Gus Carlson is a U.S.-based columnist for The Globe and Mail.
Some auto-industry observers are calling it a Field of Dreams moment, but if electric-vehicle makers can’t figure out how to bridge the gap between consumers’ curiosity in the products and their willingness to buy them, it may become a nightmare on Main Street.
The supply of unsold EVs on U.S. dealer lots has swelled 350 per cent so far this year, to more than 92,000 units in June. That’s about three months’ worth of inventory and nearly twice the industry average, according to a new report from Cox Automotive, the people behind the Kelley Blue Book auto-pricing guides.
With the average new EV costing US$64,000, that’s about US$6-billion in stock collecting dust – and all at a time when dealers are offering huge incentives for the summer sales season. Among the biggest losers – Genesis, the Hyundai luxury brand, sold only 18 of its high-end US$80,000 EV sedans in June, and some Audi and GMC EV models topped the 100-day inventory mark, Cox said.
By comparison, dealers have only 54 days’ worth of gas-powered vehicles on their lots, less than the usual 70-day threshold. The average cost of a gas-powered car is about US$30,000, less than half the price of the average EV.
Automakers such as Toyota and Honda are taking advantage of the opportunity presented by buyers’ hesitancy on EVs and spending heavily on advertising their hybrid models. On average, hybrids cost about US$39,000, not counting charging equipment for plug-in models, which can add a few thousand dollars more to the total outlay.
To be sure, like any statistic, unsold inventory is only one test of the industry’s health. EV boosters will point to strong year-over-year sales increases in the first half of the year as a more telling indicator of consumer demand. But beware the law of small numbers – EV sales account for only about 7 per cent of all new-car purchases – and they have flattened. So, it doesn’t take many units to move the needle.
While high interest rates and lingering inflation may be partly to blame for soft sales, the real story behind the unsold EVs is that while consumers may be interested in the concept, they are wary of buying them. The two big reasons for this gap between curiosity and purchase: price and charging concerns.
I’ve heard horror stories of drivers and their families getting delayed in the record heat during summer vacation road trips when their EVs are running out of juice.
Like the South Florida family I know who got stuck in a traffic jam in their Tesla just about 15 kilometres from home after a trip to Disney World near Orlando. After an hour of stop-and-go, and having turned off the air-conditioning in the 35-degree heat to conserve juice, they finally made it to an exit that took them to a service station with EV charging stations.
But relief was still more than an hour away – the lineup to use the chargers was long and winding – and when they finally plugged in, the electrical grid was so overloaded charging took longer than expected. The final 15 kilometres of their journey took more than three hours – a trek marked by frustration and near dehydration.
Interestingly, the current glut of unsold EVs may lend credence to the view of Toyota’s former president and chief executive officer, Aiko Toyoda, who favoured a multioption pathway to carbon neutrality that included hybrids, hydrogen and gas options, as well as EVs.
The reason: He believed a wholesale shift to EVs was not practical right now, and that even in the future, EVs will not be the silver bullet for all places and all uses. Each country, region and community will have different needs and will develop critical infrastructure at difference paces.
It’s a strategy that got Mr. Toyoda turfed last year by environmentally obsessed activist investors who believed he was dragging his feet on the company’s development of EVs.
Despite the coup, Mr. Toyoda’s successor, Koji Sato, has vowed to stay faithful to the multioption strategy. And Mr. Toyoda has been re-elected to the board by shareholders.
It will be interesting to watch how activists will view the glut of EVs through their green-coloured glasses. The reality of nearly 100,000 cars baking in the summer heat does not fit their narrative very well.
More concerning, if EV makers can’t solve the problems of high prices and low charging availability, industry consolidation and a slowing of development may be the next bump in the road.
That, in turn, may spook the EV car market even more, perhaps to the point where even if automakers build them, buyers may not come.
Editor’s note: A previous version of this column characterized being stranded while driving an EV that’s run out of charge as commonplace. This version has been updated to reflect the observation was based on anecdotes gathered by the columnist.