By Jim Henry
The road to battery-electric vehicle adoption is bumpy this year, with a heavy potential impact on new-car dealerships.
Dealers have invested millions in selling EVs, only to find that on average, EVs are selling more slowly than expected, and more slowly than vehicles with internal-combustion engines and gasoline-electric hybrids.
According to Cox Automotive, the U.S. industry days-supply of EVs at the end of the first quarter was 114 days. That’s down from a recent peak of 159 days in February, but higher than the rest of the market, which was at 74 days. Days-supply is an estimate of how long it would take at the present sales rate, to sell a given supply of cars and trucks.
The current situation qualifies as a “low tide moment” for EVs, although EV share certainly is expected to rise in the long run, said Elizabeth Krear, vice president, electric vehicle practice at J.D. Power, part of a May 2024 sales forecast issued by J.D. Power and GlobalData.
Notably, J.D. Power reported in May that for the first time since its U.S. EV Consideration Study was launched in 2021, EV consideration was lower than it had been a year ago.
In the latest survey, 58% of new-car shoppers said they were “likely” or “very likely” to purchase an EV, down from 61% in 2023. Within that total, the “very likely” responses declined to 24%, down from 26% a year ago.
Krear said that shoppers are rejecting EVs for familiar reasons: lack of charging station availability, purchase price, limited driving distance per charge, time required to charge, and inability to charge at home or work.
Manufacturers have responded with lower-priced models, longer mileage on a single charge, price cuts on some existing EVs, and some increased incentives, especially for leases. Lease share is up for EVs, in part because some EVs only qualify for full federal tax credits if they are leased.
Lease share was 35.2% of new-EV volume in the first quarter, Experian Automotive said. Lease share for the entire U.S. market was 24.1% in the first quarter, up from 19.3% a year ago, Experian said.
Some requirements that seemed set in stone have been delayed or modified. Manufacturers have postponed some EV-related investments, and some new-product introductions.
But the larger context is, even as they become more numerous, selling EVs in some ways is getting harder as they go from a high-end, specialty niche dominated by Tesla, to a mass-market product, likely dominated by EVs from legacy automakers.
Part of the problem for dealers is that along with the product, the target audience for EVs moves as well — from high-end, motivated and knowledgeable shoppers, to shoppers with less money, less advance knowledge about EV ownership, and with fewer stars in their eyes for EVs.
Cox Automotive says in a 2024 “Path to EV Adoption Study” that the average household income for EV shoppers in the first quarter was $72,000, down from $87,000 back in 2021. EVs are also getting higher consideration among younger shoppers, at 15% among Gen Z, ages 18 to 28, up from 12% in 2021.
However, EV share isn’t growing as high or as fast as the auto retail industry would like. According to S&P Global Mobility, May BEV share was expected to reach 7.6% of total U.S. new, light-vehicle sales. That’s similar to the month prior, and represents an increase versus the first quarter of 2024.
To be sure, it’s also higher than around 5% share in January 2022. But it’s down from a recent peak above 8% in late 2023, S&P Global Mobility said in a May 29th forecast.
The EV news isn’t all bad. Ford Motor Co., for instance, said its U.S. EV sales were up 64.7% in May versus a year ago, or up 87.8% year to date. Gasoline-electric hybrids were up 64.5% in May, or 50.9% year to date.
Meanwhile, Ford’s U.S. sales of vehicles with internal combustion engines were up 5.6% in May, and up just 0.6% year to date.
But the big share gains for Ford EVs are based on a low starting point. EVs accounted for 4.7% of Ford’s U.S. sales in May, up from 3.2% a year ago. Year to date, Ford EVs had a share of 4.2%, up from just 2.4%.
There’s also good news for dealers, in that federal regulators and automakers have proven to be more flexible. Some requirements that seemed set in stone have been delayed or modified. Manufacturers have postponed some EV-related investments, and some new-product introductions.
In addition, federal regulations unveiled earlier this year require a less-steep EV adoption curve, compared with the originally proposed rules. The emissions standards don’t mandate EVs per se, but in effect EVs are seen as the most practical way for manufacturers to hit the targets.
According to the Washington-based Alliance for Automotive Innovation, a trade group for automakers and suppliers, the Environmental Protection Agency’s original proposal for BEV adoption estimated about 37% BEV sales by 2027, 60% by 2030, and 67% by 2032.
EPA’s final rule is closer to a 50% BEV sales target by 2030, down about 10 points from the proposal, but the proposed target for 2030 is “unclear,” the Alliance said in a post in March 2024.
Even so, John Bozzella, Alliance president and CEO, said in a blog post in March that the new regulations are at “the ragged edge of achievable,” and that’s assuming everything goes as planned.
Jim Henry is a New Jersey-based, veteran freelance reporter covering the U.S. auto industry, writing for trade magazines Automotive News and WardsAuto, plus Forbes and others. Concentrations include U.S. light-vehicle sales, dealership Fixed Operations and Finance & Insurance, mergers and acquisitions, publicly traded dealer groups, OEM financial results, and Connected, Autonomous, Shared, Electric Vehicles. He is also the former department manager, corporate strategy and market research for Mercedes-Benz USA, and a former president of the International Motor Press Association.
