The nascent electric vehicle industry is currently experiencing a sales decline that has forced many carmakers to either cut back or delay EV production. For the majority of the industry’s existence, extremely limited supply coupled with high demand allowed carmakers such as Tesla to charge a high premium for their offerings.
However, with several established automakers and startups flooding the EV market with new EV models, electric vehicle supply seems to have finally surpassed the demand. Many automakers are now rethinking their electrification plans in the wake of reduced EV demand and adjusting their EV strategies.
General Motors is ditching a goal to build 400,000 EVs by mid-2024, and Ford has announced that it will postpone a $12 billion investment in EV production. German automaker Volkswagen Group has also canceled plans to build a $2-billion electric vehicle factory in Germany.
Range anxiety is still one of the largest barriers to electric vehicle adoption, although the Department of Transportation Statistics reports that the average EV has around 250 miles of range on a single charge, more than enough to cover the 27 miles average American drivers travel per day.
Even so, plenty of drivers are concerned about running out of charge mid-trip if they switch to electric cars. This has kept many drivers from buying electric cars and continues to hamper EV adoption to this day.
Limited public charging infrastructure also ties into range anxiety. While most U.S. cities and towns have at least one gas station, the nation’s EV charging infrastructure is mainly concentrated in urban regions. As a result, the majority of fossil-fuel vehicle drivers don’t worry about running out of fuel because they know they can refuel at one of the multitudes of gas stations dotting American roads.
EV drivers, on the other hand, don’t have that luxury. The country’s public charging infrastructure is woefully insufficient, and existing charging stations often have issues such as nonfunctional chargers and long wait times. This is a deal breaker for many consumers.
High costs are probably the main barrier to EV adoption. Even with tax incentives and government subsidies, many drivers cannot afford to purchase an electric car, let alone install a private charger. Overall vehicle sales have also declined thanks to soaring interest rates that have made it costly to service vehicle loans.
Since electric cars tend to be more expensive than comparable gas-powered cars, cost-conscious buyers are turning away from electric vehicles to more affordable alternatives.
The early adopter market is saturated, and most of the people who are likely to buy emerging technologies already own electric cars. This typically includes technophiles and high-income earners who adopt novel technologies before other consumers regardless of the cost. With most of these consumers fulfilled, carmakers are struggling to appeal to less affluent consumers with the premium EVs that initially attracted early adopters.
These slowing sales now give startups such as Nikola Corporation (NASDAQ: NKLA) plenty to think about in order to ignite greater interest in electric vehicles.
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