Anshula Gupta is on his third electric vehicle. Two years ago, he decided to buy a Hyundai Kona EV because it offered the best bang for his green-conscious buck.
As a policy and research director for the group, NY for Clean Power, he seeks to support clean energy causes like the electrification of the country’s transportation sector. He’s optimistic about EVs in the U.S., but points out home-grown brands need to better cater to a spectrum of consumers. “The market is very light for small vehicles. SUVs with more metal and larger batteries are costlier,” says Gupta.
The American automotive industry is very globalized, as vehicles and parts flow between the U.S. and the rest of the world. With affordable Chinese EVs that could soon cross the Pacific Ocean, American politicians are enacting protectionist policies to make sure Detroit isn’t undercut in the future. Still, those automakers will need to innovate and price well to guarantee consumers want to buy their battery-powered cars over gas-powered alternatives and other foreign EVs.
Last year, a record 1.2 million U.S. buyers chose electric vehicles, according to estimates from Kelley Blue Book, a Cox Automotive company. The EV share of total U.S. vehicles stood at 7.6% last year, up from 5.9% in 2022, according to the data.
“We are forecasting about 10% market share for EVs in 2024,” says Stephanie Valdez Streaty, a director at Cox Automotive. With the Covid-19 pandemic and subsequent chip shortage, there were inventory issues in the past few years, especially with electric vehicles. Inventory is now rebounding thanks in part to foreign competition, according to Valdez Streaty.
EV adoption growth is slowing, but is not expected to reverse. In 2022, EVs as a percentage of new light-duty vehicle sales increased 63% from the previous year, according to a report from Alliance for Automotive Innovation. In 2023, that metric in comparison increased 36% from the previous year. “I think it’s going to be a bumpy ride and we’re going to have slow growth,” adds Valdez Streaty.
Passed under President Joe Biden in 2022, the Inflation Reduction Act changed the rules for the credit for vehicles purchased from 2023 to 2032. Some all-electric and plug-in hybrid vehicles qualify for a $3,700 to $7,500 federal tax credit. Car models such as this year’s Tesla Model 3, Ford F-150 Lightning and Chevrolet Blazer qualify for the credit.
Tesla is far and away the leader of EV sales in the U.S., capturing 55% of the EV market in 2023 according to Kelley Blue Book. That’s down from 65% in 2022, but lower prices are expected to help the company hold onto a sizeable market share. A Tesla Model 3 Long Range costs $47,740 in cash as of this writing.
While the American-based Tesla leads other car brands by far, Detroit still has a singular fear: China. The Chinese car manufacturer, BYD, sells a hatchback EV for less than $10,000. The Alliance for American Manufacturing, a trade group backed by major manufacturers and labor unions, warned that the introduction of affordable Chinese automobiles could be “an extinction-level event for the U.S. auto sector.”
The fear is warranted according to David Steinert of AlixPartners. “Chinese brands are doing well because they’re focused on developing attributes that are important to young, tech-savvy Chinese consumers like interior aesthetics,” he says. “Western brands are more focused on attributes that appeal to the older consumers like handling and power.”
Steinert sees similarities in the current automobile trend to China’s manufacturing boom of the 1990s and 2000s. With government support, Chinese car brands have taken those lessons and responded nimbly to new EV technology and trends. “Last year, China became the leading exporter of vehicles in the world. One in every 14 cars made in China was exported,” he adds.
Politicians are taking notice. Three senators urged the Biden administration to increase import tariffs on Chinese electric vehicles, Reuters reported. Last month, President Joe Biden ordered the Commerce Department to open an investigation into security threats posed by operating systems in internet-connected Chinese cars and trucks.
The protectionist moves, especially in an election year, raise alarm bells among those in the industry. Cheaper options would increase EV adoption, in line with the Biden’s administration’s emissions goals, but at the cost of undercutting American legacy brands.
Meanwhile, government-funded centers like the Argonne National Laboratory are helping facilitate research in the EV space. Argonne hosts an annual EcoCAR EV Challenge where universities compete to engineer a next generation battery EV. Those students fill out a talent pipeline for American car companies, according to Kristen Wahl, a director at Argonne.
“We are at an inflection point for EVs. A lot of exciting things are happening, but certainly incentives from the government are going to be necessary for the country to be really competitive in that global marketplace,” says Wahl.
The future of American EVs might be decided by politicians and the degree to which they tweak tariffs and subsidies. With the presidential election less than a year away, the possibilities will certainly become clearer for manufacturers and consumers in November.