Despite market share and sales of new electric vehicles hitting a record in the US this year, EV growth is starting to slow and is falling short of the auto industry's lofty ambitions to move away from combustion engines .
The US has reached a crucial milestone in its electrification efforts: More than 1 million new electric vehicles have been sold here this year, according to Motorintelligence.com. The auto industry consultancy says electric vehicles represented 7.5% of total U.S. sales through November. Experts say this number must rise quickly to tackle climate change, because a large share of greenhouse gases comes from transportation.
Ford Motor Co. recently touted a 43% increase in year-over-year electric vehicle sales in a November sales release – including the top-selling electric Mustang Mach E SUV and the F-150 Lightning pickup. Hyundai's Ioniq 5 and the Kia EV6, both electric SUVs, saw year-over-year growth of around 100% each last month.
Despite these positives, this does not come close to the 90% annual growth that the EV industry experienced last summer. According to data from Cox Automotive, electric vehicles saw tremendous sales growth at the time, even with models costing more than $65,000 on average. Demand was high, inventories were low and automakers were optimistic about sales prospects.
This is largely because EVs were more attractive to buyers as gasoline prices flirted with $5 a gallon, says Kevin Roberts, director of Industry Analytics on the CarGurus website.
Now, gasoline prices nationwide have dropped to about $3 a gallon, and the average transaction price for an electric car, without any incentives, has dropped to just under $52,000. Many tech-savvy early adopters have already purchased electric cars, and the market has shifted to more price-sensitive mainstream buyers, many of whom don't want to pay more for an electric car than they would for a gasoline or hybrid car, Roberts said.
A number of other factors are weakening today's positive momentum. Until recently, there were few EV models available to choose from. Location, cost and ease of charging these cars also remain a concern, as does vehicle range.
While there is interest in electric vehicles, Richard Bazzy, owner of three Ford dealerships in suburban Pittsburgh, said many customers are telling his sales staff that given the price, they aren't ready to make the switch to battery power, even with federal tax benefits. . Customers are also concerned that the electric range is not long enough to travel where they want to go. This is especially true for people with harsh winters, where range can decrease more quickly. He also said they are concerned about not having enough charging stations.
“There's interest because it's intriguing,” Bazzy said. “But it just doesn't take away the concerns.”
As such, the sales pace slowed to 50% YoY in June 2023, and last month it fell to 35% YoY.
Some automakers are rethinking their expensive EV strategies as the year draws to a close.
Ford sold just under 36,000 Mach Es through November, up just 3.5% from the same period last year. The company's stock of Mach Es has been growing for much of the year. At the end of last month, more than 24,000 units were at or on their way to dealers, even though production has been scaled back over the past two months. Still, sales of 20,365 Lightning pickups are up nearly 54%. “We have to match supply with demand,” said Erich Merkle, Ford's head of U.S. sales analytics. “We would do that with every product in our portfolio.”
Ford recently announced plans to delay one new EV battery factory, reduce the size of another and defer $12 billion in future electric vehicle spending. GM has also postponed the redesign of an EV factory, and Volkswagen has postponed plans in Europe.
“Every automaker has been so aggressive with their plans,” said Jessica Caldwell, Edmunds' head of insights. “We see these being dialed back to better reflect where the consumer is now.”
General Motors CEO Mary Barra remains committed to the company's goals as long as consumer interest remains.
“We still have a plan in place that will make us all light vehicle EVs by 2035,” Barra said at an Automotive Press Association event on Dec. 4. “We will adapt based on where the customer is and where the demand is. “That won't be the case. If we build it, they will come. We are customer led.”
Many car dealers from these companies are now sounding the alarm about what they see as declining interest in electric cars.
Last week, several thousand dealers from across the country wrote in a public letter to President Joe Biden expressing concerns about the shift to electric vehicles, calling electrification mandates “unrealistic based on current and projected customer demand.” Electric vehicles are already piling up on our sites.”
The Biden administration set a goal in August 2021 for half of all new vehicle sales in the country to be electric by 2030, as part of its efforts to reduce greenhouse gas emissions, much of which come from is of carbon dioxide emissions in the transport sector, as a result of the combustion of fossil fuels such as oil. Transport is a major contributor to greenhouse gas emissions, especially passenger transport.
“The short answer is yes, people are resisting the move to electric vehicles,” Bazzy said. The environmental group Sierra Club and others have said many dealers aren't making an effort to sell them.
Key statistics regarding how long it takes for a vehicle to be sold once it reaches a dealer, also known as days to service, and how much inventory of certain types of vehicles is available at dealers, are used to determine current U.S. EV demand .
While internal combustion engine cars and hybrid electric vehicles had 40 and 17 days left respectively in October, the figure for electric vehicles was 57, according to data from auto retailer Edmunds. A year ago, electric vehicles took 39 days to convert, while hybrid electric vehicles took 12 days and combustion engine cars 26 days. This indicates that on average it takes longer for electric vehicles to be sold.
Automakers have increased their incentives for electric vehicles in an effort to drive down the cost of these vehicles. As of October, electric cars still averaged almost $4,000 more than gasoline cars.
According to Cox, incentives in September amounted to 9.8% of the average transaction price of electric vehicles. Before the pandemic, these types of incentives were common for the industry. During the peak of COVID, incentives hit record lows as supply dwindled. Now incentives are recovering somewhat, but the industry average was only 4.9% this fall, indicating the extent of current EV discounts.
But many EV proponents believe that the current roadblocks are temporary and that the bigger challenges are being addressed with a variety of solutions.
“The rhetoric is that there are challenges in the marketplace,” said Ben Prochazka, executive director of the Electrification Coalition. “The reality is that we continue to see strong sales and strong growth.
“There are still things we need to do that need to happen faster,” he added. “So I don't know if I would call it a pullback. There are many opportunities to continue to do more to increase consumer interest and confidence in this shift.”
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Alexa St. John is an Associated Press climate solutions reporter. Follow her on X, formerly Twitter, @alexa_stjohn. Reach her at ast.john@ap.org.
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