For driving enthusiasts, electrification is a dirty word.
But when it comes to decarbonizing the Earth’s atmosphere, being able to harness clean energy, and simplifying the automobile production process, it’s no surprise that automakers and governments around the world are eager to jumpstart the dreams of a transformation of electric vehicles.
The past year was supposed to be an important year for this transformation in the United States. But a number of factors led to a sad reality: the process of converting the nation’s vehicles to electric power was going to be much longer.
Of course, research firm Kelley Blue Book reported that Third-quarter U.S. electric vehicle sales topped 313,000, an increase of almost 50% from a year ago, with the electric vehicle market share reaching 7.9%, its highest level on record. But that growth rate is slowing and appears to be heading toward 10%, where it could continue for some time. Although places like California sees 20% adoption ratein other states the rate barely reached.
A combination of factors such as high EV prices, higher financial costs, and infrastructure issues have dimmed the outlook for America’s EV transformation, although there are still reasons for optimism in 2024 .
“A good product is not enough”
Ford (F) CEO Jim Farley, one of the biggest evangelists for electric vehicles among legacy automaker executives, warned that things need to change. “A great product is no longer enough in the electric vehicle sector. We need to be fully cost competitive,” he said. following the release of the company’s third quarter results in October.
And he wasn’t the only one warning about the high prices of electric vehicles compared to their gasoline equivalents.
“I’m concerned about the high interest rate environment we’re in,” Tesla said (TSLA) CEO Elon Musk said following the electric vehicle maker’s statement Publication of third quarter resultsadding: “I can’t stress enough how important cost is…we need to make our products more affordable so people can buy them.” »
Ford, alongside Tesla and GM (General manager), recently suspended billions in investment in electric vehicle projects until capacity is needed. Ford said in its earnings report that U.S. EV buyers were “unwilling to pay premiums for EVs over gasoline or hybrid vehicles, significantly compressing EV prices and profitability.”
Ivan Drury, Edmunds’ chief research officer, told Yahoo Finance: “In 2023, Americans grappled with high costs of living and rising interest rates, leading to a notable shift towards new, more economical vehicles… this change has negatively affected demand. for more expensive electric vehicles. With early adopters among a wealthier population sufficiently catered for, electric vehicles now face the challenge of attracting the mass market.
With this higher-income buyer already satisfied, Drury said the broader mass market has practical demands such as more charging stations, vehicle range and lower prices.
When asked what concerns them most about purchasing an electric vehicle, 77% of respondents in a Yahoo Finance/Ipsos survey conducted in the fall were concerned about the lack of charging stations on the road or at home, 73% were concerned about range and 70% highlighted the overall cost.
Bill Newman, an analyst at SAP Mobility, echoed these concerns. “I think what you’re going to find is that to get to that next level, (buyers) are going to look at things like battery density to eliminate range anxiety, and try to find additional electric vehicle charging stations and networks.”
Edmunds’ Drury also believes the shortage of products, particularly cheaper electric vehicles, was a problem.
“The stagnation in electric vehicle market share during the second half of 2023 can be attributed in part to the absence of high-profile new electric vehicle launches which typically generate significant awareness and interest,” he said. he declares.
What 2024 could hold for us
Analysts see signs of hope in 2024 for electric vehicle adoption, although obstacles are also expected in the proverbial path.
“As electric vehicle sales are expected to increase in 2024, the barrier to achieving mass-market affordability poses a significant challenge to the goals of widespread electric vehicle adoption,” Edmunds’ Drury said. “Right now, the electric vehicle adoption curve is more likely to resemble a jagged lightning bolt than a smooth curve.”
One factor that could boost electric vehicle sales in 2024 is a change in how the $7,500 federal electric vehicle tax credit is administered. Currently, the tax credit is received after a buyer files their tax return the following year, but these rules are changing, enabling “point of sale” credit where a buyer can transfer the credit to the dealer immediatelylowering the price of the EV at the time of purchase.
This could be a big bargain for price-conscious buyers. But as we know, when government gives, sometimes it can take away. And this will be the case in 2024, when stricter rules for the supply of battery components come into force. Some cars like Tesla Model 3 and Ford Mustang Mach-E will temporarily lose credit as automakers adjust their supply chains for more domestic battery parts.
Still, cheaper electric vehicles are coming, and regardless of the tax credit’s status, it will help overall electric vehicle sales in the new year.
“I think you’re going to see (electric vehicles) push into that mid-range (price)… so now, as we start to move forward, keep an eye on GM’s Equinox, right? Depending on the type of luxury I want, I can get it for less than $40,000. Now you make that available,” SAP’s Newman said of GM’s upcoming entry-level electric vehicle.
And don’t forget about interest rates, Newman added — and how the Federal Reserve will handle rate cuts next year.
The effect on prices is very real and moving in the right direction for consumers. Kelley Blue Book reveals that in November, the average transaction price (ATP) for a new electric vehicle was $52,345, down from around $65,000 a year agowith Tesla’s ATPs having fallen almost 21% from a year ago.
“In recent months, price parity between electric vehicles and internal combustion engines seemed almost possible,” said Stephanie Valdez-Streaty, director of strategic planning at Cox Automotive (the parent company of Kelley Blue Book) in a November report. “This is a complex measure with many variables, but newer products and higher discounts have driven down average EV prices, even before possible tax incentives. A year ago, the EV premium exceeded 30%. Today, it’s less than 10%.