John Denslinger takes a detailed look at how the dynamics of electric vehicle uptake are shifting over time and how this is influencing manufacturers’ design and production strategies .
Weather reporters often use the term ‘ice jam’ to refer to a mass of frozen ice chunks that clump together blocking a river’s flow. In the automotive world, the ice jam is the consumer’s affinity for ICE (internal combustion engine) that’s hindering EV adoption. At 78 per cent market share (24H1 estimate), ICE still dominates new car sales. Worse yet, a March Gallup poll found buying interest in EVs declined 2023 to 2024 from 55 to 44 per cent. Traditional automakers previously ignored the strength and preference for ICE vehicles and only now are they re-investing in EV, ICE and hybrid options more in-line with actual market demand. It seems all the regulatory urgency pushing EV adoption at any cost was unrealistic in the first place.
That is the tip of the iceberg. EV adoption faces a larger problem ahead. There is a loyalty struggle among current EV owners when it comes to buying that next vehicle. A recent Mobility Consumer Global Survey by McKinsey reports 45 per cent of US EV households plan to switch back to ICE vehicles. US consumers consistently point to three issues governing their buying decision: price, infrastructure and practicality. In the minds of many consumers, only ICE checks all the boxes.
So why are consumers opting for ICE over EV? Is it more than price, infrastructure and practicality?
The number one concern is total cost of ownership. ICE and hybrid models typically cost less to own and operate than comparable EV models. Consider the following. According to NADA, ICE vehicles enjoy a five-year average cost advantage over EV in: purchase price by 42 per cent; financing by 40 per cent; insurance by 20 per cent; depreciation by 56 per cent; and total cost of ownership by 14 per cent. EV vehicles enjoy advantages in: fuel/energy by 120 per cent and maintenance by five per cent. Repair costs were said to be comparable.
Second is a reliable infrastructure that adequately supports EV charging anywhere. By comparison, ICE refueling is easy and quick benefiting from a gas station on every corner. Consumers have little faith the Fed can actually build-out a national charging network that adequately supports EV travel.
Next is anxiety. Battery technology is far from optimized. Advances in range, weight, safety and charge time could renew EV interest and spur faster adoption. Meanwhile, hybrids to the rescue! Hybrids are an attractive alternative to EVs offering fuel cost relief and reduced emissions without the anxiety.
Lastly, EV incentives are disappearing, removing any compelling urgency to buy now.
Americans are increasingly favoring hybrids over EV and US automakers have reacted. Ford announced a delay in its EV plans to develop hybrid versions of all its models by 2030. GM originally committed to 100 per cent EV by 2035, but now plans to re-introduce hybrid models. Toyota got the strategy right from the beginning by listening to the customer and responded with a broad offering of ICE, hybrid and EV models.
While ICE sales are now outperforming EVs, it’s important to recognize EV sales are still gaining market share although the pace has noticeably slowed. Eventually, ice jams give way and the river flows again. Likewise, ICE and hybrids will eventually give way to EVs.