September 25, 2020 Blog

Bozzella’s Blog: Electric Vehicles

I know what you’re thinking. Didn’t he just write about EVs in his last blog post? First, thank you for reading. Second, I was recently asked by Credit Suisse to discuss the future of the electric vehicles (EV) market, inspiring me to paint a broader picture for industry and EV enthusiasts who might have similar questions. What’s driving the EV market? What are some of the biggest obstacles? And, for the skeptics, are automakers making meaningful investments in EVs?

According to a recent Bloomberg report, “Electric Vehicle Outlook 2020,” adoption rates of EVs by consumers are rising. The report notes that “the electric share of total vehicle sales is still small but rising fast” and predicts that by 2040 an astounding 58 percent of new global auto sales will be EVs. While this is encouraging, 2019 U.S. EV sales grew only 0.02 percent compared to 2018.

Auto Innovators members are committed to electrification and are working to offer more models, innovation, functionality, and longer range, all at a variety of price points and in nearly every light-duty vehicle segment. The industry is taking diverse approaches to EVs that include all-electric, plug-in hybrid, and fuel cell electric vehicles.

Today, there are more than 40 models available for sale, and we expect about 130 EV models available in the U.S. market by 2025.

As EV interest and investment in grow, why do sales lag? The answer is multifaceted.

Consider the base case: federal incentives for the bestselling EVs are already expired or phasing out; state incentives remain spotty with inconsistent funding and growing restrictions on the eligibility of cars or buyers; charging infrastructure growth is slow and hydrogen refueling is nearly non-existent outside of California; and gas prices are consistently low. So even with the new EV models expected in the coming years, a doubling of EVs sold seems like a bold prediction for the next five years without major investment into market development.

A solid increase in EV sales requires a strengthening economy, renewed incentives, and significant infrastructure investment and development for both battery and fuel cell vehicles. There are many ways to bolster EV sales and customer interest. Regulatory pressures aside, policymakers at the federal and state levels must decide whether they want to support significant market growth.

U.S. EV Sales vs. Europe and China

The U.S. has consistently led with automotive technology, and there is no reason why the U.S. can’t do the same with EV technology. The harsh reality is that without the significant policy drivers and incentives that the E.U. and China markets have implemented, it will be difficult to keep pace.

People often point to Europe as a booming marketplace for EVs and then wonder why we lag. The E.U. is offering significant consumer and business tax and rebate incentives for EVs, up to USD $13,150 in some countries. In many cases, the E.U. also applies policy levers that create disincentives for petroleum-fueled vehicles. This may work in the short term but could be problematic in a few years when the very vehicles that are profitable and helping to fund the shift to electrification phase out sooner than the market can bear.

The Power of Infrastructure

Infrastructure growth is equally necessary.

The U.S. is far behind China and the E.U. in charging infrastructure. According to the South China Morning Post, the city of Beijing alone has more charging spots than the entire U.S. The U.S. would need to double the number of public chargers just to catch up to a single city in China. Plus, this assumes most people charge at home, yet 50 percent of people do not have charging available near home. Progress will have to account for how we balance loads for electricity generation, and how we can get recharging capabilities into apartment and office buildings, and other parking facilities.

California leads the nation in EV sales with about 7 percent of new vehicle sales. And the state expects to spend $3.5 billion public dollars by 2025.  Yet, more will be needed to increase consumer demand to a level that will allow the state to meet its goal of 100 percent ZEV sales by 2035.   

The future for EVs in the U.S. is bright. We are seeing automakers announce more and more EVs every week. The question is not if EVs will become the dominant mode of personal transportation, but when – and what policymakers, regulators, industry, and consumers can do to accelerate the transition.