Electric vehicle demand falls short of manufacturer and dealership expectations

Electric vehicle sales have risen significantly over the years. That trend is expected to continue with the market on track to surpass 1 million sales for the first time ever this year. Those numbers, however, are not meeting the expectations of manufacturers, car dealers and President Biden. 

"Major auto companies are preparing for 50% of future sales to be electric vehicles by 2030, 100% by 2035," Biden said during remarks on rising prices in June 2022. 

Now several companies are readjusting their targets and slowing production, even with the rise in vehicles on the road.

"It has a lot to do with electric vehicles, adoption and the segments of the adoption," said Kevin Book, managing director of Clearview Energy Partners. 

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"The first buyers, the early adopters, the one-percenters are only so much of the market. And then there are also the big users, the drivers for whom the sticker price matters less than the fuel price, folks like Uber drivers. For the rest of us, it's asking an awful lot of us to pay more so that we can drive shorter distances and have longer fueling times."

Car dealers are also warning Biden's goal may be too ambitious. More than 3,000 dealerships signed a letter calling on the White House to slow proposed regulations that mandate battery electric vehicle production and distribution. 

"While the goals of the regulations are admirable, they require consumer acceptance to become a reality," the letter said. "With each passing day, it becomes more apparent that this attempted electric vehicle mandate is unrealistic based on current and forecasted customer demand. Already, electric vehicles are stacking up on our lots, which is our best indicator of customer demand in the marketplace."

Electric vehicles made up just under 1% of all vehicle registrations in 2022. When looking at registrations over the past five years, the number of EVs on the road has increased significantly. Since 2017, registrations in the U.S. have grown by nearly 547%.

"It's really important to talk about this today because electric vehicles are for certain customers who don't travel long distances, use it more (in a) commuting atmosphere, that are wealthier," Ford CEO Jim Farley said on "Special Report" in September. 

"The F-150 Lightning is the bestselling electric pickup in the U.S. And for those customers, it works great, but it's not for everyone. We're going to offer customers a choice."

Ford has since said it is slowing production of its F-150 Lightning pickup. It’s also pausing construction at a Kentucky battery factory and postponing $12 billion in planned spending on EV production. 

"There's a lot of oversupply right now, so consumers have more options," Cox Automotive Industry Insights director Stephanie Valdez Streaty said. "A year ago from today, there's 50 more models that consumers can buy."

Hybrid cars are also adding to the competition to shift away from gas. Registrations have increased over the years and now make up 2% of the vehicle market share. 

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"It seems very likely that the United States is going to electrify its transportation substantially, but maybe not as soon as hoped," Book said. "There's a lot more of us who care about our turn signals than our virtue signals.

General Motors is delaying the release of its Chevrolet Silverado and GMC Sierra Electric pickups by one year. Tesla is also holding off on production at its planned factory in Mexico. 

"Enthusiasm has stalled," the coalition of car dealers wrote. "Today, the supply of unsold BEVs (battery electric vehicles) is surging, as they are not selling nearly as fast as they are arriving at our dealerships — even with deep price cuts, manufacturer incentives, and generous government incentives."

The Inflation Reduction Act created a $7,500 clean vehicle tax credit for owners of new electric vehicles. The IRS states on its website that the vehicle must be purchased after April 18, 2023, and must meet critical mineral and battery components to qualify for the credit. 

"One big thing which I think we need to continue to do is educate," Valdez Streaty said. "Consumers are confused about the Inflation Reduction Act. What does it mean? What's eligible?"

Some lawmakers have criticized the Biden administration for pushing auto dealers and manufacturers to transition to electric too quickly and without enough incentives to get consumers to bite. 

"They were so aggressive on this. They're way, way out over their skis," Sen. Joe Manchin, D-W.Va., said. "You can't even bribe the public with $7,500. They're not there yet. It's a good product. They'll get there eventually. But I'm not getting rid of my gasoline car anytime soon, I can assure you."

The credit often doesn’t make up for the price difference between EVs and gas-powered cars. U.S. News and World Report lists Chevy’s Bolt EUV as the most affordable new electric car. Its price tag of $27,800 is still nearly $12,000 more than the most affordable new gas car, the Nissan Versa. 

"The price premium still exists in spite of that tax credit," Book said. "So, when you have a higher price for mobility, what you're going to see are really two things — a slower uptake by price sensitive drivers, which I think we're seeing, and also longer retention of existing cars, which means old gas guzzlers staying on the road longer and potentially polluting more."

The federal government also offers a credit of up to $4,000 for used electric cars. There are also some state and local incentives available. 

"I think incentives are key, but I also think that the industry will need to continue to build and create models that are in that under $30,000," Valdez Streaty said. 

AAA estimates fuel and maintenance is cheaper for electric vehicle owners. About 15,000 miles worth of electricity costs an average of $546 while gasoline costs around 130% more, over $1,200. Annual maintenance for an EV is estimated to be about $300 less than a gas-powered car. 

"Fortunately, the battery prices are going down, and that's a large cost of a vehicle. So, I think that's good news," Valdez Streaty said. "We'll continue to see that over the next few months and into next year."