Electric Vehicle Revolution Stalled: Transition to EVs Slowed Down
The progress of the United States’ shift towards electric vehicles has encountered a setback due to worries surrounding the limited range of these vehicles and the insufficient availability of charging infrastructure, exacerbating the existing affordability challenges.
In recent weeks, automakers have pushed back sales targets for electric vehicles and delayed capital projects in an effort to reduce the inventory of unsold electric cars at dealerships.
“The slowdown in electric car sales is much more pronounced than in other vehicle categories and is not related to the economy,” said Neil Saunders, CEO of GlobalData.
“There is a problem with the electric car,” he said. “It’s a much more difficult and complex acquisition because of the range of vehicles and the charging infrastructure.”
American consumers are used to frequent long trips on vacation or visiting friends and relatives due to the country’s large size and limited public transportation options.
But for now, the network of electric vehicle charging stations is still shy, with many areas either lacking infrastructure or equipped with unreliable machines.
Selection, price issues
More than three-quarters of drivers consider electric cars reliable, according to a survey by the Consumer Technology Association (CTA), which organizes the annual Consumer Electronics Show in Las Vegas.
But drivers surrounding cars also question inadequate charging infrastructure (36 percent), battery range (39 percent) and vehicle affordability (38 percent).
The average electric car sold for $51,762 in October, down about $13,000 from a year ago, but nearly $4,000 higher than the average price for all cars.
In Europe, the increased price of gasoline adds an incentive for consumers to ignore the high upfront prices of a vehicle.
But that is less of a factor in the United States, where gas prices are only about half of those in France or Britain, according to Observatoire Cetelem 2024.
Industry leaders such as Tesla CEO Elon Musk have also pointed to rising borrowing costs as a drag after several rate hikes by the U.S. Federal Reserve over the past year and a half.
Tesla remains the dominant player in electric cars, accounting for more than 55 percent of the 873,000 electric cars sold in the first 10 months of 2023, according to industry researcher Kelley Blue Book.
Ford CEO Jim Farley predicted “some unevenness” in the developing US market.
“Dynamic changes in the marketplace — pricing, adoption rates, regulations — are forcing us to continue to drive down the cost of our EVs,” Farley said last month.
Cost reduction
Ford rival and fellow Detroit giant General Motors recently delayed until the end of 2025 a plan to convert its Orion, Michigan, electric car plant “to better manage capital investment while adapting to EV demand,” the company said last month.
“In addition, we have identified technical improvements that we will implement to improve the profitability of our products,” the GM said.
Ford and Tesla are also trying to simplify their manufacturing processes to limit costs.
“Reducing the cost of our vehicles is our top priority,” said Tesla CFO Vaibhav Taneja.
In the futuristic Cybertruck, which is expected to begin shipping before the end of 2023, Tesla is “going all out to simplify the vehicle” to achieve efficiency “which is unheard of in the automotive industry,” Musk said.
Ford has also promised to tweak the design and manufacturing of its vehicles to reduce complexity.
However, according to Deutsche Bank analyst Emmanuel Rosner, the results are still unproven.
“Our biggest concern is that automakers haven’t cracked the economy to make an easy and affordable electric car,” Rosner told CNBC.
Washington has mobilized for electric cars during Joe Biden’s presidency, approving $7.5 billion in funds for electric vehicle chargers and expanding tax credits of up to $7,500 on consumer car purchases.
The Biden administration wants 50 percent of vehicle sales to be electric by 2030.
“Politicians wanted it to happen overnight, but you can’t just set arbitrary targets, you have to make sure the infrastructure is there,” said GlobalData’s Saunders.
“The long-term trajectory is probably good for EVs,” but “it’s something that’s going to be much slower,” he predicted.
