14 jan 24

America’s EV sales slump has lessons for whole world

America’s EV revolution is failing. The reason? The illusion, sponsored by both government and industry, that EVs can simply replace combustion-engine cars, while they’re in fact two very different vehicle types. What is needed, is a whole new approach to mobility. And that’s a lesson not just for the U.S., but for the rest of the world as well. 

At first glance, electrification is doing well in the U.S. For starters, EV prices are falling: last September, the average EV cost just over $50,000, down from $65,000 a year previously. That helped buoy sales. More than 300,000 EVs got sold in the third quarter of 2023, a first. EV market share, long stuck at around 1%, has shot up to around 9%. And demand is still growing. 

Slower pace

The problem is, that demand is growing at a much slower pace than automakers had anticipated. Across America, car dealer lots are overstocked with EV models that won’t sell. As a result, manufacturers including Ford and GM have announced they’re scaling back or postponing EV production. Even Tesla is delaying plans for a factory in Mexico.

This is symptomatic for a market that can’t move beyond the early adopter stage. Those early adopters of EVs generally are highly motivated to try electric cars, and have the budget to match. However, about 10 years after the first EVs came on the market, this early adopter segment is almost fully saturated.

For EV sales in the U.S. to continue growing exponentially, mainstream buyers must get as excited about electrification as those early adopters. But at the moment, they lack the enthusiasm and – more crucially – the budget. Recent polling shows that EV buyers in the U.S. have a median household income of just over $185,000 – almost triple the overall median household income in the U.S., which is around $67,500.  

Price parity

While EVs are close to price parity with ICE vehicles in the luxury vehicle segment, EVs in the middle-class segment are still $16,000 mor expensive than their ICE counterparts – and that is after the aforementioned drop in average EV price. 

Add to that the stubborn lack of sufficient public charging infrastructure across much of the country, and you have two important elements explaining why EVs are failing to go “mainstream” in the U.S. 

There is however another element – and this is the big one, the elephant in the room, argues Business Insider: “America’s EV plan was flawed from the start. (We) focused on EVs as a one-to-one replacement for gas guzzlers.” A more realistic approach would consider EVs as just one part of a revamped approach to transportation, writes Paris Marx. Failing to do that, means the U.S. is likely to miss its emissions targets.

Global pioneer

And not just the U.S. Even Norway, the global pioneer in the electrification of mobility, has built its electrification strategy on the same false premise, and is also on course to miss its emissions targets. 

In 2023, just over 82% of all new cars registered in Norway were BEVs, with another 8% being PHEVs. Ergo, petrol and diesel cars represented less than 10% of the total of 127,000 last year’s new car registrations in Norway. 

However, the EV share in new vehicle registrations says little about the speed at which Norway’s overall vehicle park is electrifying. According to the latest available figures, Norway had just under 600,000 EVs at the end of 2022 out of just over 2.9 million private cars, which works out to around 21% EVs of the total.

As in the U.S., Norwegian EV buyers until now have mainly come from the higher income ranges, with EVs being used as second cars. Next up is the larger, but harder to convince mainstream of the market. Not only does that mean that even Norway still has most of the transition to EVs still ahead, it also means that at the current rate, the electrification of mobility is insufficient to help Norway meet its 2030 climate targets.

Difficult battle

This means that in most other countries – none of which are electrifying as fast as Norway – ICE vehicles will persist very long into the future, and emissions reduction will prove a very difficult battle indeed.

The answer: let’s not pretend that EVs are exactly like ICEs. Even though the average American drives less than 40 miles (64 km) per day and 93% of U.S. trips in 2022 were less than 30 miles (48 km), 73% of Americans surveyed in a poll at the end of last year still said they were concerned about the range issue with EVs. 

Barring huge leaps in battery technology or the speed of charging, those concerns will persist. Factor in the price differential with ICEs, and demand for EVs is likely to remain sluggish for the foreseeable future. 

Mobility puzzle

To reduce emissions as fast as possible and achieve a mobility paradigm that is truly sustainable, we must stop focusing on the EV as the solution to all our problems. 

Rather, we should see EVs as a part of a new mobility puzzle, where small BEVs are used for short individual trips, PHEVs can be used for longer individual travels, and scheduled, low-emission public transport options such as buses and trains are used to plan ahead for long trips. That advice is valid for the U.S., and for other regions across the world where EV introduction is struggling to move beyond the early adopter phase. 

Image: Shutterstock 2223269713

Authored by: Frank Jacobs