ey electric cars

Charging ahead: Five hypotheses shaping the EV market landscape

Photographic portrait of Steve Patton
Steve Patton

EY Americas Automotive Sector Leader

9 minute read 18 Jul 2024
Related topics
Automotive

Despite industry concerns and consumer uncertainties, the US EV market has grown steadily with improved technology and higher sales.

In brief:

  • Three years after setting a 2030 target for EVs to comprise half of US vehicle sales, the federal government adjusted the mandate to ease market pressure.
  • EV proponents may have underestimated the time and strategic adaptability it takes to build a new market that resonates with prospective customers.
  • Local policies will be crucial in addressing EV skepticism and building strong charging networks that can propel the industry’s growth.

The race to make electric vehicles (EVs) the primary mode of transportation for Americans has run into a few speedbumps.

In 2021, the Biden administration announced an ambitious goal: by the year 2030, half of all vehicles sold in the US should be electric vehicles (EVs).¹ However, in March, the U.S. Environmental Protection Agency (EPA) adjusted this target slightly in response to feedback. Acknowledging the automotive industry and unions’ worries about the original tight timeline, the EPA unveiled its most stringent tailpipe emission standards yet — but for vehicles that will be sold from 2027 to 2032. These revised regulations aim to provide manufacturers with additional time to increase EV sales.²

While the automotive industry has its concerns about EVs, consumers worry about affordability, financing options and whether there is adequate charging infrastructure to reliably support their transportation needs. The result of all this consternation is a lot of uncertainty about the future of the EV market.

Sales of mass-market, plug-in electric vehicles (PEVs) in the United States commenced toward the end of 2010 with only a few available models. As the variety of plug-in models expanded and production volumes rose, so did the sales.

  • After nearly eight years, cumulative PEV sales reached one million, and it took only 2 ½ years to double that figure, according to a study by the Joint Office of Energy and Transportation and the U.S. Department of Energy’s (DOE) Vehicle Technologies Office.³
  • In the first quarter of 2024, EV and hybrid sales amounted to 18% of US light duty vehicle sales, according to EY research. For 2023, Americans bought one million fully electric vehicles, a new record, according to a report from the White House.⁴

The takeaway is that there is data demonstrating substantial growth in the US plug-in electric vehicle (PEV) market since 2010. This growth, not only recorded in sales but also in the variety and capabilities of the PEVs, has been rapid and steady. Furthermore, improvements in their electric driving range and maximum charging capacity have markedly increased recently.

With that as a backdrop, let’s take a look at some of the common concerns people have about EVs and see what the actual data points reveal about each hypothesis:

How EY can help

Hypothesis No. 1 – The type of vehicle the consumer is interested in buying is not available⁵

 

In December 2023, battery electric vehicle (BEVs) had 60 models available overall across all body types, with 33 models in the mid-size SUV segment and 19 under “other body types,” according to EY research. Internal combustion engine (ICE) vehicles had 262 models available across all body types, with 124 in the midsize SUV line and 62 under “other body types.”

 

Here’s a breakdown of all the models available per body type:

ey number of models available

In terms of market share, the numbers were relatively flat from February 2024 to March 2024. BEVs went from 6.97% to 6.92%, HEVs went from 8.44% to 8.49%, ICE vehicles went from 82.33% to 82.58% and PHEVs went from 2.26% to 2%, according to EY research.

What the data tells us: The introduction of many new options in the SUV segment over the last two years has certainly addressed much of the availability of desired models issue. Market shares remained steady with a slight dip in BEVs to 6.92% and a minor increase in ICE vehicles to 82.58% between February and March. Bottom line: model availability is on the rise, and once sales pick back up across the board, customers should find it easier to get the vehicle they want.

Hypothesis No. 2 – Growth of BEV market is down because overall vehicle sales are down⁶

Overall vehicle sales were flat between December 2023 and March 2024. However, a closer look at the numbers reveals a different story. BEVs have been on the rise in 2024, going from 81,815 in January 2024 to 86,384 in February and just under 100,000 in March, according to EY research. If this trend continues, it would put EV sales on track to set another sales record in 2024, according to an article from NPR.⁷

HEVs are also up in 2024, jumping from 94,776 in January 2024 to 122,811 in March. ICE vehicle sales rose from 863,939 in January 2024 to 1.19 million in March, according to EY research. So while vehicle sales experienced a big drop as the calendar turned from 2023 to 2024, the first quarter saw a substantial recovery in all vehicle segments, according to EY research.

It’s also worth noting that the adoption of new technology typically follows a predictable curve, explains the NPR article. First, the innovators embrace a new product. Next, the early adopters are willing to try something new and tolerate inconveniences like finding public chargers. They are willing to pay more for cutting-edge tech. The problem is mainstream buyers are more cautious and harder to win over. They seek reliability, convenience and competitive pricing. While challenges still exist, EVs are still the future.

What the data tells us: Despite a sales dip in January 2024, the adoption of BEVs surpassed a milestone in December 2023 and is expected to grow further in 2024. Winning over mainstream customers who value reliability, convenience and competitive pricing remains a challenge for the EV industry, but one that can be overcome.

Hypothesis No. 3 – Customers don’t want to purchase a BEV

Overall, when asked how likely they are to purchase a car in the next 24 months, the overall percentage of US respondents choosing extremely likely or somewhat likely was 60%, up from 48% in 2022, according to EY research. Among car owners, it was 66%, up from 50% in 2022. And among non-car owners, 28% said they are extremely likely or somewhat likely to buy a car in the next 24 months, up from 18% in 2022.⁸

There was a strong increase in inclination toward EVs, largely led by a sharp uptick in in purchase consideration for fully electric cars.

ey-ev-buying-intent

The rise in EV buying intent aligns with growth in BEV penetration, which rose from 1.4% in 2019 to 7.6% in 2023. This was driven by the growth in EV incentives and availability of EV models, as well as growth in the midsize SUV segment, as it contributed to 65% in 2023 compared to 14% in 2019.⁹

There is evidence to suggest consumers who purchase EVs are largely happy with their decision. Among the EV owners who intend to purchase a car, nearly 81% would again prefer an EV in their next purchase. The urge is stronger with owners of fully electric vehicles (18% in 2022, 46% in 2023) than owners of plug-in hybrids (17% in 2022, 18% in 2023) or owners of hybrids (37% in 2022, 17% in 2023.)¹⁰

What the data tells us: Fully electric vehicle owners have a stronger desire to stick to EVs compared to owners of plug-in hybrids or other hybrids. The conversion rates increased from 18% to 46% for full-EV owners, while it remained stagnant for plug-in hybrid owners (17% to 18%) and dropped significantly for hybrid owners (37% to 17%). This is positive news for EV proponents. Still to be determined is whether mainstream consumers will embrace EVs, and/or consider converting their entire garage to EVs.

Hypothesis No. 4 – There is insufficient infrastructure to charge BEVs

A December 2023 report from the White House revealed a problem with the current EV charging network. The report found that there are multiple types of chargers and plugs in use, meaning that certain chargers work only with specific EV models. The result is EV owners can’t tap into the full network of public chargers that already exists.

The Biden administration established minimum charging standards to address this issue and to make charge pricing transparent. Meeting anticipated charging needs by 2030 will require a cumulative investment between $31 and $55 billion for about 1.2 million public charging units, a goal well on track with over $25 billion announced and over 165,000 public charging ports already in place as of 2023, according to the White House.¹¹ Infrastructure law grants mandate that all eligible charging units be American made and from July 2024, federally funded chargers will need to source majority components from American manufacturers. US-based production of fast chargers has significantly grown, with over 26 firms in operation as of 2023 and the capacity to produce over a million charging stations annually, including 60,000 fast chargers, according to the White House.¹²

What the data tells us: The aforementioned study by the Joint Office of Energy and Transportation and the US DOE’s Vehicle Technologies Office found that the size and composition of the 2030 national public charging network for plug-in electric vehicles (PEVs) will depend on various factors such as the rate of PEV adoption, location preferences, access to overnight charging and individual charging preferences. The size of the network might vary by up to 50% due to factors like the share of plug-in hybrids, driver charging etiquette and access to private workplace charging.¹³ The network's layout will also vary substantially across communities — densely populated areas may need more investments for nonresidential charging and ride-hailing electrification, whereas rural areas may need fast charging along highways for long-distance travelers. This uncertainly is clearly leading to consumer hesitation, and may be the single biggest factor in promoting broader adoption of BEVs.

Hypothesis No. 5 – BEVs are prohibitively expensive compared to ICE/hybrid vehicles

Cox Automotive states that the average sales price for new electric vehicles (EVs) was approximately $52,000 in November 2023, only an 8.5% increase from the industry average of around $48,000.¹⁴ This denotes a decrease in the price gap between EVs and internal-combustion engine (ICE) vehicles compared to the previous year.

Over the past few years, the initial purchase price of BEVs has been steadily decreasing. Advances in battery technology, increased production volumes and competition among manufacturers have contributed to this trend. Stricter emission standards are pushing automakers to invest in electric vehicle technology. Compliance with these standards encourages the development and adoption of BEVs.

What the data tells us: The market shows a clear trajectory favoring BEVs, although price parity challenges remain. Ultimately, individual preferences, driving habits and local policies will play a very influential role in informing the choice between BEVs and ICE vehicles.

Conclusion

To meet Biden’s 2030 EV goal, concerns around affordability and efficient charging infrastructure need to be addressed amidst rising market trends favoring EV adoption. Introduction of PEVs into the US market in 2010 led to a steady growth in sales and capabilities with a growth of over 466% for BEVs between 2019 and 2023. Increased availability of different EV models and improved purchasing intentions among car and non-car owners reflect a growing preference for EVs. While the Biden administration is taking steps to expand and standardize the EV charging network, challenges remain in full network accessibility due to multiple charger types and price gap compared to ICE vehicles. Some progress has been recorded in closing the price gap, with the average EV price reaching $52,000 in 2023, only an 8.5% increase from the industry average. Patience will be needed to create a sustainable EV industry.

The views reflected in this article are those of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.


Summary

The US aims for 50% of vehicle sales to be electric by 2030, but this timeline depends on EV affordability, consumer adoption, and a robust charging infrastructure. Since 2010, US plug-in electric vehicle (PEV) sales increased, with one million sold in 2023. Despite the range of battery electric vehicle (BEV) models available, market share remains steady. BEV sales are rising in 2024, and consumers show increased interest in EVs, with 81% of EV owners likely to repurchase. Challenges include varied charging standards and a price gap with internal combustion engines, though average EV prices are converging with the industry average.

About this article

Photographic portrait of Steve Patton
Steve Patton
EY Americas Automotive Sector Leader
Innovator focused on Automotive, Transportation and Mobility clients and solutions. Driver of growth.
Related topics
Automotive

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