Consumer demand for electric vehicles (EVs) is at an all-time high – in fact, EV sales saw a 50 percent increase in the first half of this year, compared to 10 percent growth for combustion engine vehicles. Analysts estimate the U.S. will reach one million EV sales this year, and roughly one-third of U.S. drivers say they are considering an EV for their next car purchase. The Tesla Model Y is the best-selling car in the country.
These are the facts, yet I keep hearing claims about sagging EV demand. But to claim this is just flimsy cover for automakers who want to argue that a rapid transition away from polluting gas-powered cars and trucks is too ambitious.
Cox Automotive recently reported that EVs sit longer on dealership lots than do combustion engine vehicles. Based on that report, many media outlets concluded that EV demand is weak. Unfortunately, most analyses of Cox’s report ignore critical data and context.
For starters, Tesla, the best-selling EV manufacturer on the planet, does not use dealerships – so there is no data on the company factored into Cox’s report. Given that Tesla accounts for roughly 60 percent of all EVs sold in the U.S., to conclude that EV demand is low because EVs are sitting on dealer lots is judging demand based on only 40 percent of the market – and the weaker 40 percent at that.
For the EVs that are sold through dealers, Cox’s report looks at wait times for all EVs instead of differentiating by type – compact SUVs, hatchbacks, luxury electric trucks, etc. Internal combustion engine data is analyzed at a detailed level, instead of lumped together, so why do the opposite for EVs?
It’s 2023, and electric vehicles come in all sizes, shapes, and at wide-ranging price points. A closer look reveals that the EVs flagged for slower sales are largely big, expensive luxury SUVs or foreign-made luxury EVs. This isn’t just true for EVs: the slowest-selling gas-powered models right now are luxury cars and SUVs priced similarly to the slowest-selling EVs.
Large/Luxury EVs Sell Slower
Vehicles ineligible for federal tax credits are seeing higher lot wait times than others. If consumer demand for EVs was the problem, all EVs would be sitting on lots, not just the expensive ones.
Smaller, more affordable EVs like the Chevy Bolt and Tesla Models 3 and Y have set records and drove EV sales to all-time highs in the second quarter of 2023. That’s not a surprise, because the gas-powered cars with the tightest inventories in the U.S. are also smaller cars and compact SUVs.
The issue is not demand, it’s affordability, and it's affecting gas and electric cars alike. If the market for EVs appears weak overall, it’s only because automakers are making too many larger, pricier models and not enough smaller, less expensive ones.
Analysis of the car market cannot ignore the broader economy. High interest rates and a turbulent economy are changing consumer spending habits for all kinds of products, including cars. Earlier this year, analysts found new gas-powered cars are out of reach for many consumers as interest rates rise and the average price hit almost $50,000 (a 30 percent increase from three years ago). Manufacturers have reduced the number of affordable models, leading many people to put off buying a car or opt for a used vehicle.
Big Demand for Smaller EVs
Clearly there is enormous demand for affordable EVs. Luckily,automakers have more resources than ever from the federal government to make the transition to electric vehicles and to make more affordable EVs available now. With the Inflation Reduction Act signed into law, new tax credits for EVs make some models even more affordable than comparable combustion engine cars.
EVs are more popular than ever, and Americans want to buy them. We are moving from the early-adopter phase to the mass market, and car companies should adjust their production accordingly. Instead of producing bigger, more expensive electric trucks and SUVs, automakers must make more affordable EVs to meet booming demand.
East Peterson-Trujillo is a clean vehicles campaigner at Public Citizen, a nonprofit consumer advocacy organization that champions the public interest, https://www.citizen.org/