EV market growth hindered by cost, infrastructure

LAS VEGAS—Sales of battery-electric vehicles (BEVs) seemed to have plateaued this year as some OEMs have switched to investing in hybrids, making them a substantial part of their portfolio mix through 2030, according to the "2024 Joint EV Trends and Outlook Forecast," sponsored by the Auto Care Association (ACA) and MEMA Aftermarket Suppliers.

The report, unveiled during the AAPEX show in Las Vegas in November, provides analysis and forecasts on the continuing shift toward electrification. Research and analysis were provided by PwC Strategy&.

After years of steady growth, BEV adoption in the U.S. is expected to slow down due to potentially curtailed regulatory forces; higher selling and maintenance costs versus internal combustion engine (ICE) vehicles; and an underdeveloped charging station infrastructure.

BEVs are expected to account for 8 percent of new vehicle sales in the U.S. in 2024, slightly higher than the 7.7 percent of sales for 2023; U.S. BEV adoption had been increasing at a rate of about 25 percent CAGR since 2019.

Last year's Joint EV Trends and Outlook Forecast report projected that the share of electric vehicles in operation in 2025 would be triple that of the share in 2023, and that the 2025 share would triple again by 2030 and continue to build momentum.

However, this year Strategy& provided a more conservative short-term forecast for EV penetration.

BEV adoption varies significantly by state, with zero-emission-vehicle-mandated states leading in EV adoption over the rest of the country.

But the first quarter of 2024 was the first quarter since COVID to see sequential decline in BEV sales, with new vehicle sales dropping to 7.3 percent in the period, from 8.1 percent in the fourth quarter of 2023, according to the report.

But sales have since edged up over the course of 2024.

Globally, BEV adoption has plateaued in the last two years, the study said.

Overall, BEVs are expected to reach 30 percent of total light vehicle sales by 2030 and grow to 59 percent of sales by 2035.

But for the overall vehicle car parc, BEVs will only account for 8 percent penetration by 2030, growing to 20 percent in 2035, the study predicted.

Because of the BEV drawbacks, hybrids will enjoy a longer run, serving as a transition from ICEs to BEVs, the study said.

Many of the OEMs (Toyota, Honda, Ford and Stellantis) are keeping hybrids as at least 15 percent of their portfolio mix going into 2030. Therefore, as BEV adoption slows, hybrids will grow to 24 percent of sales until 2030, but taper afterwards, the study said.

In 2024, hybrids accounted for 13 percent of U.S. car sales and grow to 24 percent by 2030, but drop to 11 percent by 2040.

However, as for the vehicle parc, hybrids account for only 3 percent and BEVs 2 percent of the 284 million cars on the road; by 2030 hybrids will account for 9 percent and BEVs 8 percent of the estimated 293 million cars; by 2040 hybrids will make up 13 percent and BEVs 35 percent of the estimated 312 million cars on the road, the study predicted.

Another stumbling block to BEV adoption is that 41 percent of current BEV owners would consider switching back to ICE vehicles due to disillusionment over BEV range, higher maintenance costs and driving experience, Strategy& said.

According to its survey, 23 percent of respondents said the main reason for switching back was insufficient driving range; 25 percent cited higher maintenance costs; 30 percent cited the charging experience was worse than expected; and 23 percent said the driving experience was worse than expected.

The incoming Trump administration may impact the economics of owning a BEV, including regulations on fuel economy standards, EV incentives and ICE bans.

The report noted key factors influencing the cautious BEV growth forecast include price; consumers' concerns about battery charging; and service frequency.

A Strategy& survey indicated that 60 percent of prospective BEV buyers were willing to pay up to $45,000 for a BEV, but only 14 percent of current models are in this price range.

The total cost of owning a BEV over a three-year period is 20 percent to 40 percent higher than an ICE vehicle, driven by high transaction prices, insurance costs and a drop in BEV residual values due to recent price cuts, the report said.

The total cost of ownership without incentives "will be the tipping point for large electric vehicle adoption," the study said.

The availability of BEV charging infrastructure decreases consumer range anxiety but so far the number of charging stations is lagging behind the BEV adoption rate and needs to increase four-fold to meet about 35 percent of the adoption rate by 2030, the study said.

Charging time and duration are the biggest deterrents for prospective buyers: 65 percent are willing to wait only 30 minutes or less, the study said.

Automotive aftermarket growth over the next several years will be driven primarily by ICE vehicles, until they age out of the car parc.

By 2030, BEVs that are six years old or older (considered the service "sweet spot") will account for an estimated 15 percent of the car parc. So service providers have time to prepare their shops for servicing BEVs.

Small- to medium-sized shops will need to invest $80,000 to $270,000 in equipment and training over the next few years, according to the report, which also predicted that new dedicated BEV service shops will open in areas of high BEV adoption.

Investments by a shop with three to five service bays and one to three technicians can expect to invest:

• Technician training and certification: $2,500 to $10,000;
• Safety equipment: $5,000 to $15,000;
• Level 3 charging capabilities (50-150 kw): $40,000 to $100,000;
• Battery testing equipment: $10,000 to $20,000;
• Diagnostic tools: $7,500 to $15,000; and
• Lift modifications and battery handling equipment: $15,000 to $40,000.

The report suggested that service shops develop an action plan for preparing to service BEVs, including:

• Develop a BEV service catalog roadmap based on current portfolio assessment and customer demands;
• Upskill current technicians and hire new staff for BEV-related service procedures;
• Invest in training and certifications to stay up-to-date with technologies and service procedures;
• Invest in BEV-related infrastructure and equipments—bays, charging points, battery tables, etc.;
• Invest in technology to stay up-to-date on the latest tools and software for BEV maintenance and updates;
• Develop in-house safety protocols complying to battery HAZMAT requirements;
• Establish relationships with BEV manufacturers, dealers and suppliers to access parts, tools and technical support; and
• For a one-stop shop for battery service, identify partners for pack collection, repurpose, recycle and storage.

The full report is available for free to MEMA and ACA members; non-members can purchase the report at digital.autocare.org or mema.org.