The Possible Perfect Storm Facing EVs
By Edward A. Sanchez — Dec. 1, 2023
Over the last few months, public and investor sentiment in EVs and their prospects has cooled considerably. Major automakers have scaled back ambitions, and others are smugly leaning back in their executive chairs and saying, “I told you so.” But in many ways, the EV ship has already sailed, whether it seems like it or not with the current narrative. Unfortunately, one of the very real prospects is a chaos scenario where certain segments of the EV ecosystem are over-invested, and others where it’s under-invested, which could result in a disastrous outcome that could sour consumers on EVs for years to come. Here are the major factors I see at our current stage.
Consumer Ambivalence About EVs
While many consumers tell pollsters they’re “likely” or “somewhat likely” to purchase an EV for their next car, it’s easy when it’s in the realm of the hypothetical, and powered by hopes and dreams. When the rubber meets the road and consumers have to deal with unenthusiastic dealers, unreliable public charging infrastructure, and shorter-than-anticipated ranges, the idealistic aura of EVs will fade quickly under the harsh light of everyday real-world use. Many will sell their EV and go back to ICE.
Already Billions Invested
While investments and plans have been scaled back with battery plants and factories dedicated to making EVs, there are many already under construction that can’t be easily paused or delayed. While many of these plants won’t be fully online for another two to three years, and the demand scenario for EVs could change considerably by then, in the meantime, it’s an unenviable scenario for corporations that are too far committed to turn back now.
The ”Osbourne Effect” in Action, Thanks to NACS
As Phil Royle and myself have discussed numerous times on The Watt Car EV Podcast and in multiple blog posts, there’s a very real possibility that consumers will delay or defer buying new EVs until they come equipped from the factory with the NACS, or in popular vernacular, the “Tesla” plug. Tesla owners have long enjoyed a significant strategic advantage over other EV drivers in charging convenience, availability and reliability, simply by virtue of Tesla’s superior charging infrastructure.
While that will inevitably change with other EV brands and drivers soon to populate Supercharger stations, Tesla’s head-start is significant, and it doesn’t appear the company is slowing down anytime soon on the buildout of its charging infrastructure. It could be a tough two years for brands that still have CCS1 models languishing on their lots. Expect massive discounts and rebates to try to entice consumers to purchase these “obsolete” models, or retroactive, dealer-installed NACS hardware port updates.
Still-Inadequate Public Charging Infrastructure
While it sounds like I’m beating a dead horse bringing up charging infrastructure, its importance to consumer adoption of EVs cannot be overstated. Yes, you will have some EV evangelists that will claim Level 1 120V home charging is perfectly acceptable for EVs, citing the 40-mile daily average commute for U.S. drivers. If you make a concerted effort to make an EV fit into your life, you can make that scenario work. But in America’s buy-it-now, microwave, ADHD culture, in addition to kids’ activities and sports, unexpected trips to the grocery and convenience stores, a 20+ hour recharging time (or considerably more with larger EVs) will be a non-starter for many. Furthermore, many Americans don’t have access to off-street, private parking, and many don’t have, or can’t afford to upgrade their garages for a 240V outlet. Affordable, reliable, ubiquitous public EV charging infrastructure is a practical mandate for consumer confidence in EVs.
The ”Other Shoe” – Tesla’s $25,000 Car
Tesla’s unpredictability is simultaneously amusing and terrifying to other OEMs. Almost none of Tesla’s vehicles have come to market on-schedule and on budget. But over time, the company has achieved nearly all of its objectives and claims, though sometimes three to five years after it said it would. The Cybertruck is finally coming to market five years after it was first revealed. That’s a complete model cycle for some OEMs. It has been beaten to market by the Ford F-150 Lightning, the Rivian R1T, and although in limited numbers, even the Hummer EV and Chevy Silverado EV. And it will not start at $40,000, as originally promised.
Likewise, the mythical $35,000 Model 3 was only available as an off-menu, software-limited special. Today, the Model 3 starts at approximately $39,000, after having gone up and down in price several times.
Musk claims the company is hard at work on a compact model smaller and more affordable than the Model 3 that will be built and sold globally, with a target price of $25,000. Some will dismiss these claims as “vaporware” or something that will only materialize three to five years down the road, and for considerably more than the claimed starting price. That may be true. But if this vehicle reaches the market even close to the claimed timeline and price, it will be a major disruption in the automotive market, much like the Model Y has become the best-selling vehicle in many markets globally, not just of EVs, but of all models on sale.
While the “Model 2” (or whatever it’s called) may not be the blockbuster hit in the U.S. (thanks to American’s historic aversion to small cars), it will certainly be popular in markets such as Europe and China, where practicality, economy, and urban maneuverability are top considerations. Tesla’s EV and overall market share, which many analysts and pundits expected would only inevitably shrink with more competitors entering the EV market, could potentially grow even more dominant.
The likely outcome of all of these factors – and I say this as a pragmatic observer of trends, not a Tesla fanboy – is even more commanding dominance of the EV sector by Tesla. Free from the legacy obligations of organized labor, not having to deal with the cost disadvantage of franchise dealership distribution and sales, and constant, iterative manufacturing and product innovation, the company is an elusive target for nearly every other automaker on the planet. While I still believe there will be room for multiple players in the automotive market globally, consolidation, acquisition and mergers are inevitable ahead. Some brands may die altogether, others may just turn into re-badges of other models.
I could be wrong and Tesla could wither and die, and Toyota could make a roaring comeback with EVs and surprise everyone. But I think Tesla has more than proven its staying power. I don’t think the question is whether Tesla is a winner anymore, but rather, it’s by how much.
