If you base your opinions on recent news, you might think that the electric vehicle industry in the US is in dire straits. The headlines say that automakers are worried about EV growth, consumer demand is falling, and President Biden’s tax cuts haven’t helped drive consumers toward EVs.
So this news may come as a surprise: EV sales increased a an impressive 50% in the third quarter compared to a year earlier. Electric vehicles are actually selling faster than any other segment of the automotive industry, and total sales are expected to surpass 1 million for the first time this year.
About 67% of US citizens are open to buying an EV, according to S&P Global Mobility. Yes, you read that right. They recognize the value of electric vehicles, both socially (they create jobs, reduce our dependence on foreign fossil fuels, and are important in fighting climate change) and personally (they require less maintenance, unlock freedom from the natural gas prices and it’s just incredibly fun to drive).
Does it look like a market in declining demand? Image Credits: DvX Ventures uses Kelley Blue Book data
Bottom line: American consumers want EVs.
The problem is that the US is already behind in the global electric vehicle race, and some argue that we should slow down even more. If we ease up on EV adoption now, it won’t mean fewer EVs. it will simply mean fewer US-made electric vehicles, which in turn will mean fewer jobs in the country. Those politicizing EVs may want to consider the economic impact of their arguments.
We’re back to the tippers: Competitive pricing, billing infrastructure, consumer choice and domestic supply chain. That’s why focusing only on consumer demand misses the most important point about the EV ecosystem: Like it or not, the US needs to adopt EVs, and we need to foster a better environment for that to happen. .
The global market has already made up its mind about EVs. The best-selling car in the world, not just the best-selling electric car, is the Tesla Model Y. In Europe, 21.6% of all new vehicle registrations in 2022 were EVs. In China, 50% of people said they are likely to buy an EV as their next vehicle. In the US, January 2023 was the first time EVs accounted for 5% of new car sales, and that number had risen to 7% by September.
The automotive industry is going through one of the biggest technical transitions in its history. Europe and China saw this before us and invested heavily in electric cars a decade ago. This is why the US is currently behind in battery technology and charging locations and is dependent on Korean and Chinese battery manufacturers.
As the largest manufacturing sector in the US, the automotive industry is an approximately $2 trillion annual market and is responsible for 3% of our GDP. It is also responsible for more jobs than any other manufacturing sector. For all the talk of making sure we don’t lose our lead in chips and AI, the fact is we can’t afford to lose our lead in car manufacturing technology.
There is cause for concern, but it is not as dire as the news suggests.
The reality is that we will not see a seamless transition from petrol to electric cars. Demand for EVs has grown, but not as fast as US automakers had hoped. And it’s true that automakers around the world had bet big on EVs, and many were forced to delay investment and change plans for manufacturing.
That’s because there are some real barriers (pun intended) to making the switch.
EV infrastructure in the US is still lacking. Consumers have legitimate concerns about charging their cars, and fewer than half of US mayors said they felt ready to support the widespread adoption of electric vehicles. Our cities need more charging stations, more energy sources, more electricians… the list goes on.
Although prices have come down, they are still too high for some buyers. Today you can buy an EV for $30,000 (before tax credits), but the options are still limited compared to gas cars: You can now choose from more than 40 different EV models, but if you buy a gas car, you have hundreds to choose from. Additionally, car dealers are often much more comfortable helping a buyer understand these options.
There is no doubt that these factors affect demand, but I do not believe that any of these issues undermine the ultimate promise and potential of EVs.
Sometimes, big problems are exposed when things escalate. That’s not what’s happening here. Barriers to adoption are solvable. These problems are already being addressed through a myriad of public and private partnerships, industrial agreements and start-ups. Through tax policies and CHIPS legislation, some of these barriers to entry are being broken down.
In 2018, when I was President of Tesla, Piero Ferrari (yes, that Ferrari) came to visit the Tesla factory and raved about our electric sedan, which was faster than his supercars. He wanted to see what we did with his eyes.
Fast forward to 2021, Ferrari introduced its first hybrid car to the market and in 2025, Ferrari plans to sell its first fully electric car. Even a legacy, luxury sports car manufacturer with the oldest and most successful F1 team recognizes consumer demand for EVs.
But it may be too little, too late for the Italian automaker. Italy once produced some of the most magnificent and sought-after cars in the world, but Italian companies and policy makers did not invest in the development of the industry. In 1997, Italy produced 1.8 million vehicles. last year, a little less than 800,000 thousand cars were produced in the country.
We I have to solve these problems.
As we head into the new year, we’re about to see a new round of EV sales. Sales may be better than we expected, or demand may have grown a percentage point or two less than we expected. Whatever those numbers are, I expect skepticism to persist.
However, we cannot lose sight of the big picture. We have to stay the course if we want to remain a leader in this multi-trillion dollar industry, or keep manufacturing jobs, or stop relying on other countries for our cars. We need to be aggressive about addressing the roadblocks in front of us and continue to push for adoption. To do this, we need leadership, both in the public and private sectors, and determination.
Before it’s too late.
