The electric vehicle (EV) market in the United States is a dynamic landscape influenced by consumer sentiment, industry trends, interest rates, and government policies. As we look ahead to the next five years, opinions vary regarding EV sales and adoption; unpacking these, sometimes conflicting, narratives is crucial to understanding the trajectory of this rapidly evolving industry.
EV Adoption
EVs, like other new technologies, saw a rapid increase in sales and year-over-year growth primarily due to innovators and the first wave of early adopters. Early adopters of EVs had both the wealth and, generally, at least one other motivation driving their purchases. Buyers were motivated by environmental benefits, being first with new technology, decreased reliance on gas (avoiding the volatility of gas pricing), favorable interest rates, etc. This group of early adopters were also able to manage the risk of the new technology, often having more than one vehicle and a home / homebase to install charging infrastructure.
Contrary to some headlines suggesting a slowdown in EV sales, data from Bloomberg NEF indicates a significant year-over-year growth in EV sales in North America. Although the growth rate is projected to decrease in 2024, it remains robust compared to other segments of the transportation industry. The availability of more EV models and strong incentives for adoption indicate continued growth potential.
Evaluating monthly sales data for light duty vehicles over the past five years, there is a consistent increase in the percentage of new vehicle sales that are EVs (total sales share). This trend, like many other new technologies, is an s-curve that will likely repeat as there are periods of innovation and slower adoption followed by rapid adoption and then another round of innovation. The sales curve for EVs may not be as predictable as other new technologies due to vehicle availability, legislation, incentives, interest rates and other factors that impact buyers.
Sources: Argonne National Laboratory, Light Duty Electric Drive Vehicles Monthly Sales Update; (P) C6 Insights Predicted Values
A Slowdown?
Looking at the same monthly sales data from the graph above, the year-over-year growth rate is declining but still shows a positive growth rate. Interpreting this decline in the growth rate as a measure of EV potential is misleading. This change in the growth rate is not a decrease in sales or share of sales, but rather the rate at which that share is increasing. Again, this is an expected trend that can be explained by usual technology adoption trends and also by factors specific to the EV market. For example, EVs are still inaccessible for many as prices have not reached parity with ICE vehicles in the same classes, there have been limited options for used EVs, and interest rates have increased.
While many anticipate continued growth in the EV market, there are concerns about potential declines in sales. Some experts caution that obstacles such as charging infrastructure limitations could impede further adoption, especially among commercial and industrial fleets. The reduction or end of subsidies and incentives adds another layer of complexity to the future of EV sales. EV adoption in the US market is also highly variable at the state level.
A recent report by J.D. Power highlights this growing divide in EV adoption across states. For example, California stands out with a projected 94% EV market share by 2035, while states like North Dakota and Michigan are expected to have significantly lower adoption rates in the same time period. While these differences raise concerns about overall EV adoption rates, the state to state variances are not unexpected. Like with many technologies, adoption is influenced by accessibility (both to try and use), compatibility with existing values, environment and infrastructure, and observable benefits. In some states, where there are many early adopters, state incentives/mandates, and developed infrastructure (like California), switching to an EV is an easier decision. For North Dakota, where there are range and infrastructure concerns, vehicle limitations (for off-road, heavy loads, extreme weather, etc), and alternative fuel options (e.g. biodiesel), EV adoption may be limited without further innovation.
Future Outlook
While there may be challenges slowing the growth rate of adoption, EVs remain an important solution in the roadmap to sustainable transportation. There is an evolving landscape of EVs with new model offerings, battery innovations, charging innovations, and price parity. The transition to electric vehicles offers global and local environmental benefits, by reducing both greenhouse gas emissions and harmful air pollution at the community level. Fuel costs and incentives play a crucial role in accelerating EV adoption by making EVs more affordable and driving demand for charging infrastructure.
When comparing the costs of electricity and the cost of gasoline in each state, companies and residents of many states can capitalize on significant savings per mile with a switch to EVs. The cost savings are especially compelling when combined with the environmental benefits where electric grid emissions are low (cleaner grids). The two maps below show the cost savings of electricity over gasoline (darker blue indicates higher savings) and the level of grid emissions (darker green indicates lower emissions).
Savings calculated based on a Ford F-150 driving 12,000 miles/year vs equivalent EV driving the same distance
States like California and New York have very clean grids, but the ongoing fuel cost savings when switching to electric may not be as attractive. However, the legislative environment will likely continue to support the switch to EVs with financial incentives. States like Missouri and Nebraska offer significant financial savings when switching from gas to electric, but their grid emissions still need to be reduced to deliver a more significant environmental benefit. Then there are states like North Carolina and Washington that check both boxes – a cleaner grid and the potential for greater fuel savings.
As the US navigates evolving trends in EV sales and adoption, addressing access to charging infrastructure, increasing the variety of models in the market, and maintaining incentives will help support continued growth of this developing technology. This transition to electrification presents both opportunities for investment and challenges; strategic planning, from policymakers to industry leaders, will guide the shift to electric mobility in the next five years.
About C6 Insights
C6 Insights’ carbon-management platform provides industry-leading emissions and sustainability analytics for fleets using existing telematics data. We embrace a multi-faceted approach to fleet decarbonization that is not just about reducing emissions; it's about reshaping the future of mobility and logistics. Our mission is to accelerate the decarbonization of transport through better measurement, education, and engagement, and by proving the financial benefits of a low-carbon fleet.
