The US government wants half of all new car sales to be electric by 2030. But achieving that goal appears to be becoming increasingly difficult due to obstacles ranging from pricing to charging infrastructure.
Earlier this week, more than 3,000 car dealers called on the White House to “hit the brakes” on its electric car target. The letter, posted online, says enthusiasm for electric vehicles has stalled, adding that battery electric cars “are not selling nearly as quickly as they arrive at our dealers – even with steep price cuts, manufacturer incentives and generous government incentives.”
The letter states that the majority of consumers are not ready to make the switch.
A Tesla charging station sits idle on Wednesday, November 15, 2023, in Albuquerque, New Mexico. (Susan Montoya Bryan/AP Photo) (ASSOCIATED PRESS)
“They are concerned about BEVs [battery electric vehicles] be unaffordable. Many do not have garages for home charging or easy access to public charging stations. “Customers are also concerned about loss of range in cold or hot weather,” the letter said, adding: “Today’s technology is inadequate to meet the needs of the majority of our consumers.”
In response, the White House pointed to the Inflation Reduction Act (IRA), passed last year, which incentivizes electric vehicle adoption by offering $7,500 in credits to eligible households.
The IRA “makes electric vehicles more affordable and helps Americans save money while driving,” a White House spokesman said, noting in a statement that “EPA’s proposed standards are not a mandate — they do not force anyone to make certain products , to sell or to buy.” Vehicles. The proposed standards are performance-based, meaning manufacturers can choose to comply in the way that makes the most sense for them and their respective fleets.”
“Price extremely high”
According to an industry observer, the loans offered by the IRA are not enough to drive mass adoption of electric vehicles.
“The biggest challenge to electric vehicle adoption is that the price is extremely high,” Ramanan Krishnamoorti, vice president of energy and innovation at the University of Houston, told Yahoo Finance.
The story goes on
“Only the top 10% of the population can afford to buy electric vehicles,” he said. “We thought there was a lot of prospect of prices going down.”
As the Federal Reserve has raised interest rates to combat inflation, higher borrowing costs have made it harder for drivers to finance electric vehicles and for manufacturers to build them.
“What we had two years ago, the cheap money, is no longer available today,” Krishnamoorti said.
Virtually all costs associated with electric vehicles have increased, from labor to batteries. Meanwhile, demand has weakened, prompting legacy automakers to scale back their multibillion-dollar plans to transition to electric vehicles.
“Many North American customers interested in purchasing electric vehicles are unwilling to pay a premium for them over gasoline or hybrid vehicles, severely depressing the prices and profitability of electric vehicles,” automaker Ford (F) said in its latest Earnings Announcement.
Read more: Are electric cars more expensive to insure?
Industry giant Elon Musk reiterated the need to make electric vehicles more affordable.
“I just can’t emphasize enough how important cost is. … We need to make our products more affordable so people can buy them [them]” said the CEO of Tesla (TSLA) during the company’s latest conference call.
It is a challenge that manufacturers will probably also have to face in 2024.
“In 2025, I think we will really look at the question of affordability. And throughout this time we will also see further expansion of the charging infrastructure. This is what needs to happen,” GM CEO Mary Barra told Yahoo Finance Editor-in-Chief Brian Sozzi earlier this week.
Another major challenge is drivers’ concerns about the charging station infrastructure, which is still under construction. Drivers often complain about incompatible or unreliable stations.
“[Consumers] I want to know when a charger is available and working,” said GM’s Barra.
Earlier this year, the government announced an agreement with Tesla aimed at building a network of chargers open to all electric vehicle drivers for use by the end of 2024.
“Electric vehicle infrastructure is not being rolled out fast enough. Even when it is available, we find that loading times are just too long,” said Krishnamoorti.
“Away from electric vehicles”
Given the cost and infrastructure challenges of electric vehicles, consumers are increasingly turning to hybrid models that turn off gasoline when idle.
According to recent data from iseecars.com, the BMW X5 and Toyota Highlander hybrid models were among the two fastest-selling used cars in October. The data shows that electric vehicles are selling more slowly, even though their prices are falling faster than hybrid or gasoline models.
The research shows that it takes an average of 57.5 days for an electric vehicle to leave a dealer, compared to 20 days a year ago. In comparison, a hybrid vehicle now takes 37.2 days to leave the dealership, compared to 20 days a year ago.
“This just shows that there is a shift in the market away from electric vehicles and towards more of these sustainable solutions,” Krishnamoorti said.
Despite these challenges, electric vehicle sales are still growing in the third quarter of this year – up nearly 50% year over year to 313,000. Electric vehicle market share in the US reached 7.9% – the highest level ever.
“You need the time to build capacity, build out charging stations, reduce costs and move forward,” said Amos Hochstein, senior adviser for U.S. energy, in an interview with Yahoo Finance last month.
“So you’ll see strong sales and adoption growth, and then maybe it will slow down a little bit and then grow again,” he added.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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