Are Electric Vehicles Losing Ground in the Race for Auto-Market Dominance?

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Electric vehicle demand is dropping, and automakers know it. Despite a record 2023 for EV sales, the start to 2024 has been marked by sales values dropping, competitive gas prices for existing combustion vehicle owners, and EV battery equipment malfunctions in colder climates. The opening month of 2024 has been a reality check for automotive manufacturers and the long heralded green shift towards renewables and electric cars. You can bring the consumer to the EV but you can’t make them drive it apparently, at least not in this economy.

Furthermore we have seen a marginal increase in negative mentions on our ESG Platform for electric vehicles, which is normally an overwhelmingly positive topic in our Taxonomy.

The lack of demand for EVs starts with the infrastructure. Combustion engine vehicles could not have had their meteoric rise without fueling stations and roads built for them. EV charging in the U.S. remains extremely limited despite the focus by corporations and the government on building out the electric infrastructure. In Chicago Tesla users have been unable to charge their batteries in the extreme cold. In California Volkswagen has spent $800 million on EV charging but they are reportedly faulty and inefficient. Their charging network, Electrify America is the largest charging station network in the U.S., with Tesla charging as a close second. The other problem with this is Tesla charging stations are exclusive to Tesla vehicles. Imagine not being able to pump gas for your car because it is a different brand than the gas station. Furthermore Tesla has started to charge fees for charging in crowded cities like New York. In parsing out charging and making it difficult for users, the auto industry forgot one of the biggest lessons in the combustion engine’s success, its ubiquitous compatibility with nearly any gas station in the world. Just as infrastructure played a role in the automobile industry’s rise, it is playing an equally important role in hindering the electrification of it.

If infrastructure is the skeleton of the combustion engine staying power, gasoline is its lifeblood. Even amidst global unrest and shipping disruptions in the Red Sea, gas prices have remained relatively stable and affordable for most consumers in the U.S. These same shipping disruptions have caused EV manufacturers to balk at their plans to expand EV production. This hasn’t seemed to affect the price of gas in America in the short-term though, maybe an upcoming election cycle plays some part in that. In fact, the cost of a gallon of gas has gone down in recent years from nearly $4 a gallon at its high in 2022 to roughly $3.08 a gallon at the beginning of 2024. When it comes to prying drivers away from combustion engine vehicles, the dropping gas prices give the combustion engine major staying power.

The drop in EV demand is not just affecting the auto industry, but also their supply chains. Lithium mining expansion was expected to be big business about a year ago, but dropping demand in EVs has led to a ripple effect that has caused major lithium miners like Albemarle to reduce production. Hertz, in the car rental business rather than car production, is selling off its EV fleet citing low demand. There are periphery players that have been caught up in the EV euphoria that are now getting stuck with the ramifications. Toyota has long been an outlier in the automotive industry in that they have been pushing for a hydrogen fuel cell solution as opposed to a battery electric solution. Green hydrogen fuel has become the choice method for greening more industrial vehicles that typically run on diesel. This is primarily because larger batteries are too heavy and impractical for larger trucks and ships. Hydrogen infrastructure is also more compatible with existing infrastructure making it more easily adoptable. While EVs have had a large head start in the consumer grade vehicle market, hydrogen has never looked as enticing compared to EVs as it does now.

Despite the government investment, and tax incentives, and plans for large scale production, the cost of an electric vehicle is simply too high to compete with traditional cars, and the EV charging network too immature to pry a meaningful number of drivers away from combustion engines in the near future. There are some ideas that automakers should seriously consider, primarily manufacturing the hybrid model. If the combustion engine is going to be phased out more slowly than previously assumed, consumers should have a vehicle that shares some of the benefits of EV but not totally dependent on a developing EV charging network. Another easy win for adoption would be to standardize EV charging infrastructure so all vehicles can use the same chargers. While gas prices may be low now, it won’t be forever. The market is always moving and eventually demand for EVs may rebound, even though at this point in time it seems unlikely.

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