacturers’ Association.

But December 2023 brought a negative surprise in the EV market. New battery-electric car sales declined for the first time since April 2020, dropping by 16.9% to 160,700 units. Despite this, the overall volume for the full year of 2023 surpassed 1.5 million units, reflecting a substantial 37% increase compared to 2022. Petrol cars have 35.3% of the market, with the battery-electric car market share reaching 14.6% in 2023, surpassing Diesel cars (13.6%).

In Romania the EV vehicle sales increased by 32.1% in 2023, and hybrids were up almost 30%. But there is one category where the EV and hybrids were almost 80% of all registrations in 2023. This category is buses. Out of the 600 registered, 474 belonged to the above green categories.

In the US, it is estimated that over 1.2 million EVs were sold in 2023. Out of these over 55% were Teslas with the next brand by market share being Ford (6.1%), followed by Hyundai (4.8%) and Rivian (4.2%).

Despite these figures the battery EV adoption is still lagging behind companies and investors expectations and companies are starting to acknowledge it. Mainstream customer adoption of EVs is happening at a slower rate than the industry expected, as majority customers are not willing to pay a significant premium for EVs.

After reporting losing $47,000 on every sale, Ford it’s deferring certain capital investments in EVs until they’re justified by demand and prospects for acceptable returns.

Toyota Chairman, Akio Toyoda is also known as a skeptic of a full EV adoption believing that only 30% of the cars will be electric, with the company continuing investing in electrification but also in hydrogen powered cars. “The enemy is CO2,” Toyoda said, proposing a “multi-pathway approach” that doesn’t rely on any one type of vehicle. “Customers, not regulations or politics” should make the decision on what path to rely on, he said, according to Fortune.

Toyota and Ford reported well this week posting positive surprises in both earnings and revenues and offering strong guidance. Investors seem to stand behind the companies decisions, Toyota Motors shares gaining over 11% and Ford shares over 7% in the past 5 days.

Despite the cooling down in the sector, the two most held stocks, at the end of last year, by the Romanian investors on the trading and investing social platform eToro are battery EV manufacturers Tesla Motors and Nio. Tesla is also the most held company at global level on the platform with Nio being the fourth, keeping their positions unchanged from Q3 of 2023, showing the investors trust in the positive evolution of the sector.