The auto industry’s gamble on electric cars has turned into a catastrophe

We are already getting close to the €100bn (£87bn) mark and the total is still rising.

Stellantis – the company that controls Fiat, Peugeot and Chrysler – announced on Friday that it was writing down €22bn on its electric vehicle unit. The bill is only the latest in a series of enormous losses suffered by the major American and European auto manufacturers who jumped on the EV bandwagon.

In reality, it turns out that electric cars are only a small part of the overall market and that, insofar as it exists, Chinese manufacturers will capture most of the sales.

The gamble on electric cars has turned into a catastrophe and it will be many years before the industry recovers.

With less than four years remaining until the original target date for banning the sale of all new petrol and diesel cars, the giants of the industry were meant to be riding a boom in sales of battery-powered vehicles by now.

Sleek new models would be rolling off the production lines, new battery plants would be creating hundreds of thousands of jobs, while the billions poured into investment would be the catalyst for reindustrialising both Europe and the United States.

“We’re going to need 70,000 skilled people just to make batteries across this country,” announced Boris Johnson, the former prime minister, back in 2021. He promised unlimited government support for British EV production.

Over in France, Emmanuel Macron, the French president, was pouring billions into making his country a force in battery and EV production.

So we are starting to see the results of all that investment, right? Sales are booming, profits are rising and new jobs are being created? Well, not exactly.

Stellantis’s €22bn write-down on Friday, combined with plans to offload a stake in a Canadian battery joint venture, sent shares down 27pc on the day. They have now more than halved over the last year, taking Stellantis’s value down to just €17bn.

Unfortunately, it is far from alone. General Motors said last month that it was taking a $7bn (£5bn) charge against earnings, almost all of which was accounted for by its EV unit.

Just before Christmas, Ford said it was taking a $19.5bn hit on its EV business, including cancelled vehicles and a battery joint venture. Volkswagen has started scaling back production of EVs amid heavy losses.

Porsche, which had said that electric vehicles would account for 80pc of profits by the end of this decade, instead announced a €3.1bn charge late last year after scaling back those targets.

Even Tesla, a company that knows more about electric cars than any of its rivals, is starting to struggle. It has scrapped the iconic Model S and Elon Musk, its chief executive, is desperately trying to convince everyone that robots are the future instead.

Antonio Filosa, the chief executive of Stellantis, conceded that the company had overestimated “the pace of the energy transition that distanced us from many car buyers’ real-world needs, means and desires”.

It is a painful admission but one that is at least honest. One point is surely clear. We are not hearing very much about how the transition to EVs would lead to an industrial renaissance any more.

There have been two major problems. First, EVs may only be a niche product.

Drivers are worried about the range, it is far from clear they are better for the environment once the impact of all the raw materials in the manufacturing process is taken into account, the charging infrastructure is not in place and we don’t generate the electricity to power them all at a price cheap enough to make EVs cost-effective.

Next, where there is a market, the new breed of Chinese brands led by BYD is walking away with it.

The traditional auto giants thought the transition was just a matter of replacing an internal combustion engine with a big battery, but it turned out that an EV was a piece of electronics with wheels attached. It has much more in common with the mobile phone market than anything the petrolheads running the industry were familiar with.

It is far easier to create a new EV company from scratch than to convert one of the traditional giants.

The result? All the auto companies are now in deep trouble.

Even worse, under the direction of Ed Miliband, the fanatical Energy Secretary, Britain is pressing on blindly with the 2030 target for phasing out sales of new petrol cars even as the rest of the world recognises that it is complete madness.

Indeed, only this week, the boss of South Korea’s Hyundai warned that sticking to the target threatened “severe disruption” in the UK auto market.

The blunt truth is this: the massive bet that the auto giants took on EVs has backfired spectacularly.

It has cost them tens of billions in capital, it has wasted five years of time and energy that could have been more profitably deployed elsewhere and – perhaps worst of all – it has allowed Chinese manufacturers that no one had ever heard of to establish new brands. It will very difficult to get rid of them now.

It is one of the worst self-inflicted calamities of recent industrial history.

To start the recovery process, the manufacturers will have to persuade governments to stop imposing ridiculous top-down targets that only distort the market. They will have to ruthlessly get rid of units that don’t make any money. They will have to wean themselves off subsidies and, most crucially, they will need to reconnect with their customers, making cars that people can afford and want to drive again.

After the madness of the last five years, it is the only way back – and it will be a long, hard and expensive road.