The year 2022 slated to bring steady EV growth, but barriers to buyers linger


Lingering supply-chain issues, consumer wariness about EV pricing, batteries and charging, and uncertainty about additional federal support pose potential roadblocks to hitting ambitious targets from the Biden administration and automakers themselves. — Reuters

The new year is expected to bring steady growth in the electric-vehicle segment, still just a sliver of US sales, amid a federal push to accelerate the transition to zero-emissions vehicles.

Bullish EV forecasts follow a year that brought pivotal developments in the race to electrify America's vehicle fleet. They have included announcements of tens of billions of dollars in new investments in products and manufacturing capacity, high-profile EV reveals, the launches of new models to challenge market leader Tesla Inc and the promise of federal investments in charging infrastructure.

"For electrified vehicles in general and EVs specifically, it bucked the trend of the year," said Cox Automotive executive analyst Michelle Krebs. "While overall sales were down, electrified and EV sales soared — from a small base, but percentage-wise, soared."

Most of that growth came from Tesla, but newcomers like Ford Motor Co are beginning to grab slices of the electrified pie with such products as the Mustang Mach-E. And in 2022, electrification is expected to gain more steam with a slate of new entries coming to market.

Automotive website Edmunds.com Inc estimates EV market share in the United States will climb to 4% next year, and surpass 600,000 units for the first time.

"I think it's going to be another strong year for electrified vehicles," Krebs said, "in an overall improved market."

Still, a tipping point in EV adoption in the US isn't expected until closer to mid-decade. Lingering supply-chain issues, consumer wariness about EV pricing, batteries and charging, and uncertainty about additional federal support pose potential roadblocks to hitting ambitious targets from the Biden administration and automakers themselves.

Consumer acceptance grows

All-electric vehicles remain a small share of overall car sales in the US. They made up just 0.4% of the total registered vehicle fleet in the country in 2020, according to the National Highway Traffic Safety Administration.

But in the third quarter of 2021, the most recent period for which data was available, Kelley Blue Book reported the highest level of interest in electrified vehicles it had ever seen: Nearly 1 in 4 new-vehicle shoppers considered either a hybrid or all-electric vehicle. And despite a global computer chip shortage that dragged down auto production and sales this year, the US notched more than 1 million sales of hybrids and battery electrics by the end of the third quarter, reaching their highest-ever share of the market at 10%, according to KBB.

Meanwhile, global consulting firm AlixPartners LLP conducted a consumer survey earlier this year that found that the number people who are very likely to buy a battery-electric as their next vehicle has more than doubled in the past two years, from 11% to 25% globally and from 5% to 19% in the US.

Experts chalk up recent growth in the segment to the launch of new models by companies that previously weren't in the electric space, and greater willingness among US consumers to consider something other than an internal combustion engine. Though Tesla continues to dominate the market, the past year saw new entrants in the US from Ford with the Mach-E, Volkswagen with the ID.4, the launch of startup Rivian's R1T electric truck and GMC Hummer EV pickup deliveries beginning this month.

But EVs also saw some setbacks. General Motors Co recalled every Chevrolet Bolt EV and Bolt EUV ever made, more than 141,000, for battery fire risk in August, halting the sale of its only EV models currently in the market. The automaker is now working to replace battery modules on the recalled vehicles and is keeping the Bolt plant down through February.

"Tesla has been the name of EVs for the past decade, and they're going to continue to be a strong player, but we're seeing finally some more viable products coming into the market from the traditional manufacturers," said Mike Fiske, associate director of research and analysis, automotive, powertrain and compliance for data firm IHS Markit.

The introduction of new EV models has opened options for Evan Gerstein, 28, of Chicago and his parents, Mark and Julie, who want to go electric for environmental reasons but aren't fans of Tesla's designs. Gerstein, though sticking with his gas-powered Audi for now, plans to eventually buy an EV, and in the meantime is helping his parents make the transition.

With the warranties up on their current vehicles and inventory shortages making it a prime time to sell, the Gersteins are considering an Audi e-tron SUV and perhaps the Porsche Taycan. They're weighing battery range options, and leaning toward buying new so they can take advantage of the US$7,500 (RM31,380) federal tax credit for certain EV models.

"The cars are here now," Gerstein said. "It's no longer just Tesla."

Binesh Patel, 48, of Bingham Farms, who married into a loyal Ford family, had been waiting for the Dearborn automaker to introduce an all-electric option. He got his wish, and in November he switched out his Lincoln Continental for a Mach-E GT.

Going electric has allowed him to cut out twice-weekly stops at the gas station to fuel up for his hour-long commute to Flint.

"I love it. The best thing I can say about the car is when you make a turn, the acceleration that you can immediately get on that turn feels like... a catapult around the corner," said Patel. "I'm already excited for the next Ford electric vehicle that I'll get in three years."

Automakers go all in

2021 was the year that Detroit automakers signalled they were all in on electrification, as President Joe Biden pushed to speed up the pivot as a key part of his economic and climate agenda.

The White House earlier this year set a goal, endorsed by the Detroit automakers, of 50% of new vehicle sales being EVs by 2030.

The Environmental Protection Agency this month released final auto emissions rules that would see reduction targets for 2023 to 2026 increase in stringency from 5% to 10% in each model year to reach a fuel-economy fleetwide average of 40 mpg in 2026. The EPA projects the new rules will accelerate consumer adoption of plug-in hybrids and EVs from 7% of sales for model-year 2023 to 17% for 2026.

Biden also signed into law an infrastructure package that allocates US$7.5bil (RM31bil) for EV charging and more than US$7bil (RM29bil) for battery manufacturing, materials and recycling.

And though its fate is uncertain, a second legislative package would include EV incentives of up to US$12,500 (RM52,300) per vehicle and make GM and Tesla again eligible for tax credits after they hit the cap on the existing US$7,500 (RM31,380) incentive.

Meanwhile, auto companies underscored their commitment to going electric with massive investments. AlixPartners this year reported that the industry's planned investment in electrification, which it looks at on a rolling five-year basis, jumped from roughly US$200 bil (RM836bil) globally to US$330bil (RM1.3 trillion).

GM plans to invest US$35bil (RM146bil) in electric and autonomous vehicles by 2025, with the goal of ending the sale of gas- and diesel-powered vehicles by 2035. Ford is investing more than US$30bil (RM125bil) into EVs through 2025. Stellantis NV plans to spend US$35.5bil (RM148bil) on electric vehicles and their software by 2025. And all three companies this year announced major investments in the EV supply chain.

"The inflection point in the money that the industry is putting in, it's definitely there," said Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners.

Barriers remain

Still, experts say the United States remains well behind leading EV markets in China and Europe, and will not hit an inflection point in terms of consumer adoption until around mid-decade. In the meantime, the nation will have to overcome complicated hurdles.

Among them are consumers' lingering concerns about vehicle range, affordability and the availability of charging stations.

AlixPartners found through its recent survey that vehicle cost remains among the top three concerns consumers have about buying a battery-electric vehicle. In October, the average price for an EV was US$56,000 (RM234,304), Cox reported, more than 20% higher than the average transaction price of US$46,000 (RM192,464) for a new vehicle.

And experts expect the segment will continue to be dominated by higher-priced options in the near term. Cutting prices depends on manufacturers' ability to leverage better technologies and scale production — at the same time, mainstream consumers are unlikely to buy in until more affordable options exist. That's where experts say federal policy on incentives, infrastructure, the supply chain and sustainability regulations plays an important role in helping bridge the divide.

"It all has to work together for this to be successful. You just can't have automakers produce really cool EVs without plans for better infrastructure across the country," said Jessica Caldwell, executive director of insights for Edmunds. "It really all needs to be in tandem."

In addition to offering more affordable EVs, Fiske of IHS Markit said automakers must continue to invest heavily in the supply chain: "Seeing shovels in the ground and plans being announced for battery plants and battery capacity and new chemistries, these are all steps toward achieving those 2030 goals and beyond. But we're going to have to continue to see this kind of pace of development and spend."

Still, 2022 could be a pivotal year for electrification. IHS Markit expects to see 30 new EVs introduced next year, entrants that will give consumers more choices, spur competition and potentially chip away at Tesla's market share. And industry observers will be paying close attention to the launch of key products such as the Ford F-150 Lightning, a battery-electric version of the best-selling truck in America for decades running with a starting price of US$40,000 (RM167,360).

Experts say that once consumers get into an EV, they're very likely to stay in one.

Take, for example, Brad Bell, 31, of Kalamazoo, who opted to sell his Chevrolet Malibu earlier this year and buy his first EV, Tesla's Model 3 sedan.

"Barring any crazy financial hardships, I would never buy another gas car again," Bell said. "We're already talking about eventually getting rid of our minivan and looking into a Model Y." – The Detroit News/Tribune News Service

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