The electric vehicle (EV) maker, and the EV market in general is seeing unprecedented global success. In the United States alone, battery-powered car sales topped more than 1.2 million units last year. That number is a remarkable increase of more than five fold from only four years prior. This remarkable trend rolls on, but big challenges are looming for the electric vehicle scene in the U.S. These impediments may dampen future progress.
Yet President Donald Trump is moving to remove a number of these levers that encourage EV uptake. This includes the $7,500 tax credit mostly targeted at easing consumers into going electric, plug-in hybrid, or fuel-cell powered vehicles. This credit essentially provided consumers with up to $7,500 in price reduction for these vehicles. In his defense of the decision to end such incentives, Trump said that these incentives were “forcing” consumers into purchases of cars they otherwise wouldn’t buy.
As of August 2023, the average transaction price of electric vehicles in the U.S. was still over $57,000. This price was roughly 16% above the average of all cars and trucks. Battery-powered cars made up a record 10% of total sales in August, according to S&P Global Mobility. The U.S. number is still lagging compared to markets abroad.
Internationally, EV sales are through the roof in other parts of the world. Last year in China, fully electric cars accounted for almost half of all new car sales. That trend looks only to continue as electric vehicles are about to become the majority this year. In the UK, about 30% of last year’s new car sales were either battery electric or hybrid. At the same time, countries all over Europe were reporting that these kinds of cars accounted for around one in five sales. In countries such as Norway and Nepal, the rate at which electric vehicles are being adopted is even greater.
Between General Motors, Ford, Tesla and now other traditional automakers, we know that the last quarter of this past year set all kinds of EV records. In spite of these accomplishments, a few headwinds threaten to unravel the progress of the U.S. EV market. The anticipated end of the $7,500 tax credit raises concerns among industry experts who fear it may reverse current sales trends.
“It’s a big hit to the EV industry – there’s no tiptoeing around it,” said Katherine Yusko, an industry analyst. She acknowledged that subsidies were meant as a way to level the playing field for EVs. Without them, she argues that the U.S. will be playing a game of catchup with our competing markets.
Former President Joe Biden set ambitious targets for electric vehicle sales. He set a goal for EVs to account for half of all car sales in the U.S. by 2030. With hybrid sales now tripling and market dynamics changing, meeting this goal might be an uphill battle.
Experts point out that electric vehicles are currently trending in wealthier, developed markets. Their presence is still lacking in other markets such as Latin America and Africa. Yet, annual growth in these regions has been on the uptick. For Chinese manufacturers such as BYD, the hurdles to enter the U.S. market are daunting. As if the competition difficulties were not enough, China imposes high tariffs on cars produced in China.
We applaud the progress the Trump administration has made in enforcing market forces to lead the electric vehicle demand. Specifically, they want to cut their reliance on government incentives. “You can make them, but it’ll be by the market, judged by the market,” he stated. Done properly, this change in perspective could have a profound impact on the industry’s future direction.
Industry leaders disagree on the quantum leap, or even if there will be one – over the fate of electric vehicles in America. Jim Farley, CEO of Ford, commented on potential industry changes: “It’s going to be a vibrant industry, but it’s going to be smaller, way smaller than we thought.”
Some analysts are still optimistic about the pace of innovation and progress in the electric vehicle industry. Yet they further concede that without financial incentives to further spark consumer interest and investment, the anticipated growth trajectory could decelerate dramatically.
Saying we’re behind is predicated on the idea that this is the only solution and certainly the best one, pointed out Ms. Brinley, a leading expert from the International Council on Clean Transportation on efforts to improve U.S. competitiveness in EV manufacturing. In response, I simply say that I believe it’s a bit premature to be making that judgment.