Electric vehicle sales reach a tipping point in 2022

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The next time you’re driving through a crowded parking lot, try to remember what you saw just a few years ago. Things are different now. There are a lot more electric vehicles, and they’re not just Teslas anymore either.

“It’s not your eyes that are deceiving you,” said Matt Degen, publisher of Cox Automotive, a company that owns several automobile-related websites and businesses. “For a long time, most EVs on the road were Teslas, and they still get the lion’s share of sales, but now they’re hardly the only game in town.”

Electric vehicles accounted for 5.6% of all new vehicles sold last year, according to Kelley Blue Book. That might not seem like a lot, but in 2019 that number was just 1.4%. Based on experience in other global markets — particularly Norway — 5% market share appears to be an important tipping point for broader adoption, said Corey Cantor, a researcher at BloombergNEF. Other markets such as China and Europe in general showed similar trends, according to data provided by BloombergNEF. Bloomberg includes plug-in hybrids in its “electric vehicle” count, but the vast majority are purely battery-powered models.

It’s unclear exactly why 5% seems to mark the point at which EV sales really take off. It may mark the level where something starts to feel normal. Hyundai’s overall US market share, for example, is about the same as the electric vehicle market share, according to Cox Automotive, and buying a Hyundai doesn’t seem strange or unusual at all. It’s starting to be the same for electric vehicles: it’s not uncommon to see them on the roads anymore, which makes it easier to think about buying one.

Now, electric vehicles just have to become easier to buy.

“I think now the demand is definitely there,” Cantor said. “It has been more of a supply-side issue of automakers not being able to ship enough.”

The global auto industry has been grappling with parts supply issues that have slowed production of all types of vehicles. But several electric models also proved to be popular beyond what their manufacturers were prepared for.

The Mustang Mach-E, which hit the market in 2021, it was the first electric vehicle to get a notable share of Tesla’s still dominant electric vehicle market. Ford is still struggling to produce enough to meet demand. Each of the more than 150,000 Mach-Es This one Ford’s output so far has been built to a specific customer order, with none being made just to fill dealer lots, said Darren Palmer, vice president of electric vehicle programs at Ford.

“We could sell it at least two or three times,” he said. “We have held back from launching more global markets because we are completely sold out.”

Since then, Ford has also introduced the F-150 Lightning, an all-electric version of America’s best-selling vehicle, the F-series pickup truck. Ford is already expanding the new factory in Dearborn, Michigan, where the Lightning is built, pouring more concrete to increase floor space even as trucks are being assembled inside.

The variety of EVs available for sale has also increased.

In 2019, there were 11 EV models selling over 1,000 units, according to Kelley Blue Book. This year, there were 26. Hyundai and Kia, which already had EVs on the market – albeit not very exciting ones – released the radically designed Hyundai Ioniq 5 and Kia EV6. Rivian released the R1T truck and R1S SUV. And General Motors saw a huge sales run for its Bolt EV and Bolt EUV as they returned to the market following a battery recall. Luxury brands like Audi, BMW, Mercedes, Genesis and Volvo have also added EVs to the market.

“There are different segments, different price levels,” Degen said. “It’s not just having to spend $50,000 or $100,000 on an EV anymore.”

Cheaper electric vehicles are also improving with longer ranges and faster charging, said Tony Quiroga, editor-in-chief of Car and Driver. The Hyundai Ioniq 5, which has a starting price of around $41,000, won Electric Vehicle of the Year for Cars and Drivers this year.

“It goes from 10% to 80% on a fast charger in 18 minutes,” Quiroga said, “something only luxury brands were doing.”

The even wider range of EVs hitting the market next year, combined with the easing of the production issues that have hampered overall car production this year, should help EV sales rise even further – although there are some unknowns.

Take gas prices, for example. The increase in costs to fill the pump earlier this year “made people aware of the [electric] vehicles, even if they weren’t thinking about them before,” said Jessica Caldwell, industry analyst at Edmunds.com.

But gasoline prices have also dropped significantly in recent months, which could reduce some drivers’ urgency to switch to electric in 2023.

The impact of the Inflation Reduction Law is also not yet clear. The law, passed this year, changes the rules around which electric vehicles are eligible for consumer tax credits. It imposes limits on the price of the vehicle and on the buyer’s income; there are also requirements aimed at promoting domestic production of electric vehicles and their batteries.

The key question is not just how many EV models will qualify, but which ones, said BloombergNEF’s Cantor.

“So if a Tesla Model 3 and the Chevy Bolt and the Tesla Model Y and a Ford Mach-E and an F-150 Lightning qualify, those are high-volume vehicles,” he said.

Given their popularity and already high sales, incentive rules can help significantly increase EV sales.