March 3, 2024

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Automakers, dealers and shoppers are slow to buy electric vehicles despite strong sales growth in the United States during the year

Automakers, dealers and shoppers are slow to buy electric vehicles despite strong sales growth in the United States during the year

Although new electric vehicle market share and sales reached a record high in the United States this year, electric vehicle growth is slowing and falling short of the auto industry’s lofty ambitions to transition away from combustion engines.

The United States has reached a critical juncture in its electrification efforts: More than 1 million new electric vehicles have been sold here this year, according to Motorintelligence.com. The auto industry consulting firm says electric vehicles accounted for 7.5% of total U.S. sales through November. Experts say this number must rise quickly to address climate change because a large proportion of greenhouse gases come from transportation.

Ford Motor Company recently reported a 43% increase in year-over-year electric vehicle sales — which include its best-selling electric vehicle, the Mustang Mach E SUV, as well as the F-150 Lightning pickup truck — in its November sales release. The Hyundai Ioniq 5 and Kia EV6, both electric SUVs, posted nearly 100% year-on-year growth last month.

Despite these positives, this is nowhere near the 90% annual growth the electric vehicle industry achieved last summer. Electric cars have achieved tremendous sales growth in that time, even with models averaging more than $65,000, according to data from Cox Automotive. Demand was high, inventories were low, and automakers were optimistic about the sales outlook.

This is largely because electric vehicles have been more attractive to buyers as gasoline prices approach $5 per gallon, said Kevin Roberts, director of industry analytics at the CarGurus website.

Now, the price of gasoline has dropped to about $3 per gallon nationwide, and the average transaction price of an electric vehicle, without any incentives applied, has fallen to just under $52,000. Many tech-savvy early adopters have already purchased electric vehicles, and the market has moved to more price-sensitive mainstream buyers, many of whom are unwilling to pay more for an electric car than they would for a gasoline or hybrid car, Roberts said.

There are a number of other factors working to dampen today’s positive momentum. Until recently, there were few electric car models available to choose from. Location, cost and ease of charging these cars also remain a concern, as does the vehicle’s range.

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Despite the interest in electric vehicles, Richard Bazzi, who owns three Ford dealerships in suburban Pittsburgh, said many customers are telling his sales staff they are not yet ready to move to battery power given the price, even with the federal tax credits. Customers also fear that the electric range is not long enough to travel where they want to go. This is especially true for those with harsh winters, where range can become depleted more quickly. He also said they were concerned about too few charging stations.

“The interest is there because it’s interesting,” Bazzi said. “But that doesn’t overcome the concerns.”

As such, the pace of sales had slowed to 50% y/y by June 2023, and last month, it fell to 35% y/y.

Some automakers are reevaluating their expensive electric vehicle strategies as the year comes to a close.

Ford sold just under 36,000 Mach Es through November, an increase of just 3.5% compared to the same period last year. The company’s inventory of Mach Es has been growing all year. It had more than 24,000 cars in or on their way to dealers at the end of last month, although it has reduced production over the past two months. However, Lightning sales of 20,365 vehicles were up nearly 54%. “We have to manage supply with demand,” said Eric Merkle, Ford’s head of U.S. sales analysis. “We will do this with any product in our portfolio.”

Ford recently announced plans to delay construction of a new electric vehicle battery plant, downsize another, and defer $12 billion in future electric vehicle spending. General Motors also delayed the retooling of an electric vehicle plant, and Volkswagen postponed its plans in Europe.

“Every automaker has been very aggressive in their plans,” said Jessica Caldwell, Edmunds’ chief insights officer. “We’re seeing a reconnection of those to better fit where consumers are now.”

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GM CEO Mary Barra remains committed to the company’s goals, as long as consumer interest is there.

“We still have a plan in place that will allow us to become all light-duty electric vehicles by 2035,” Barra said at an Automotive Press Association event on December 4. “We’ll adjust based on where the customer is and where the demand is. It won’t be, if we build it they will come. The customer will lead us.”

Many of these companies’ car dealers are now raising alarm about what they see as a slowdown in interest in electric vehicles.

Last week, several thousand dealers from across the country wrote in a public letter to President Joe Biden their concerns about the shift to electric vehicles, calling electrification mandates “unrealistic based on current and projected customer demand.” Already, electric cars are piling up in our yards.”

The Biden administration targeted half of the nation’s new vehicle sales to be electric by 2030 in August 2021 as part of its efforts to reduce greenhouse gas emissions, most of which come from carbon dioxide emissions in the transportation sector, from burning fossil fuels such as petroleum. Transportation is a major contributor to greenhouse gas emissions, especially personal transportation.

“The short answer is yes, people are resistant” to switching to electric cars, Bazzi said. The environmental group Sierra Club and others said many dealers don’t make the effort to sell them.

Key metrics related to how long it takes a vehicle to sell once it reaches a dealer, known as “days to delivery,” as well as the amount of inventory of certain types of vehicles available at dealerships, are used to assess the current state of demand for electric vehicles in the United States.

While internal combustion engine cars and hybrid electric vehicles saw 40 and 17 days, respectively, in October, the number for electric cars was 57, according to data from car shopping company Edmunds. A year ago, electric vehicles took 39 days to convert, while hybrid electric vehicles took 12 days, and combustion-engined vehicles, 26 days. This indicates that electric cars are starting to take longer to sell, on average.

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Automakers are boosting their incentives on electric vehicles, in an effort to lower the cost of these vehicles. As of October, electric cars were still about $4,000 more expensive, on average, than gasoline cars.

Incentives reached 9.8% of the average transaction price for EVs in September, according to Cox. Before the pandemic, industry incentives like this were common. During the peak of the coronavirus, stimulus reached record levels as supply dwindled. Now, incentives are recovering slightly, but the industry average was just 4.9% this fall, indicating the extent of cuts on electric vehicles today.

But many electric vehicle proponents believe today’s roadblocks are temporary, and the bigger challenges are being addressed with a variety of solutions.

“The speech was saying there are challenges in the market,” said Ben Prochazka, executive director of the Electrification Alliance. “The reality is that we continue to see strong sales and strong growth.

“There are still things we need to do and we must move faster,” he added. “So I don’t know if I would call it a pullback. There’s a lot of opportunity to continue to do more to help build consumer interest and confidence in this shift.”

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Alexa St. John is a climate solutions reporter for The Associated Press. Follow her on X, formerly Twitter, @alexa_stjohn. Contact her at [email protected].

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AP’s climate and environment coverage receives support from many private foundations. Learn more about AP’s climate initiative here. AP is solely responsible for all content.

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