FOX Business’ Jeff Flock breaks down customer demand for electric vehicles.
The world’s largest car manufacturers have made something very clear: they believe that electric vehicles will dominate their industry in the coming years.
But to make it happen, they have to sell the idea to people like Steve Bock.
When Bock recently replaced his family’s Honda Pilot SUV in 2013, he considered the idea of buying an electric vehicle – and then got fired. An EV with enough space to carry his two dogs would cost too much, he decided. And he will be worried about driving long distances with too few charging stations.
“I would consider it if prices went down,” Bock said, although next time he left open the possibility of buying an electric vehicle.
Instead, Bock, from suburban Raleigh, North Carolina, settled on a Subaru Outback. Like the majority of other vehicles sold in the United States, it uses gasoline.
Opinion polls show that a large majority of Americans agree with Bock. An EV can appear on their shopping list if it costs less, if more charging stations exist and if a wider range of models is available. In other words, the time is not right.
All of this contributes to a significant risk for the largest automakers. Most of them have their future in mind that consumers will soon be ready to buy vehicles that have not been used for more than a century on the internal combustion engines that have powered cars and trucks, but on electricity packaged in a battery .
General Motors, Ford and Volkswagen plan to jointly develop $ 77 billion over the next five years in global electric vehicles, with models ranging from pickups to small SUVs. GM has gone so far as to announce a goal to end petrol and diesel-powered passenger vehicles by 2035 – and become carbon neutral by 2040.
For the automaker, the risk is as dangerous as it is simple: what if American consumers still reject electric vehicles for years?
Companies have no choice but to discount it and meanwhile hope that their profits from gas vehicles would still cover their costs – at least until large quantities of buyers to EVs increased.
If they do not, the financial burden can be severe. For now, EVs make up less than 2% of U.S. sales of new vehicles and about 3% worldwide.
“It’s still a sector that does not have a large 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 do not buy at the same level.”
Unlike the United States, car sales in Europe and China have risen, mainly due to much more drastic pollution regulations and government incentives. Those stricter environmental regulations are forcing the industry to sell more electric vehicles.
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In Europe, carmakers have unveiled a slew of new electric models ahead of lower EU limits for average emissions of carbon dioxide, the primary greenhouse gas to blame for climate change, which went into full effect earlier this year. Incentives supported by the government could reduce the cost of an internal combustion vehicle.
The result: Nearly 730,000 battery-powered vehicles were sold in Europe by 2020 – more than 300,000 of them in the last three months of the year. The market share of electric vehicles – battery and plug-in hybrids only – increased from 3% to 10.5%. By December, their share had reached almost one in four.
Among the new owners is Kerstin Griese from Essen, Germany, who bought a battery-powered Peugeot 208 after driving electric cars in the car pool at work. Griese found that they provided the necessary acceleration to merge safely on the highway for her 40-kilometer commute to the public works department in the city of Solingen.
‘I said to myself, if they cost about 30 000 euros and have more than 300 kilometers range, and if the incentives are high, then I’m there. And that happened last year. ”
After a government subsidy of 6,000 euros and the shareholder of 3,000 euros, her new car will cost about 24,000 euros ($ 29,000). The car can use fast charging stations along highways, where it can recharge within half an hour if it undertakes longer journeys, such as shopping trips to the surrounding Netherlands, about 65 kilometers away.
“I found it very attractive,” she said.
In China, which accounts for about 40% of global EV sales, purchases have accelerated due to the limitation on the number of internal combustion engines that can be registered in six major cities, said Arndt Ellinghorst, an analyst at research firm Sanford C. Bernstein. said. .
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Car manufacturers, including start-ups Lucid, Bollinger, Rivian and Workhorse, plan to launch 22 new EV models in the US this year after launching six last year, according to LMC.
Stricter regulations – and perhaps with them higher car sales – could also come to the United States if the Biden government succeeds in promoting electric vehicles as part of a broad plan to fight climate change.
Yet it can be an uphill battle. Only 260,000 fully electric vehicles were sold in the United States last year. This is out of a total market for new vehicles of 14.6 million. In fact, Americans in general continue to encourage cars in favor of less fuel-efficient trucks and sport utility vehicles.
Two polls late last year gave a glimpse into Americans’ appetite for electric vehicles. One, according to Consumer Reports, showed that only 4% of adults with a driver’s license planned to obtain an EV the next time they would buy a vehicle. An additional 27% said they would consider one. About 40% show some interest – but not for their next purchase. About 29% do not want an EV at all.
Similarly, when JD Power surveyed people planning to buy or rent a new vehicle in the next 18 months, only about 20% said they would probably buy an EV. About 21% were unlikely. The rest was undecided.
“For every customer who is seriously considering a new vehicle (electric battery vehicles), there is a different one on the other end of the spectrum,” said Stewart Stropp, senior director of automotive at JD Power.
For one thing, Stropp said, most buyers are not familiar with electric vehicles and do not drive in one yet. Those who do have it are about three times as likely to consider it, he said. People want just as many chargers as filling stations, Stropp said, but they apparently do not realize that most charging can be done at home.
The task of breaking down the reluctance of the American public to invest in a fully electric vehicle can be problematic. And the car manufacturers clearly recognize this. Last year, General Motors planned a major public campaign with test drives and engineers to answer customer questions at events across the country. However, the viral pandemic forced it to scrap the plan.
GM is making experts virtually available this summer as it sells a small Chevrolet Bolt electric SUV for just under $ 34,000, the first electric entry into the most popular segment of the US market. But Tony Johnson, marketing director of Chevy electric vehicles, acknowledges that there is no substitute for ‘seats on seats’.
Johnson notes optimistically that surveys conducted for GM show that the number of people who would consider an EV was much higher than it was five years ago. GM is keeping the price of the refurbished Bolt hatchback below $ 32,000, according to him, and offering free charging stations for homes.
Schuster predicts that U.S. sales will rise to 359,000 this year, starting in 2022 and reaching more than 1 million next year. By 2030, LMC forecasts US sales of more than 4 million EVs. But even that would make up only a quarter of the total market.
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In February, however, encouraging signs emerged when EV sales rose 55% from a year ago to 18,969, according to Edmunds.com. According to Schuster, the variety of models was a contribution to sales, plus additional incentives and the expectation of stricter pollution limits from the Biden government. Biden is in favor of extending a tax credit for the purchase of EVs and has promised to build 500,000 more charging stations and increase fuel consumption requirements.
A $ 7,500 federal tax credit is currently being phased out after a carmaker achieved 200,000 EV sales. GM and Tesla have both exceeded that level, and Nissan is close. A Democrat bill would increase the limit to 600,000.
The market will turn to EVs, Schuster predicts when all these forces are in line.
“There are more choices, competitive pressure,” he said. A new generation of technology will bring prices down. We get there. ”