If recent headlines are to be believed, the electric vehicle (EV) market seems to be declining. But while catchy headlines may lure readers in, they’re not accurate. Here’s just a smattering of the latest statistics:
- According to EPRI, both battery electric vehicle (BEV) and plug-in hybrid (PHEV) sales have risen to 9% of the U.S. new car market, the highest ever.
- EV sales year-to-date are up 61% against 2022 and third-quarter sales are 49.8% higher than the same 2022 period.
- 4.2+ million EVs are now on the road in the U.S., with EV sales on track to exceed 1M this year.
- The Tesla Model Y crossover is the best-selling vehicle in the world for 2023.
- Sales numbers show U.S. demand for EVs remains strong. Tesla Model Y is up 95.2%; the Model 3 is up 19.2%; the Chevrolet Bolt EUV is up 136.1%; the Bolt EV is up 269.5%; Hyundai’s Ioniq 5 is up 25.1%; and BMW’s i4 is up 415.2%.
- California just released its EV sales numbers through the end of September 2023, making up 25.8% of the market.
So, what’s really going on? Several different factors are at play in the headlines.
Use of Capital Matters
First, some automakers have postponed a portion of EV investment and stepped back from previous sales commitments. Higher interest rates may be to blame, making it more expensive for large companies to fund ongoing operations and needed investment. Legacy OEMs may need to subsidize EV development and early sales using the profits from internal combustion SUVs and pickups, but continue to meet expectations for quarterly earnings.
However, while Ford may delay its 600,000 EV production goal from 2023 to 2024 and GM may delay its 400,000 EV North American production goal, other EV manufacturers aren’t waiting. Hyundai sped up construction of a large EV factory near Savannah, Georgia, and Volvo and Polestar announced plans to begin building EVs in North America next year.
While competition is increasing from legacy OEMs, it’s also coming from new automobile companies that may not have the same capital constraints.
Pricier EVs Come First
Second, some of these adjustments reflect other considerations within the automotive industry. Globally, the industry is going through a major transition to electrification. Moving to battery-electric vehicles controlled by entirely new software requires not only the infusion of new capital but a shift in planning.
Historically, major technology innovations in automobiles have arrived at the high end, either in luxury or performance vehicles—from electric self-starters in 1912 to automatic transmissions, disc brakes, turbochargers, anti-lock brakes, and much more. To launch EV technology, it’s understandable that carmakers would first design and build high-end EVs, then move down the scale to launch more mass-market EVs. While Tesla has done many things unconventionally, it followed that model.
Car Shoppers Aren’t Deterred
Finally, is consumer demand for EVs actually falling? Through the end of the third quarter 2023, that is not reflected in the share of new EV sales, which continues a steady upward trajectory. If legacy car manufacturers can’t offer moderately-priced EVs, other automakers likely will. In particular, Hyundai and Kia offer small EV SUVs starting in the mid-$30,000 range.
And despite forecasted sales of one million or more EVs this year, the sales process at car dealers is more complex for EVs compared to gasoline or diesel vehicles.
As far as the demand for EVs go, then, it’s like an ice cream shop only offering five-scoop sundaes, but not chocolate, vanilla, and strawberry on their own. So, when their line of buyers for expensive ice-cream sundaes shortens, the ice cream shop claims “no one wants ice cream”—or they can shift to offering a different product.
Because if they don’t, the ice-cream shop down the street will.