One Step Forward, Two Steps Back
US EV adoption is still lagging
04 July 2024
US EV Adoption Still Lagging as Automakers Revamp EV Strategies
America’s well-known car culture romanticised in many classic movies was borne out of necessity as the car-centric urban planning that has occurred over the last few decades created the two-car household seen today. As a result, consumer attitudes and preferences towards personal vehicles are unique compared to other markets as they are viewed as a need rather than a want due to a lack of alternative transport options and travel distances. Furthermore, the transportation sector is responsible for 16.4% of the country’s emissions and the debilitating air pollution effects from living near major roadways is well documented. Therefore, we continue to ponder why EV adoption has been so low given these circumstances especially since Tesla is a homegrown success story. Although there are many consumer preference hurdles that need to be overcome, we also see a chicken-and-egg problem between the auto and the energy sectors playing out that will need to be addressed before we see robust growth in EV adoption seen in other markets.
Car-centric urban planning leads to the highest vehicle distances travelled and increased pollution.
First and foremost, the population density in the U.S. is one of the lowest in the world (13/mi2 vs 89/mi2 in the UK and Germany) as 70% of the population live in suburban and rural areas without alternative transport options. Furthermore, funding for highways and roadways has had priority over building and maintaining public transportation infrastructure for decades. In other words, suburban urban planning post war favoured highways and un-walkable suburban neighbourhoods without public transportation have made personal vehicles a necessity. Many urban centres also have unsightly elevated highways that make it difficult to travel between neighbourhoods even within the city without a vehicle. As a result, the U.S. has the most vehicle ownership per capita in the world (860 per 1,000 inhabitants vs. 632 in the UK and 627 in Germany) out of sheer necessity.
Personal vehicle transportation also accounts for 16.4% of the greenhouse gas emissions in the country and 36% of Americans live in areas with unhealthy levels of ozone and air pollution. The removal of tailpipe emissions via EV adoption would greatly reduce these exposures depending on the source of the state’s electricity generation. The bottom line is that it could easily be argued that EV adoption is the only solution to the country’s emissions and pollution problem, yet EV adoption only represents ~9% of the total vehicle market compared to the ~24% and ~27% rates seen in Europe and China.
![Source: Congress for the New Urbanism, Next City](/media/xdlbi5eq/car-centric-planning-sfa-oxford.png?anchor=center&mode=crop&width=1481&height=562&format=auto&quality=5&rnd=133647750636770000)
Source: Congress for the New Urbanism, Next City
Early adopters aside, there are a number of issues impacting the consumer willingness to take the EV plunge:
- Range anxiety is a real problem in this market especially in northern states. While the average American drives about 60 km (37 miles) a day and average EV vehicle range on a single charge is 300 miles, driving conditions, traffic volume, temperatures below or above optimal and battery ageing reduce that range. This is especially true in cold temperatures when range is reduced by 20-70%, depending on the model, temperature and driving conditions. Research by Consumer Reports found that the range starts to drop at 4°C and there was a 25% range reduction at highway driving speeds. While all vehicles struggle in the cold, even ICE vehicles, EVs have unique challenges in the northern part of the country that consumers may or may not be willing to take on.
- Upfront costs and vehicle availability play an important role in purchase decisions. According to Cox Automotive, the price gap between new EVs and ICE vehicles was $5,000 in 2024. Although this gap reduced from $17,500 in 2022 and we expect parity vehicle availability remains a problem. Tesla’s Model 3 and Y currently have 1-2 month wait times and have a starting base price of $39K compared to a price of $28K for the Honda Accord, the most popular vehicle in the country with no wait times. Given the reliance on personal vehicles in the country, upfront costs and wait times are a key deterrent to adoption in this market.
- Only Tesla has a straightforward purchasing arrangement with consumers in all states greatly impacting availability. Tesla circumvented traditional dealership networks and is one of the only EV brands offered in states that do not have additional EV incentives. According to the Sierra Club, 66% of car dealerships in the country do not offer EVs at all and only 15% of Toyota dealerships and 11% of Honda dealerships had at least one EV in stock. Until recently, Ford required dealers to invest over $1 million to join its ‘EV-certified program’ in order to receive stock.
- State incentives are needed to support EV adoption above and beyond the federal tax credit. Unlike the point-of-sale purchase incentives that have proved to be popular in Europe, the federal tax credit has always been cumbersome with buyers not knowing whether they were eligible even before the changes made under the IRA. While new rules will allow buyers to receive the EV tax credit at the point of sale rather than waiting for the next income tax season to receive it, EV adoption continues to be greatest with additional incentives and invests in public charging infrastructure.
- U.S. consumers generally prefer SUVs and pick-up trucks to sedans and micro cars. There are limited EV options in these preferred vehicle segments and the few electric SUV and pick-up truck models available are too expensive for the average consumer. The basic Ford F-150 gasoline model is priced at $39K while the electric version starts at $62K. This large price gap contributed to the high levels of unsold inventory seen last year and Ford cut production by 50% to 1,600 units per week.
True collaboration between the auto and energy sectors is needed
In the US, it is the state government and not the federal government, that regulates electricity markets and decides whether there is a price cap (regulated state) or whether prices are determined by market forces (deregulated state). This, along with the type of electricity generation and age of the state’s energy infrastructure, has led to substantial differences in electricity bills across the country. Similarly, average gasoline prices are also influenced by state and local taxes along with the distance travelled from the supply source. This means that the cost of running an EV compared to an ICE vehicle varies from state to state as well.
Energy infrastructure across the country is ageing with blackout frequency and duration becoming more intense especially in the evenings in the summer months. Since the energy infrastructure varies from state-to-state, so do the implications from ageing and many states do not have the capacity, nor the funds to modernise and expand capacity, to support growing EV adoption.
- A lack of cohesive public fast-charging infrastructure has led to a rise in charge anxiety. Most public charging points are in urban areas along the ocean coasts, and drivers who do not drive a Tesla must rely on third-party charging networks until a more standardised charging network is implemented. Last year, many OEMs, including GM and Ford, have announced the adoption of Tesla’s unique charging ports, now called the North American Charging Standard (NACS), thereby accessing Tesla’s robust and standardised network.
- Installing home chargers is not straightforward and may not even be possible. Although every home has the capability for level 1 charging, it takes 20 hours to fully charge a vehicle. Level 2 chargers may reduce charging time, but they need to be installed by an electrician, have the electrical capacity of the home assessed and submit the appropriate electrical permits. Concerns about the impact of EV charging on rapidly ageing electricity infrastructure are warranted in many parts of the country as many operators are struggling to meet demand.
- Data centers buildout in Georgia foreshadows the impact of EV adoption on the energy grid. In the state of Georgia, a growing number of data centers have built that has led to an additional 5GW in capacity demand. Combined with another 1.2GW in capacity demand from growth in other sectors, consumer bills went up $15.90 per month. Although Georgia Power received regulatory approval to add an additional 1.4GW in capacity from fossil fuel and renewable energy, it exemplifies the struggle that utilities are having with the proliferation of data centers, let alone clean-tech and battery factories.
US: New EV (BEV and PHEV) unit sales per quarter
![Source: SFA (Oxford), InsideEV](/media/lekpzrsa/us-ev-sale-sper-quarter-sfa-oxford.png?anchor=center&mode=crop&width=928&height=539&format=auto&quality=5&rnd=133647759021970000)
Source: SFA (Oxford), InsideEV
For more information on the US EV market and consumer sentiment, see our Q2 Battery Metals Quarterly Service available now
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Kimberly Berman
Energy Transition Technology and Metals Specialist
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