EV Adoption Increasing, Boosted by Policy
Monday, May 01, 2023
EV Adoption Increasing, Boosted by Policy
Resource considerations raise questions
By Michael Chung, Director, Market Intelligence, Auto Care Association
Adoption of battery electric vehicles (BEVs) in the United States has increased substantially the past several years – BEVs accounted for 6% of new vehicle registrations in 2022 and are forecast to reach 56% of vehicles sold in 2035 and 81% in 2045. This would translate to 19% of the U.S. car parc being BEVs or plug-in hybrid electric vehicles (PHEVs) in 2035 and 42% in 2040 as reported in our Joint EV Trends and Outlook Forecast, released at AAPEX 2022.
Clearly, momentum is building. And consumer preference studies confirm this: as reported in the 2023 Deloitte Global Automotive Consumer Study, 8% of U.S. consumers prefer a BEV for their next vehicle, 8% prefer a PHEV and 62% prefer an internal combustion engine – down from 69% in 2022.
The U.S. Environmental Protection Agency’s recent proposed emission standards to reduce harmful air pollutant emissions from light-duty and medium-duty vehicles starting with model year 2027 incentivizes vehicle manufacturers to produce more electric vehicles, so it seems likely that more consumers will make the switch.
Vehicle Affordability Remains a Hurdle
Vehicle prices are high, though – the average price of a new light vehicle in 2Q2022 was $45,700 – 36% higher than in 1Q2018, according to S&P Global Mobility. New vehicle prices generally favor gasoline powered vehicles: The New York Times reports that “the average price of an electric vehicle was $61,488, compared with $49,507 for all passenger cars and trucks, according to Kelley Blue Book” at the end of 2022.
Vehicle affordability remains a significant hurdle for U.S. consumers – according to the Deloitte study noted above, “nearly 7 in 10 of those looking to purchase an EV in the U.S. expect to pay less than $50K for their next vehicle.” A tailwind for EV adoption is that total cost of ownership parity is expected in 2024 when accounting for costs associated with fuel/energy, maintenance, taxes, registration fees and depreciation of both the battery and the vehicle itself based on projections by Strategy &.
Parts Growth Potential Amidst Sourcing Concerns
Growth of EVs creates opportunity for manufacturers of parts associated with electrification and Advanced Driver Assistance Systems (ADAS) – this includes batteries, inverters, alternators, starters, sensors, electronic control units, cameras, central processors and the like.
However, material sourcing has been raised as a concern – whether from a planetary capacity or source country perspective. Copper, cobalt, lithium, manganese and nickel are widely reported as elements necessary for EV manufacture. Interestingly, at least one mining company proposes to mine the ocean seafloor for nodules (“potato-sized rocks” as reported by The Washington Post) rich in these materials – thankfully, numerous vehicle manufacturers publicly support a moratorium on seabed mining or do not currently include seabeds as a source in their supply chain.
More Models, Restricted Incentives
Many new vehicle providers are expected throughout the decade, with multiple models expected to be marketed in the coming years.
Incentives for new vehicle purchase are geared toward domestic brands – as reported by The Wall Street Journal, federal tax breaks through the Inflation Reduction Act are available for buyers who meet certain income requirements of vehicles that are built in North America, cost less than $55,000 (sedans and coupes) or $80,000 (SUVs, light trucks, vans) and meet certain battery-sourcing requirements. This brings the list of vehicle models now eligible for a tax credit from 25 to 16 (additional information available at the U.S. Department of Energy).
New Forecast Coming to AAPEX 2023
The automotive aftermarket has seen numerous interesting trends develop over the past several years and the emerging narrative around EV adoption continues to stimulate considerable interest and discussion. The Auto Care Association and MEMA Aftermarket Suppliers look forward to updating our Joint EV Trends and Outlook Forecast and releasing it at AAPEX later this year. Stay tuned for more updates throughout the year and see you in the desert!
Michael Chung is director, market intelligence at Auto Care Association. With more than a dozen years of experience in market research, Chung provides the industry with timely information on key factors and trends influencing the health of the automotive aftermarket to help businesses throughout the supply chain make better business decisions. Chung has earned degrees in chemical engineering, environmental health, and business administration.
May 1, 2023