By: Phillip B. Jones
I am both an optimist and a realist about our EV future.
First, optimism.
Ironically, the phasing out of the federal tax credit may have spurred interest in EVs and PHEVs. Q3 saw a surge in demand as tens of thousands of new EV buyers were spurred to action before federal tax incentives expired on September 30th. Worried about missing a deal, EV buyers who were on the fence over cost moved to take advantage of lower prices on a sale or lease. Buyers flocked to auto dealers to test drive these vehicles and became more familiar with the superior technology, design, infotainment systems, and trims of the various OEMs.
Auto OEMs and dealers predicted the surge in sales and produced and shipped ample supplies of EVs to dealer lots. Many dealerships offered fantastic deals on new vehicles in the leading up to the end of the federal credit– especially for leased vehicles. Sales surged to new highs with thousands deciding to go electric for the first time. From Plug in America and other consumer surveys, we know that once a consumer goes electric, they are likely to stay electric.
It is fair to expect that we will see a slowdown in new EV sales in the near term. A variety of macroeconomic factors like higher inflation and economic uncertainty are affecting consumer spending across the board and may likely impact all vehicle sales, not just EVs. But the market fundamentals driving EV adoption remain solid.
Public charging is more plentiful than ever and, while more efforts are still needed, reliability is improving. Automakers are refining and honing products and finding their equilibrium in supply and demand. Used EV sales are booming and poised to continue, bringing needed exposure, familiarity, and confidence to new markets. Utilities, EV service providers, and network operators are increasing collaboration to build out more reliable EV infrastructure and enroll customers in smart charge management and other programs.
Now some realities.
With federal incentives now officially gone, everyone is asking what happens now.
I have been on several panels recently with automotive experts who have offered forecasts. I am reading many articles in the trade press and talking with our members about where the future may take us. The truth is that no one really knows what will happen. As with other basic market transformations, the future may be bumpy and uncertain for a while – both for light-duty and medium heavy duty (MHD) EVs.
After talking with automotive experts and our members across sectors, these are some of the key market developments I expect to see over the near term.
Automakers Will Find Their Path and EV Inventory Will Begin to Stabilize
The private sector recognizes that it must pick up the baton and offer value to consumers. We have already seen some continuation of certain discounts and deals on EVs, and I expect this to continue. For example, GM and Chevrolet introduced a revised Chevy Bolt, a subcompact electric hatchback, available early next year at an attractive price of about $30,000. Other OEMs are similarly working to create more affordable and appealing EVs. Auto dealers need to work through their EV inventories after the surge in supply from OEMs. Over the next few quarters, the supply-side push from the OEMs for BEVs and PHEVs will moderate as they shift production in certain factories from BEVs to ICE or hybrids at least for the near term. OEMs will find their respective balance on EV strategy as they better understand what their customers want from them as a company and what they want from their EVs specifically.
Battery Technology Innovation and Domestic Supply Chain Will Drive Costs Down
Battery costs will continue to decline, putting downward pressure on prices. Battery chemistry innovation will continue through industry partnerships like the lithium manganese rich (LMR) announcement by GM several months ago with production scheduled to start in 2028. Other lower-cost battery chemistries, such as lithium-ion phosphate (LFP), have scaled up to become a mainstay in the industry. U.S.-based manufacturers have built up substantial production capacity with factories in nearly every region of the country from Kansas to Georgia to Michigan to Indiana. This tremendous growth in production capacity will accelerate electrification in transportation and beyond.
States Will Drive EV Growth with Their Policies
State leadership in clean transportation is more critical than ever, and several Governors, agency heads, and Commissions are stepping up to the table. Absent the California waiver, states like California, Colorado and Washington are actively seeking ways to spur EV growth and keep the momentum moving forward. The balance of NEVI funding has resumed with mostly private sector providers leading the way. Utilities continue to file TE Plans, tariffs, and other programs to integrate and leverage growing EV load. Charging providers are increasing their investments and deployments substantially. The capacity to deliver cost effective electrification is expanding, and states that continue to support EV infrastructure development will see significant growth. Those that choose not to will still see growth but at much slower rate, higher expense to customers, and with less benefit to their energy costs and electricity rates.
The Bumpy Road Ahead Still Leads to Transportation Electrification
While the near-term is fraught with uncertainty, all signs continue to point to transportation electrification. Getting there remains the task of the members of ATE and our partners and peers. In future blogs, I will discuss specific ways we can collaborate to build more EV infrastructure, implement managed charging programs, improve reliability, and increase the value both to consumers and the grid. While we must grapple with hard realities, the upward trajectory of transportation electrification remains strong. When we look back on this challenging period a decade from now, this may prove to be the moment that the EV market came into its own.