Electric Cars and Plug-in Hybrids (PHEVs) Enter the Market in Low Numbers

Automotive manufacturers in the U.S. and around the world are investing very heavily in research, design and factory capacity for new electric vehicles (EVs) of all types. This includes fully electric cars and trucks as well as hybrids. Plug-in hybrids (PHEVs) are similar to standard hybrids (in that they can run on their gasoline-powered engines or battery power), but they enable the owner the option of plugging-in at home overnight to recharge the battery. This will eliminate the need to run the car’s gasoline engine, using only battery power as long as the relatively short range isn’t exceeded. (Standard hybrids recharge only by running the gasoline-powered side of the car, and by drawing on the drag produced by using the brakes.)

According to Cox Automotive, sales within America of all-electric vehicles rose from 490,456 in 2021 to 807,180 in 2022 and 1.1 million in 2023. EVs accounted for 7.1% of U.S. auto sales in 2023, compared to 5.8% in 2022 and 3.2% in 2021. Worldwide, there were about 14 million electric and plug-in hybrid cars sold in 2023, according to the International Energy Agency (IEA).

In the U.S., the Schumer-Manchin tax bill includes EV subsidies in which certain purchasers qualify for a $7,500 tax credit. The bill eases a previously established cap of 200,000 total all-time EVs sold per manufacturer that could qualify for credits and establishes an income limit of $150,000 per year for an individual, $225,000 for a head of household, or $300,000 for married couples who purchase the cars and want the tax credit. It also sets qualifying price limits of $80,000 for pickups, SUVs and vans and $55,000 for sedans. In addition, credits are being adjusted so that EV batteries must be made of materials mined or processed in the U.S. or in countries with which the U.S. has free trade agreements.

Competition is driving price drops to some extent, as Tesla now has lots of competitors in EVSs, ranging from well established companies like Ford and Volvo to startups like Rivian. Also, new, cheaper battery technology is being developed to make this possible. In 2023, Tesla dropped prices by $5,000 each for two of its popular base models, and also reduced prices for its Model 3 sedan and some Model Y crossovers.

Challenges For EV Makers’ Lofty Production Goals

The EV market is facing very significant challenges. EV sales represent a modest market share in most nations. Charging station networks are not well developed, and many potential buyers are concerned they will not be able to recharge when needed, particularly on long trips. Batteries remain costly. EV sales are so small compared to the expenses involved in manufacturing EVs that some manufacturers, including Ford and Rivian, are estimated to have been losing tens of thousands of dollars on each EV sold as of 2024. Tesla is faring better, with its substantial sales base, but its ability to earn a profit has largely hinged on the fees it earns by selling by selling “carbon offset credits” (nearly $2 billion in some years) to other car companies that do not meet emissions standards set by the State of California. Meanwhile, the world’s reliance on much of the EV supply chain coming from China, as well as controversy over the environmental challenges in mining and utilizing cobalt, nickel, manganese and other metals in batteries, pose other challenges to this sector. The bottom line is that it remains to be seen whether or not either governments’ goals or car manufacturers’ goals for EV production and market share can be met over the mid-term.

Electric pickups are garnering the lion’s share of EV attention in the U.S. Plug-in versions of the Chevy Silverado and the Ford F-150 have hit the market. Tesla delivered its first futuristic Cybertruck pickups in late 2023 (originally planned for 2021) while Rivian Automotive delivered the first of its R1T pickups in 2022. In 2023, the IEA reported electric truck sales in the U.S. reached 1,200 units, about three times the number sold in 2022 but still less than 0.1% of total truck sales.

As EV sales slow, sales of hybrid vehicles were moving upward. Manufacturers reported hybrid vehicle sales up 43% in the U.S. in the first quarter of 2024 compared to the same period in 2023. More buyers are choosing hybrids over EVs due to their fuel efficiency without the recharging concerns relating to fully-electric vehicles.

SPOTLIGHT: EVs Could Transform Detroit

The shift away from internal combustion engines (ICEs) is changing the face of automotive manufacturing in America and elsewhere. Vehicles that run on batteries require fewer parts than ICEs, making them less labor intensive to produce (needing about 30% fewer manufacturing workhours from start to finish). Yet another facet to the EV industry is the relative ease of production compared to that of internal combustion engines. According to Volkswagen, EV production takes 30% less effort that internal combustion vehicles. Ford concurs, saying that the simplified production of EVs could lead to a 30% reduction in labor hours per vehicle (which is not good news for the United Autoworkers Union). On the other hand, EVs rely on electrical engineers, software developers and other technicians and researchers, which may offset at least some of the job losses. Plants are undergoing major conversions. However, as of mid-2024, American manufacturers were scaling back on EV production and manufacturing plant construction due to sales that were falling far below initial expectations. JD Power forecast EV sales in the U.S. for all of 2024 of 1.2 million units, or only about 9% of all vehicles sold, down from a previous prediction of 12%.

Tesla has a massive network of Tesla-owned charging stations. As of mid-2024, Tesla’s Supercharger network (where Tesla owners can get a rapid recharge of batteries) had more than 50,000 stations worldwide, including about 2,260 housing more than 27,000 ports) in the U.S. Tesla recently agreed to open part of its U.S. charging network to certain non-Tesla owners. Another player in this sector, Electrify America, had more than 950 charging stations in operation by early 2024. The U.S. Government is providing massive financial incentives to qualified installations of new charging stations in America, both in homes and at commercial facilities.

SPOTLIGHT: Charging Stations

There are three levels of EV charging stations.

= Level 1 (120 volts), approximately five miles of range per hour of charging, typically at home.

= Level 2 (240 volts), approximately 25 miles of range per hour of charging, again typically at home.

= Level 3 (Fast Charging), approximately 100 to 200+ miles of range per 30 minutes of charging, typically at public charging stations.

China has imposed increasingly strict mandates boosting zero-emission vehicles due to the massive air pollution problem in Chinese cities. Tesla began exporting its China-made Model 3 to several EU countries in late 2020. The nation of India is also boosting sales of its electric vehicles. India, China and the EU are all likely to see very high ratios of electric car sales by 2030.

Internet Research Tip: Electric Cars

For the latest on electric car manufacturers see:

Electric Drive Transportation Association, www.goelectricdrive.org

Global Electric Motorcars, www.gemcar.com

Tesla Motors, www.teslamotors.com

Electric Vans and Long-Range Trucks: Tesla has developed heavy-duty electric trucks capable of hauling major loads up to 500 miles at a price of about $150,000 and up (considerably higher than the price of traditional diesel-powered truck costs). The first truck was delivered (about 3 years behind schedule) to PepsiCo in December 2022. Other early orders were on-hand from major companies like Walmart and FedEx.

Daimler delivered its first Freightliner eCascadia all-electric semi in August 2019. The problem with electrifying 18-wheeled trucks is the weight of including enough batteries to allow long driving range. Other truck industry firms, including Volvo, Peterbilt and BYD are active in electric truck research or manufacture. A diesel-powered engine weighs about two tons while an electric version with its batteries would weigh between four and nine tons, depending on range. However, long-range heavy electric trucks face massive challenges, including the lack of the specialized, high-capacity charging facilities needed at truck stops.

Improvements in EV technology are enabling the development of larger electric vehicles. Retail giant Amazon is purchasing electric delivery vehicles from Rivian Automotive. Amazon hopes to have 100,000 EVs on the road by 2030.

Electric vans are also being developed. GM created a new company, BrightDrop, in early 2021 to manufacture the vehicles. BrightDrop delivered its first 150 electric vans to FedEx in mid-2022. Startup electric van manufacturer Canoo delivered its first electric vans to NASA in 2023, for use as crew transportation vehicles at the launchpad.

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