Timing is EVerything...

In 1979, the world watched the volatility that can arise from reducing oil production by a mere 4%. In the US, a recession was at full boil by the time auto loan interest rates were beginning to near 8%+. The major auto OEMs had been laughing at the idea of smaller, four cylinder and fuel-efficient cars, when the demand for V8's dropped off the map. Toyota and Honda, with their smaller FWD offerings, were ready and waiting. The big 4 US OEMs would say they were building what American's wanted/demanded...big cars with big engines. By 1982, interest rates on some loans neared 20%, and inflation was near what we are seeing today. The market needed yet-wasn't-demanding new, efficient, and affordable cars... until it was.

A few federal bailouts later, American automakers were starting to produce the cars the American buyer needed, rather than what the American buyer 'wanted'. The new plan was starting to work, maybe best exemplified by Chrysler's comeback story having famously paid off its $1.5B in Federal loans ahead of schedule, in 1983, after wide success of the K car platform. Even still, joint production agreements, domestic production facilities, and strong residual values due to proven quality kept the Japanese manufacturers in hot pursuit and gaining market share as the late 80s downturn arrived.

Cool story, Sean. Now read me some tea leaves...

I don't put much value into oracles speculating on the future of EV, but history does seem to repeat itself. As the American buyers were initially cool on the idea of EV conversion, niche adopters were served by offerors of cheap small hybrids and low range BEVs. These cars were mostly seen as novelty, and entrants by smaller OEMs were seen as not-made-to-serve the vast American demand. However, as the overall demand for BEV rose, early adopters began including higher income earners, who wished to own luxury EVs or big range/big truck type vehicles. This is where the largest OEMs seemed to have focused their investments and development.

It is not cheap to develop a new model, let alone a new EV with a big battery. The early adopters with bigger purchase power are now inundated with options, while the higher volume of would-be buyers are watching auto loan interest rates climb, and their dollar not stretching as far as last year. OEMs who have a portfolio ready to serve buyers with modal credit scores could see a stronger demand from a buyer segment this industry truly needs... late adopters.

Yeah, but Americans want what they want, man...

American consumers hold more than one and a half TRILLION dollars in automotive loan debt, and the average consumer is credit worthy for around $40k USD in lending. The average price of a new car has reached $49k USD, and the average EV price is hovering around an astounding $53k USD. According to KBB, the average new car payment in 2023 has reached an unlucky $777/mo, and the most common lending term is 72 months.

The delta between what the average consumer can afford (or receive credit to obtain) and what the market pricing is requiring is roughly fifteen thousand dollars. This amount of money is not negligible or a rounding error. It is not an extra shift of work, or a few skipped coffee treats. While it's true that recent investigations are showing inventory is building on some dealer lots, and incentives are starting to grow, the fact remains that the bulk of new car buyers are finding EV ownership more than slightly out of reach, without taking on longer loan terms, or stretching their dollar further.

So, what are you saying, Sean? Make cheap electric cars?

While I do believe there are buyers waiting on cheaper entry points into their first EV, that doesn't appear to be the only hurdle this industry must abound. Today, roughly 2% of the 290,000,000 cars on American roads are BEV, and while it is growing at a strong pace, regardless of what nay-sayers will proliferate in social media, we are not seeing the coveted mass adopter shift quite yet.

If you spend time on social media, attend industry expos, and listen in on trade show discussions, you'd think that mass adoption will happen when Americans can finally buy an EV with 500 mile range, can charge that battery in 10 minutes, be marveled by large infotainment screens that show battery charging curves and a host of range diagnostic information. When I spend time out at charging stations talking with owners (usually early adopters, tech savvy folks), they love to drum up their range and charging experiences, so that aligns perfectly with the "what buyers want" narrative. However, when you chat with the curious-but-don't-own passersby, they'll share that they think charging is far too complicated & unreliable, and that they don't want to operate interior controls through a touch screen. Did we make EV's complex and techy just because we could? Did we do it just because that's what an early adopting niche buyer wants? Are we trying to steer a market to this complexity because we think it is just a pill that mass adopter must swallow eventually?

Ok, so make a point...

Will EV demand stall to the point that spells doom for the technology? Very unlikely, and even when stalled, history tells a tale of polluted cities needing a revolution. Doom-ers will see in the tea leaves what they will, and so may the EVangelists, but unless we keep developing new cleaner technologies, another generation will have to endure a mess needing cleaned. However, the market demands what it can't afford, and industry is saying would-be-buyers will want something they don't yet need.

PHEV and BEV technologies are emerging at the right time, and demand will continue to grow. To keep the momentum, we need affordability and simplicity themed options on the overall menu. I am starting to see curiosity and acceptance for an industry shift from a buying class that will define the future of EV, and I will do what I can to keep it simple so that we don't let this opportunity to connect with these buyers pass us by. After all, timing is EVerything...

Smooches,

Electric Cowboy