Manyearly-adopting EV owners around the world want to gas up...

Manyearly-adopting EV owners around the world want to gas up again - CNBC

Car buyers who wereamong the first to make the EV switch are far from wholly converted. Nearly 30%of electric vehicle owners globally are likely to switch back to internalcombustion engine vehicles, according to a recent survey of consumers aroundthe world conducted by McKinsey. Many U.S. EV owners, in particular, are havingsecond thoughts. According to the McKinsey survey, 46% of U.S. EV ownersclaimed they were likely to switch back to ICEs, well above the 29% globalaverage of EV owners who stated they were likely or very likely to switch backto gas-powered cars, which included drivers from Australia, Brazil, China,Germany, Norway, France, Italy, and South Korea. EV adoption has slowed in theU.S., even as the recent earnings and delivery reports from both GM and Fordshowed sizable increases in EV sales. But those sales gains come off a very lowbase, and with both major automakers indicating that they are pulling back ongrowth and production forecasts for EVs in the near term. At GM, for example,EV deliveries increased 40% in Q2 compared to a year ago, but comprised only3.2% of total U.S. sales. Ford said EV sales were up 60%, to nearly 24,000units, but CEO Jim Farley described a “more realistic and sharpened” EV planduring its earnings call. Tesla remains the leader, but its EV sales have beenfalling and it has aggressively slashed prices. In addition to the McKinseydata on current EV owners, a recent Gallup poll found fewer non-EV owners inthe U.S. saying they might consider an EV purchase, down from 43% in 2023 to35% in 2024. The percentage of American adults who do not intend to buy an EVwent up from 41% to 48% year over year. GM CEO Mary Barra recently said at aCNBC Councils: Leaders’ Library event that the EV experience is one that moredrivers will be sold on once they “get in that electric vehicle and drive it.”However the McKinsey data is reinforced by a study from auto market researcherEdmunds, which found that in Q2, 39.4% of EVs utilized as a trade-in were usedto purchase or lease a new ?ICE vehicle. “Once you turn someone off, it’s a lotharder to get them back,” said Ivan Drury, Edmunds director of insights. “Theirexperience is already mired in negativity. For someone for whom it’s going tobe the charging component, or maybe the range wasn’t good enough, or batterydegradation. Maybe [EV buyers] experienced it firsthand, and it was so bad, andthey lived in a cold weather state where they said, ‘You know, I’m never gonnabuy one again.’” The EV sales pressure has not only resulted in automakersslashing prices and offering more incentives to move EVs — in many cases withlower interest rates and better terms on leases than for gas-powered cars — butalso led to a steep decline in the value of used EVs, which before 2024 hadbeen selling at a premium. The lack of adequate public charging infrastructureremains a major issue. There are large disparities in distribution of EVchargers. In the U.S., 60% of urban residents live less than a mile from thenearest public charger, compared to 41% of suburban residents and 17% of ruralresidents. Even in high-growth EV markets, charging is behind. With one publicport for every 29 EVs, California, which has the highest rate of EV purchases,ranks 49th among states in the ports-to-drivers ratio. Of electric vehicle driverslikely to purchase an ICE as their next vehicle, 35% cite the lack of adequatepublic charging infrastructure as the basis for their decision, and 21% citeanxiety about charging access, according to McKinsey. “Real-world concerns thatconsumers have voiced through the mainstream surveys are finally coming tofruition,” Drury said. “And that speaks to both current adoption rates thathave stalled out, but also the idea that not everyone’s going to buy another.”Drury said that some distinctions are becoming clear between all EV owners andthose who are most satisfied. Among early EV adopters for whom the electricvehicle is their primary mode of transportation, there is more dissatisfactionwith the vehicle and a higher likelihood of trading in an EV for ICE.Meanwhile, high-income drivers with garages and multiple car options are morelikely to be satisfied with their purchase. Drury said luxury EV buyers are themost likely to purchase another EV. “The affluent homeowner, who can havemultiple cars and has their own home charging system, and most of the timethey’re going less than 100 miles on their daily driving, it’s beautiful forthat person to use an EV, because it’s never inconvenient for them,” saidiSeeCars executive analyst Karl Brauer. “Especially for expensive EVs, they’rejust looking for another flashy product.” As battery range and densityincrease, and EV charging infrastructure improves, and prices continue down,Brauer said the picture should brighten for EV sales. “As all these things shift,it should theoretically make EVs more perfect or more functional and logicalfor a wider band of the consumer market. But we don’t know what the time frameis to solve all these problems,” he said. In her recent appearance at the CNBCCouncils: Leaders’ Library event, Barra spoke in terms of a decade or more forthe EV story to play out. Ford CEO Farley said on its earnings calls thatsmaller and more affordable vehicles are the way to go with EV in volume. “Why?Because the math is completely different than ICE. In ICE, the business we havebeen in for 120 years, the bigger the vehicle, the higher the margin, but it isexactly the opposite for electric. The larger the vehicle, the bigger thebattery, the more pressure on margins because customers will not pay a premiumfor those larger batteries.” While EV prices have been under pressure thisyear, cost is the second-most common reason for going back to an ICE vehicleamong EV buyers in the McKinsey survey, with 34% of EV drivers saying the“total costs of driving are too high.” “The biggest barrier to entry for new EVbuyers is price, because they tend to cost more than a non-EV,” Brauer said. “Aperson looks at them and they’re like, ‘This is what I have to pay for theequivalent EV versus a compact car that isn’t an EV?’” Brauer said for somedrivers, that cost is not just the sticker on the car. “I pay more for anxietyabout how I’m going to be able to use the car if I can’t find a charger,”Brauer said. Some buyers also feel that EVs are less functional, resulting in“less confidence in my ability to go out and do what I want to do whenever Iwant to do it,” he said. The one thing that no one is saying is that EVs arenot the long-term future. Drury says the EV demand slowdown in the U.S. is nota halt and EV adoption is ultimately headed higher. “We know what the futureis, regardless of our current concerns,” he said. Some markets have done abetter job to set up an infrastructure and policy framework to supportcontinued EV adoption in the short-term, such as the oil-rich nation of Norwaywhich has invested heavily in energy transition goals, with the plan to onlysell zero-emissions passenger cars starting 2025. With high taxes for gasvehicles and steep incentives for EV drivers, including free tolls, zeroregistration tax, and zero value-added tax, Norway has been described as an “EVUtopia.” Compared to the 46% of U.S.-based EV owners who say they may switchback to ICEs, only 18% of Norwegian owners want to switch. In 2023, Norway hadthe highest electric vehicle adoption rate in the world. “The best solution isthe hardest solution. It is solving the charging problem, and that’s both athome and on the road. We know for sure, if you could make that go awayovernight, then you’re probably curing 80% to 90% of people’s issues. Thatspeaks to both range anxiety, charge times, all those things that are theprimary issues with EV ownership,” Drury said. If that could be solved, he saidcar buyers “have almost no excuse other than the fundamentals of ‘Hey, myfavourite brand doesn’t sell one in this body type.’ Okay. Well, then, that’lleventually get solved too."