Big Auto is going all-in on EVs, but is their big bet on the electric vehicle revolution foolish given America’s reluctance to embrace it with the same gusto? For as much as EVs (read: Tesla) tends to dominate media headlines, the adoption rate of EVs in America has been painfully slow. For every “150% increase” in annual EV sales—or whatever the smoke and mirrors figure is these days, there are numbers that show the real story: EVs make up 1.9% of all retail autos, according to Edmunds.
And their estimated EV sales figure for 2021 could be dressed up in terms of 100%+ growth, or we could get real—EVs will make up a paltry 2.5% of all retail sales in America.
The growth numbers look great. But 100% growth of a tiny piece of the market is still… tiny. And it shows that Americans aren’t buying into the EV revolution just yet. Meanwhile, Big Auto is focusing all its efforts on electrifying their fleets. Are they decades too early?
Growth vs. Demand
Yes, the percent growth for EVs is none too shabby. But the Department of Energy estimated that EVs made up 2.1% of all new light-duty vehicle sales in the United States in 2019. That’s up from 0.7% in 2015. While that’s impressive growth, in terms of actual market share, EVs are still getting less than 3% of the automobile pie.
And according to the Edison Electric Institute, EVs are projected to make up 7% of all vehicles on the road by 2030—this equates to roughly 18.7 million vehicles. But alas, those are just predictions. The slow adoption we’ve seen to date should be triggering alarm bells for Big Auto, who is sinking money hand over fist into an EV future.
The good news for Big Auto is that there are more EV-friendly forecasts out there that suggest that 57% of all new vehicle sales will be EVs by 2040.
Related: Oxford Institute: Don't Expect A Supercycle In Oil
Some analysts have pointed to more favorable studies showing that “early adopters” tend to think fairly highly of EVs and are on board for buying another one when the time comes.
According to J.D. Power U.S. Vehicle Experience Ownership Study (EVX) released in January, 82% of those early adopters who already own electric vehicles say they “definitely will” consider purchasing another EV in the future.
While this is more positive than those who have not yet tried an EV, it still shows a rather unenthusiastic response. The fact that 18% of EV adopters won’t even consider a second EV purchase is a fairly bleak view of how EVs are perceived.
Studies—supported by sales figures—show that Americans just aren’t ready to embrace the monumental shift in the motoring industry. And even the cultish following of Tesla that has catapulted the EV-maker’s stock over the last two years to unreasonable levels cannot overcome sentiment toward actually driving one. A few of the biggest barriers are:
- Cost to Charge: Public charging infrastructure isn’t everywhere. This leaves EV owners to charge their own EV at home, in their garage. Unfortunately for EV owners, charging an EV sucks up 100 kW of energy—more than triple the daily energy consumption of an average American household.
- Range Anxiety: Despite the fact that Americans drive about 30 miles per day, drivers are still concerned with range, with J.D. Power claiming that when it comes to picking out an EV, range is the top deciding factor.
- Cost: Cost continues to be the biggest barrier to EV adoption. An Ipsos study in early 2020 showed that consumers are willing to pay only 10% more for an EV over an ICE vehicle. But EVs are often significantly more expensive, because of the high cost of EV batteries. Driving the high cost of EV batteries are the metals used to make it. The price of battery metals have recently spiked, sending battery costs through the roof. Big Auto will have to address this issue if they are to overcome America’s EV-buying reluctance.
- Bitterness: Big Auto is somewhat stuck, because EVs have become politically polarizing, and subsidies and incentives are widening the gap. ICE vehicle owners harbor some bitterness because EV owners don’t pay the same taxes on the vehicle that fund roads—meanwhile they are benefiting from those roads. ICE vehicle owners view themselves as being forced to subsidize the EV revolution. Then there is the ‘ICE shaming’. Instead of trying to woo ICE owners to choose electric by highlighting the pros, there is a campaign to shame the gas-guzzling crowd. FOr now, this strategy seems to be causing ICE owners to dig in, not convert.
Big Auto is working with a different set of goals than climate activists and politicians who are trying to spur on the EV revolution. Big Auto is trying to seize what they anticipate will be a healthy demand for EVs in the years to come, and each automaker is hoping to get their foot in the door first. Or rather—second—since Tesla clearly has the pole position. Climate activists, on the other hand, are trying to save the world. This dual strategy isn’t necessarily cohesive.
Related: The World Still Needs Hundreds Of Billions Of Barrels Of Oil
Climate activists and those who are hoping the EV revolution will conserve energy and limit climate change are failing to focus on the things that really would get Americans on board: range, cost to charge, the cost to purchase, and car quality.
Meanwhile, Big Auto doesn’t have much skin in the climate change game. It’s focusing efforts on having a better EV than their rivals. GM, for one, has tried to “Americanize” EVs, starting with the Super Bowl. They’re not moralizing; they’re capitalizing. But in doing so, they’re assuming Americans will, in the end, choose EVs over ICE.
But Big Auto must rely on the right U.S. policies for laying the EV foundation, and they are sensing that this is the administration to do it. Incentives or subsidies, charging infrastructure, ensuring the grid can handle all the charging, and favorable battery metals policies must be in place for the revolution to truly kick in. Once Big Auto has sunk billions into the EV revolution, we will see them fully support policy shifts in favor of EVs.
No Brand Loyalty
The good news for Big Auto, which is nipping at Tesla’s heels, is that EV connoisseurs aren’t exactly brand loyal. Tesla might be attracting a hoard of loyal investors, but actual EV drivers are more fickle.
According to the J.D. Power EVX study, range trumps brand. Another consideration is the availability of the public charging infrastructure looks. Quality and reliability also drive consumer decisions for EVs, with Tesla drivers seeming to be highly satisfied despite the perception that Tesla’s have mediocre or even poor quality.
Big Auto must time it right. Automakers such as GM that have already announced they will completely electrify are somewhat out on a limb. Being first to market comes with enormous benefits, but limbs sometimes break, and this EV revolution has many moving parts.
By Julianne Geiger for Oilprice.com
More Top Reads From Oilprice.com:
- Forget OPEC Production Cuts, It’s Exports That Matter
- World’s Largest Lithium Producer: Get Ready For A Mega-Rally
- U.S. Oil Production Is About To Climb