Small EVs Could Break Dominance of SUVs

Micro-electric vehicles could be the smoking gun that finally breaks the dominance of SUVs (sports utility vehicles) on American roads. Unlike consumers in the European Union, American drivers have repeatedly shown that they prefer larger vehicles, such as SUVs and pickup trucks, over smaller cars, making them less likely to purchase regular-sized electric cars.

The International Energy Agency (IEA) estimates that sports utility vehicles accounted for a whopping 50% of global vehicle sales last year. Demand for SUVs and similar large vehicles is on the rise, and the IEA notes that the transition to “larger and heavier” vehicles is one of the early 21st century’s most-defining automotive trends.

Automakers in the United States began churning out larger cars to circumvent certain emissions standards, and few of them have taken any steps to develop a small electric car in recent years. As a result, American drivers only have access to electric sedans and pickup trucks, with the majority still opting to purchase internal combustion engine (ICE) SUVs.

Established automakers such as Ford have tried to work around this issue by developing larger electric vehicles, including the F-150 Lightning, which fulfill the desire for a large vehicle and produce zero tailpipe emissions. Tesla’s Cybertruck as well as the Rivian R1T are also attempts to attract more Americans to the EV camp with a large electric truck. Unfortunately, the upfront costs involved mean only a small percentage of the American market can afford to purchase an electric pickup truck.

However, tiny electric cars have the potential to bridge the popularity gap between the nascent electric vehicle industry and SUVs. Chinese automakers have already achieved a lot of success with tiny EVs over the past decade, especially in dense Chinese cities where smaller vehicles offer better maneuverability. Smaller electric cars also tend to be cheaper, making them more accessible to consumers with budget constraints.

Challenging SUVs’ dominance in the global market will still prove to be a significant hurdle due to their market popularity and the benefits they offer manufacturers. University of Birmingham professor of business economics David Bailey notes that the popularity of the sports utility vehicle isn’t a fluke but the result of several different factors.

Consumer demand for increased cabin space as well as regulations covering factors such as emissions control systems and airbags have made it more economically feasible for carmakers to develop larger cars. These pressures would ultimately increase the costs involved in manufacturing smaller electric vehicles, the professor states.

It is now incumbent upon other electric vehicle makers such as Nikola Corporation (NASDAQ: NKLA) to come up with smaller EV models that will appeal to consumers who are concerned about the current cost of larger models.

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