No, electric vehicle sales are not declining. This is what’s really going on


Tesla has lowered prices. Ford also just slashed the price of its Mustang Mach-E, plus scaled back production of its electric pickup. And General Motors is thinking about bringing back plug-in hybrids, possibly taking a step back from GM’s previous commitment to switching directly to pure electric vehicles.

And now the EPA is considering slowing requirements for automakers to sell more electric vehicles, and rolling back aggressive plans to move away from gasoline-powered cars and SUVs.

You’d be forgiven for thinking that the US electric vehicle market is collapsing. But in the final quarter of 2023, electric vehicle sales were up 40% from the same quarter a year earlier, according to Cox Automotive. In fact, sales of electric vehicles in the United States reached a record last year, surpassing 1 million for the first time.

Yet there is still a disturbing gap between expectations and reality. For example, Bloomberg New Energy Finance predicted sales of 1.7 million plug-in vehicles by 2023, but only 1.46 million were ultimately sold. (BNEF’s figures include plug-in hybrids, but the vast majority are fully electric vehicles.) The trend line isn’t rising as sharply as many predicted, so the industry is lowering future estimates.

Industry experts cite a number of reasons for this, including vehicle price, lack of charging capacity and confusing tax credit rules.

Most electric vehicles currently on sale in America are at the more expensive end of the car market.

“Between $50,000 and $60,000, we’re now getting Kia and Cadillac,” said Tyson Jominy, an industry analyst at JD Power, referring to the Kia EV9 and Cadillac Lyriq electric vehicles. “Those two don’t normally face each other.”

Besides being too expensive for the average buyer, choices are limited in terms of body style, says Corey Cantor, an industry analyst at Bloomberg New Energy Finance. The vast majority are relatively expensive SUVs, and there are few sedans or compact cars for customers who want something different.

The target market is also changing, because selling more EVs means reaching outside a core of knowledgeable EV enthusiasts.

“As the COVID shock subsided, we learned that if you scale EVs to 5,000, to 7,000 units per month and you become the early majority customer, they’re not willing to pay a significant premium for EVs,” said Ford CEO Jim Farley. “This is a huge moment for us.”

This is why Ford recently cut prices on the Mach-E SUV and why Farley has created a team to work on a lower-cost EV tech platform that will form the basis for future models.

Then there is the continued lack of public charges. The National Renewable Energy Laboratory, part of the U.S. Department of Energy, estimates that the U.S. will need 182,000 fast chargers for electric vehicles by 2030. According to the DOE, there are currently fewer than 40,000, with about a quarter of them in California.

Beyond the raw numbers, the EV chargers currently available tend to score low among consumers in terms of reliability, JD said. Asset surveys.

The two issues of vehicle price and public charges are related, Jominy said. People who can afford to buy luxury vehicles are also more likely to have a home in the suburbs with a garage where they can charge their car overnight. Public chargers are more important for people who cannot afford an expensive vehicle or a home with private parking.

Automakers are finally taking big steps to address that, using newly available federal funds, plus their own money, to install more chargers.

BMW, GM, Honda, Hyundai, Kia, Mercedes-Benz and Stellantis have come together to form a joint venture that plans to install approximately 30,000 chargers across the United States and Canada.

To make things easier for drivers, every major automaker in the U.S. has agreed to switch to the same charging standard used by Tesla, still the largest seller of electric vehicles. That means that in a few years, virtually all electric cars sold in America will have the same type of charging port and use the same type of charger.

There’s still a long way to go, says Carlos Tavares, CEO of Stellantis, the company that makes Jeep and Dodge vehicles. In the words of the Portuguese automotive executive, who recently spoke to journalists in New York, public EV charging has to ‘jump in your face’ before most customers will consider an electric vehicle.

“It means that when you go to the mall, when you go to the supermarket, when you go to the restaurant, when you go to the gym, when you park your car, there are charging units waiting for you,” he said. “You don’t have to look for them.”

EV chargers in the U.S. are nowhere near that level, but things will improve, Valdez Streaty said.

“I think we’re going to see exponential growth in charging over the next few years,” she said, “and hopefully with that comes reliability, because that’s the other big aspect of it.”

There are many substantial tax breaks available to offset the costs of purchasing electric vehicles, but the rules are complex. Some have restrictions on where the vehicle is built, where the battery pack and its components come from, the price of the vehicle and the buyer’s household income.

More and more models are becoming eligible as automakers expand complex application procedure. In addition, from this year onwards, customers can claim the tax benefit as a rebate at the time of purchase, instead of waiting until they file their tax returns.

Leasing also provides a way for more consumers to receive tax benefits. Because of the way tax laws are written, leased cars are exempt from most restrictions on federal tax credits, so many automakers offer the tax credit as a leasing incentive.

“We’re going to see leasing take off and that’s because of the loophole,” says Valdez Streaty, “but also because consumers aren’t sure if they want to buy electric, or are ready to buy.”

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