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For driving enthusiasts, electrification is a dirty word.
But when it comes to decarbonizing the Earth’s atmosphere, harnessing clean energy, and simplifying the car production process, it’s no surprise that automakers and governments around the world are eager to jump-start their electric vehicle transformation dreams. It means.
Last year was supposed to be a big year for that transformation in the United States. However, a number of factors have created the sober reality that the process of converting the nation’s fleet to electricity will take much longer.
Indeed, research firm Kelley Blue Book reports that U.S. EV sales exceeded 313,000 units in the third quarter, an increase of nearly 50% year-over-year, and EV market share reached 7.9%, an all-time high. It was reported that the standard had been reached. However, that growth rate appears to be slowing and heading towards the 10% level, which may continue for some time. While places like California have reached 20% adoption rates, other states have barely recorded adoption rates.
A combination of factors including high EV prices, rising financial costs, and infrastructure issues have dimmed the prospects for EV transformation in the United States, but there are still reasons for optimism in 2024.
“A great product is not enough”
Ford CEO Jim Farley, one of the biggest EV evangelists among traditional automakers, warned that things need to change. “In the EV business, great products are no longer enough. We have to be fully competitive on cost,” he said after the company’s third-quarter results in October. Told.
And he wasn’t the only one to warn about the high cost of EVs compared to gas-powered cars.
“I’m concerned about the high interest rate environment we’re in,” Tesla (TSLA) CEO Elon Musk said after the EV maker’s third-quarter results, adding, “I’m worried about the high interest rate environment we’re in,” adding, “I’m concerned about the high interest rate environment we’re in,” adding, “I’m worried about the high interest rate environment we’re in.” I can’t stress enough how important it is…that’s what we’re doing.”To make our products more affordable for people to buy [them]”
Ford, along with Tesla and GM, recently paused billions of dollars worth of investments in EV projects until production capacity is needed. Ford said in its earnings call that U.S. EV buyers are “reluctant to pay a premium for electric vehicles.” [EVs] The price and profitability of EVs have been significantly compressed compared to gasoline and hybrid vehicles. ”
Ivan Drury, director of insights at Edmunds, told Yahoo Finance: “In 2023, Americans faced rising costs of living and rising interest rates, leading to a noticeable shift to new, more budget-friendly vehicles…This shift negatively impacted demand for more expensive EVs.” Having catered well to affluent early adopters, EVs now face the challenge of appealing to the mass market. ”
With high-income buyers already satisfied, the broader mass market has practical requirements such as more charging stations, range and lower prices, Drury said.
When asked what their biggest concern is about purchasing an electric vehicle, a fall Yahoo Finance/Ipsos poll found that 77% of respondents were concerned about a lack of charging stations on the road or at home; 73% were concerned about range. , 70% noted the overall cost.
SAP Mobility analyst Bill Newman echoed those concerns. “To reach the next level, [buyers] To resolve concerns about range, the company plans to focus on things like battery density and look for additional charging stations and networks for electric vehicles. ”
Edmunds’ Drury also believes a lack of products, especially cheap electric vehicles, is a problem.
“The stagnation in EV market share in the second half of 2023 can be attributed in part to the lack of high-profile new EV launches that typically generate significant awareness and interest,” he said.
What will happen in 2024?
Analysts see signs of hope for EV adoption in 2024, but also some well-known challenges.
“EV sales are expected to increase in 2024, but the hurdle of achieving mass-market affordability poses a major challenge to widespread EV adoption goals,” Drury said at Edmunds. Ta. “At this point, the EV adoption curve is likely to resemble a jagged lightning bolt rather than a smooth curve.”
One factor that could boost EV sales in 2024 is a change in how the $7,500 federal EV tax credit is administered. Currently, the tax credit is available after the purchaser files his or her tax return the following year, but those rules have changed to allow for a “point of sale” credit that allows the purchaser to immediately transfer the credit to the dealer, and the EV will go down. At the time of purchase.
This could be a big boon for buyers who value price. But as we all know, when the government gives, sometimes it takes away. And it will be so in his 2024, when stricter battery parts sourcing rules apply. Some cars, including the Tesla Model 3 and Ford Mustang Mach-E, will temporarily lose credibility as automakers adjust their supply chains to increase domestic battery parts.
Nevertheless, cheaper EVs are emerging regardless of tax credit status, which should help overall EV sales in the new year.
“I think you’ll see [EVs] push it in there [pricing] Midrange…so keep an eye on GM’s Equinox when we start pushing. Depending on what kind of luxury you want, you can achieve it for less than $40,000. Now it’s available,” he SAP’s Newman said of GM’s upcoming entry-level EV.
And don’t forget about interest rates and how the Federal Reserve will manage rate cuts next year, Newman added.
The impact on pricing is very real and moving in the right direction for consumers. According to Kelley Blue Book, the average transaction price (ATP) for new EVs in November was $52,345, down from about $65,000 a year ago, and Tesla’s ATP was 21% lower than a year ago. It fell by almost %.
“In recent months, price parity between EVs and ICEs is almost possible,” Stephanie Valdez Streety, director of strategic planning at Cox Automotive (parent company of Kelley Blue Book), said in a November report. “It looked like that,” he said. “This is a complex metric with many variables, but new products and higher discounts are driving down the average price of EVs even before potential tax benefits. Previously, EV premiums were over 30%. Now they are less than 10%.”
Pras Subramanian is a reporter for Yahoo Finance.you can follow him twitter And even more Instagram.
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