BEV Adoption Poor But No Plan 'B' Needed, Says Analyst

The past few months have been very difficult for battery-electric vehicles in the U.S. market, with dispiriting news items following each other like elephants in a circus parade.

For example, Ford announced that it was pausing $12 billion in BEV factory construction because many customers in North America were no longer willing to pay extra for the vehicles over their internal combustion equivalents. More recently, the company said it was cutting weekly production of its electric Ford F-150 Lightning by 50% because of slowing customer demand.

In addition, General Motors delayed production of its upcoming slate of BEVs for a few months “to make the trucks less expensive to produce, and therefore more profitable,” says CEO Mary Barra. And Hertz, which signed agreements with Tesla and Polestar to buy nearly 200,000 BEVs, is halting its rollout because of falling resale values and the high cost of repairs, which are about double what the company spends on ICE vehicles.

Late last month about 4,000 U.S. car dealers sent a letter to President Joe Biden asking him to pause proposed emissions regulations intended to accelerate the country’s electric transition. The dealers said consumers aren’t interested in buying BEVs, which are stacking up on their lots.

Perhaps the biggest blow to the market came in late November when Consumer Reports stated in its annual car reliability survey that BEVs “from the past three model years had 79% more problems than conventional cars,” while hybrids had 26% fewer problems than ICE vehicles.

Jake Fisher, senior director of auto testing at the nonprofit organization, says most BEVs are being manufactured by automakers that are new to the technology. “It’s not surprising that they’re having growing pains and need some time to work out the bugs.” He notes that some of the most common problems BEV owners reported were issues with electric drive motors, charging and batteries.

That is a lot of bad news in a short time for a technology that, in the U.S., is meant to have a 50% share of all new-vehicle sales by 2030. In the third quarter of 2023, BEVs accounted for 7.8% of U.S. new vehicle sales. That is expected to reach 9% by the end of the year, up from 7.3% at the end of last year. With seven years to go, there is still every chance that the Biden Admin.’s goal could be reached.

However, with sales slowing and a great deal of uncertainty about the 2024 presidential election, are carmakers now looking for a Plan B for their transition to zero-carbon transportation? According to Jose Pereira, mobility advisory director at Frost & Sullivan Europe, there isn’t any Plan B. “This is a temporary speedbump. I don’t think it’s a major issue. Yes, you have several compounding factors. Inflation and interest rates are high, which makes it hard on leasing, and a lot of people buy EVs on lease.”

He says that in a worst-case scenario, with BEV sales falling, carmakers would find themselves “between a rock and a hard place because they have invested in this technology.” But he adds that if carmakers paused investments for a few years because of a slow market, “they might say, ‘We weren’t making much money on these cars anyway, so we’re happy to wait a while. And we’re still going to carry on investing in this technology because if you look 10 or 15 years down the line, electrification is where it’s going to go, whether people like it or not.”

Pereira says there is too much riding on electric to abandon it, both from a climate and an affordability perspective. “The technology is expensive now, but as soon as you solve the batteries it’s a cheap technology; it’s just an electric motor and a battery. So, this is the logical direction, even for the consumer.”

To ride out a bad market, carmakers could “shuffle the cards around” and continue improving their combustion and hybrid models while waiting for consumer interest to recover. “But there’s not going to be a major shift like to hydrogen, which has even worse issues than electric,” Pereira says. He also dismisses e-fuels, saying: “The industrial processes are just not there for production at scale. So, unless the oil companies and the chemical companies and the refineries start investing billions to develop these processes and the supply chains to make it happen, it won’t happen – and they’re not investing anything.”

Pereira sees the possibility of the transition deadlines being pushed back, even in the European Union, but he takes a long view on BEV adoption. “Everybody is committed to electric because electricity is everywhere. Electric is the way to go because you can get it from the sun and the wind. We’re talking about a 50-year horizon and the 50-year horizon for transport is going to be electric.”