Jeff Flock of FOX Business analyzes customer demand for electric vehicles.
The world’s leading automakers have made something quite clear: they believe that electric vehicles will dominate their industry for years to come.
However, for that to happen, they will need to sell the idea to people like Steve Bock.
When Bock recently replaced his family’s Honda Pilot 2013 SUV, he considered – and then rejected – the idea of buying an electric vehicle. An EV with enough space to transport his two dogs would be very expensive, he decided. And he would worry about driving long distances with few charging stations.
“I would consider it if prices went down,” said Bock, while leaving open the possibility of buying an electric vehicle next time.
Instead, Bock, from the North Carolina suburb of Raleigh, chose a Subaru Outback. Like most other vehicles sold in the United States, it runs on gasoline.
Opinion polls show that a substantial majority of Americans are aligned with Bock. An EV can be on your shopping list if it costs less, if there are more charging stations, and if there is a greater variety of models available. In other words, it is not the right time.
All of this represents a significant risk for the largest automakers. Most of them are betting their future on the notion that consumers will soon be ready to buy vehicles that run not on internal combustion engines that have been running cars and trucks for more than a century, but with electricity stored in a battery.
General Motors, Ford and Volkswagen plan to spend $ 77 billion on developing global electric vehicles over the next five years, with models from pickups to small SUVs. GM went so far as to announce a goal to end passenger cars powered by gasoline and diesel entirely by 2035 – and to become carbon neutral by 2040.
For automakers, the risk is as dangerous as it is simple: what if American consumers reject electric vehicles for many years?
Companies would have no choice but to discount them and hope, in the meantime, that their profits from gas vehicles would still cover their costs – at least until large proportions of buyers gravitate towards EVs.
Otherwise, the financial blow can be heavy. For now, EVs represent less than 2% of new vehicle sales in the United States and about 3% worldwide.
“It is still an industry that does not have mass appeal to the entire population,” said Jeff Schuster, president of global vehicle forecasting at LMC Automotive, a consulting firm. “It can be a financial drain if consumers don’t buy at the same level.”
However, in contrast to the United States, sales of EVs took off in Europe and China, mainly because of long-range pollution regulations and government incentives. These stricter environmental regulations are forcing the industry to sell more electric vehicles.
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In Europe, automakers have unveiled a series of new electric models ahead of the EU’s lowest limits on average carbon dioxide emissions, the main greenhouse gas blamed for climate change, which went into effect earlier this year. Government-supported incentives can reduce the cost to an amount close to that of an internal combustion vehicle.
The result: almost 730,000 battery-powered vehicles were sold in Europe in 2020 – more than 300,000 of them in the last three months of the year. The market share of electric vehicles – batteries and plug-in hybrids only – jumped from 3% to 10.5%. In December, its participation had reached almost one in four.
Among the new owners is Kerstin Griese of Essen, Germany, who bought a battery-powered Peugeot 208 after driving electric cars in the workplace. Griese found that they provided the acceleration needed to safely enter the highway for its 40-kilometer (25-mile) route to the public works department in the city of Solingen.
“I said to myself, when they cost about 30,000 euros ($ 36,263) and are more than 300 kilometers in range, and when the incentives are high, I am there. And that happened last year. “
After a government subsidy of 6,000 euros and the carmaker’s 3,000 euros installment, his new car will cost around 24,000 euros ($ 29,000). The car can use fast charging stations along the highways, where it can recharge in half an hour when taking longer trips, such as shopping excursions in neighboring Holland, about 40 miles away.
“I found that very attractive,” she said.
In China, which accounts for about 40% of global EV sales, purchases have accelerated due to limits on the number of internal combustion cars that can be registered in six major cities, said Arndt Ellinghorst, an analyst at research firm Sanford C. Bernstein.
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Automakers, including startups Lucid, Bollinger, Rivian and Workhorse, plan to launch 22 new EV models in the United States this year, after launching six last year, according to LMC.
Tighter regulations – and, perhaps, higher sales of EVs – may be arriving in the United States, too, if the Biden administration is successful in promoting electric vehicles as part of a broad plan to combat climate change.
Still, it can be an uphill battle. Only 260,000 all-electric vehicles were sold last year in the United States. This is out of a total new vehicle market of 14.6 million. In fact, Americans are still rejecting cars, in general, in favor of less economical trucks and SUVs.
Two surveys at the end of last year offered a glimpse of Americans’ appetite for electric vehicles. One, from Consumer Reports, showed that only 4% of adults with a driver’s license planned to purchase an EV the next time they purchased a vehicle. Another 27% said they would consider one. About 40% express some interest – but not for the next purchase. About 29% do not want an EV at all.
Likewise, when JD Power interviewed people looking to buy or rent a new vehicle in the next 18 months, only about 20% said they would likely buy an EV. About 21% were unlikely. The rest were undecided.
“For every new vehicle buyer seriously considering (battery powered electric vehicles), there is another at the opposite end of the spectrum,” said Stewart Stropp, senior director of automotive retail at JD Power.
On the one hand, said Stropp, most buyers are not familiar with electric vehicles and have never ridden one. Those who did, however, are approximately three times more likely to consider them, he said. People want as many porters as gas stations, said Stropp, but they don’t seem to realize that most of the cargo can be done at home.
The task of breaking the American public’s hesitation to invest in a fully electric vehicle can be problematic. And automakers recognize this clearly. Last year, General Motors planned a major public campaign featuring test drives and engineers to answer customer questions at events across the country. The viral pandemic, however, forced him to dismiss the plan.
GM is making experts available virtually this summer as it starts selling a small Chevrolet Bolt electric SUV for just under $ 34,000, its first electric entry into the most popular segment of the American market. But Tony Johnson, director of marketing for Chevy electric vehicles, acknowledges that there is no substitute for “putting the seats in the seats”.
Johnson notes with optimism that research by GM shows that the number of people who would consider an EV is much higher than five years ago. GM is keeping the price of the refurbished Bolt hatchback to less than $ 32,000, he said, and is offering free domestic charging stations.
Schuster predicts that sales in the United States will increase this year to 359,000, taking off in 2022 and reaching more than 1 million the following year. In 2030, LMC foresees sales in the USA of more than 4 million EVs. However, even that would represent only a quarter of the overall market.
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Still, encouraging signs emerged in February, when EV sales increased 55% from the previous year, to 18,969, according to Edmunds.com. What helped drive sales, Schuster said, was the variety of models, as well as additional incentives and the Biden government’s expectation of stricter pollution limits. Biden is in favor of expanding a tax credit for the purchase of EVs and has pledged to help build an additional 500,000 charging stations and increase fuel economy requirements.
Currently, a federal tax credit of $ 7,500 is eliminated after an automaker reaches 200,000 EV sales. GM and Tesla have surpassed that level and Nissan is close. A Democrats bill would raise the limit to 600,000.
The market will lean towards EVs, Schuster predicts, when all of these forces align.
“There are more options, competitive pressure,” he said. “A new generation of technology will cut prices. We’re getting there. “