Why is the EV Market Stalling?

Figure 1: Electric Vehicle ChargingPhaneuf, Taryn, et al. “California Bet Big on Electric Cars. Should You?” KTLA, KTLA, 5 Sept. 2022, ktla.com/news/nexstar-media-wire/california-bet-big-on-electric-cars-should-you/.

Introduction

With the consequences of global warming becoming increasingly evident, one of the key solutions to the climate change issue has been the ongoing transition from traditional gas-powered cars to electric vehicles (EVs). However, despite the craze surrounding the novelty of EVs spearheaded by Tesla, government tax credits and incentives for purchasing EVs, and increasing supply as automobile manufacturers begin turning to EV production, the EV market is stalling and demand remains low. Why has the EV market failed to take off?

Overview of EVs and the EV Market

Vehicle electrification is not a recent phenomenon but a trend that originated in the 19th century accompanying the breakthrough of the battery and electric motor. However, the market position of EVs eroded with improvements to the internal combustion engine, the lower upfront cost of gasoline vehicles, and cheap gas prices. It wasn’t until the last two decades that the interest in EVs would be truly revived. In 2000, the Toyota Prius was released worldwide. Using a nickel metal hydride battery and capitalizing on rising gasoline prices, the Prius became the best-selling hybrid worldwide over the past decade. The second event that reshaped EVs was the 2006 announcement that Tesla Motors would start producing a luxury electric sports car. With a $465 million loan from the DOE in 2010, Tesla began manufacturing in California and became the largest EV manufacturer in the U.S.

In 2023, the EV market has now expanded as a combination of large, established automobile manufacturers with new startups entering the EV space. Consequently, the global electric vehicle market is valued at 388.1 billion USD in 2023 and is expected to reach approximately 951.9 billion by 2023. However, this market is largely dominated by China, with other countries like the U.S. falling behind and struggling to catalyze a major shift to EVs, especially at the consumer level.

Limitations to EVs

In reality, EVs in general are minimally profitable and many EV startups, which are key to driving competition in the EV space, are going bankrupt. For example, Ford stated that its EV unit will lose approximately $3 billion in 2023. Due to persisting inflation and the global supply chain crisis originating from COVID-19, companies are now being forced to find ways to save money to outlast an adversarial economy. This issue is exacerbated by the pressure mounted by Tesla for other manufacturers to cut prices in order to compete. Combined with the naturally higher output generated from the entry of new firms in the EV space, companies like Ford are struggling to find a price point that is both acceptable and competitive for consumers, and profitable.

A number of technical issues with EVs and their implementation also undermine their viability from a buyer perspective.

Because of the recent adoption of EVs, there is a general lack of a robust and convenient charging infrastructure. According to the Alternative Fuels Data Center, EV adoption is growing at a rate that is nearly double charger installation rates. While this discrepancy is being partially resolved as EV infrastructure grows as part of President Biden’s push for green energy, a survey from J.D Power found that 20% of EV users have visited a charger but did not use it for reasons including long lines and dysfunctional equipment. The most common issue consumers cite with EVs is range anxiety: the fear that EV batteries will run out of charge before reaching one’s destination.

Additionally, despite the push for lower prices and generally lower operational costs, EVs typically offer a higher upfront cost compared to internal combustion vehicles. New EVs are generally luxury model cars with an average upfront sales price of $61,000, about $12,000 more than the industry average. Compared to internal combustion vehicles, electric vehicles are usually more expensive to manufacturers due to chassis, body, and battery costs.

Works Cited

Iea. “Electric Vehicles.” IEA, www.iea.org/energy-system/transport/electric-vehicles. Accessed 19 Nov. 2023.

Klayman, Ben. “More Alarm Bells Sound on Slowing Demand for Electric Vehicles.” Reuters, Thomson Reuters, 25 Oct. 2023, www.reuters.com/business/autos-transportation/more-alarm-bells-sound-slowing-demand-electric-vehicles-2023-10-25/.

Lee, Medora. “Here’s Why People Aren’t Buying Evs in Spite of Price Cuts and Tax Breaks.” USA Today, Gannett Satellite Information Network, 15 Nov. 2023, www.usatoday.com/story/money/personalfinance/2023/11/14/ev-sales-2023-slow-inventory-pile-up/71572499007/#:~:text=EVs%20sit%20on%20the%20market,with%20government%20incentives%2C%20surveys%20say.

Morgan, Kate. “Three Big Reasons Americans Haven’t Rapidly Adopted Evs.” BBC Worklife, BBC, 10 Nov. 2023, www.bbc.com/worklife/article/20231108-three-big-reasons-americans-havent-rapidly-adopted-evs.

RobertoFerris. “Why Dealers Say EV Sales Have Slowed.” CNBC, CNBC, 1 Nov. 2023, www.cnbc.com/2023/11/01/why-dealers-say-ev-sales-have-slowed.html.