The US shift towards electric cars is facing obstacles due to concerns about limited charging capacity and vehicle range, which further exacerbate affordability issues. Automakers have encountered setbacks in recent weeks, resulting in a reduction in EV sales targets and delays in capital projects as they attempt to reduce the inventory of unsold EVs at dealerships.
Neil Saunders, managing director of GlobalData, stated that the slowdown in EV sales is unique to this category of vehicles and is not directly linked to the economy. He believes that the challenges of purchasing EVs lie in their limited range and inadequate charging infrastructure.
American consumers are accustomed to undertaking lengthy road trips during holidays or to visit friends and family due to the country’s vast size and limited public transportation options. However, the current network of EV charging stations is unreliable, with many areas lacking sufficient infrastructure or having malfunctioning machines.
While a survey by the Consumer Technology Association (CTA) revealed that over three-quarters of drivers view EVs as reliable, there are still significant doubts concerning charging infrastructure (36 percent), battery range (39 percent), and vehicle affordability (38 percent). The average price of an EV sold in October was $51,762, which is $13,000 lower than the price a year ago but almost $4,000 higher than the average price of conventional vehicles.
In Europe, high gasoline prices serve as an incentive for consumers to overlook the upfront cost of EVs. However, in the United States, where gas prices are approximately half that of France or Britain, this factor holds less sway, according to Observatoire Cetelem 2024.
Tesla remains a dominant force in the EV market, accounting for over 55 percent of the 873,000 EVs sold in the first ten months of 2023, as reported by Kelley Blue Book. Elon Musk, Tesla’s Chief Executive, and Jim Farley, Ford’s Chief Executive, anticipate challenges in the evolving US market.
Farley stated that dynamic changes in the market, such as pricing, adoption rates, and regulations, have compelled them to lower the costs of their EVs. General Motors, a rival of Ford and another Detroit heavyweight, has postponed its plan to convert its Orion, Michigan plant for EV production until the end of 2025 to better align with the evolving demand for EVs while managing capital investment.
Ford and Tesla are also seeking to streamline their manufacturing processes to reduce costs. Tesla’s Chief Financial Officer, Vaibhav Taneja, emphasized the company’s priority of reducing vehicle costs, while Musk highlighted their efforts to simplify manufacturing in order to achieve unparalleled efficiency in the auto industry for the forthcoming Cybertruck.
However, Deutsche Bank analyst Emmanuel Rosner remains skeptical, stating that automakers have not yet discovered the economics required to produce affordable and easily accessible EVs. Despite this, the Biden administration has pledged its support for EVs, approving $7.5 billion in funding for EV chargers and extending tax credits of up to $7,500 for consumer purchases of EVs. The administration aims to achieve 50 percent of vehicle sales being electric by 2030.
Saunders of GlobalData believes that although the long-term trajectory for EVs appears promising, progress in this transition will be slower than anticipated due to the need for adequate infrastructure.