Mountains are being made over the molehill of moderating consumer interest in electric vehicles.
Yes, consumer interest in EVs has recently cooled from red hot to reasonably warm, according to a pair of surveys.
Online vehicle marketplace AutoTrader found that “56 per cent of car shoppers [in Canada] who do not own an EV are open to purchasing one for their next vehicle, down from 68 per cent the year prior.” Similarly, J.D. Power’s 2023 survey found, “overall EV consideration in Canada has declined 13 percentage points to 34 per cent from 47 per cent in 2022.”
AutoTrader’s year-end trend report was released around the same time as the federal government unveiled its Electric Vehicle Availability Standard outlining increasingly stringent sales targets for zero-emission vehicles, which prompted headlines like this one from the National Post – “Interest in EVs is down as Canada aims to convert all new sales to electric” – and “Canada faces declining EV interest, report shows, despite push to boost sales” from Global News.
Yet, dig down a little, and this momentary dip in excitement seems to be driven more by economic headwinds and a product mix that skews toward high-end models, rather than some larger, permanent falling-out between Canadian drivers and battery-powered cars.
The same AutoTrader year-end report that noted the dip also noted online searches for EVs on its marketplace increased in 2023 by 15 per cent year-over-year. (Although their share remains low at less than 3 per cent of total searches.)
More illuminating were the top reasons Canadians gave in that survey for not considering an EV. They were: vehicle prices (40 per cent), interest rates (24 per cent), and inflation (13 per cent). In other words, people still want EVs – they just can’t afford them right now.
Let’s consider why: EVs are pricier up front than conventional cars and 8-per-cent finance rates only exacerbate the problem.
Inflation has also been high and is still tracking around 3.5 per cent, which is straining households and forcing drivers to think about where they can cut back on expenses. With the average asking price for a rental unit in Canada topping $2,100 in December, according to Rentals.ca, and the average mortgage payment about the same in the third quarter of 2023, according to the Canada Mortgage and Housing Corporation, many people are feeling stretched. If they are thinking about cancelling Crave or Netflix subscriptions, you can bet they’re also rethinking a pricey EV purchase.
Another reason to postpone an EV purchase, perhaps: Gas prices have descended from record highs, which makes the switch to electric less financially attractive than it was in 2022.
The fact that so many new EVs are high-priced luxury models isn’t helping either.
“I believe there’s a mismatch between the demand and the types of vehicles that are being produced,” Jake Fisher, senior director of auto testing at Consumer Reports, said in an interview. “There are a lot of very expensive, feature-rich vehicles that are luxurious and high performance, but I think the majority of consumers who are just looking for safe, reliable, economical transportation do not have EV options available to them.”
In other words, if you want a luxury EV, you might be able to drive it off the lot that day. If you want a base-level EV by a mainstream brand, well, you’d better hope your current car will last a while.
“For all the headlines written in the last six months about how EV demand is faltering, the data definitely doesn’t support that, or at least not yet,” wrote Colin McKerracher, head of advanced transport at BloombergNEF and co-author of its latest annual Zero Emissions Vehicles Factbook. Published in December, it showed global sales of passenger EVs (fully electric and plug-in hybrid vehicles) were on pace to hit a record 14 million units in 2023. “In the U.S.,” McKerracher continued, “where most of the concerns on demand have been raised, sales are growing even faster and will be up 50 per cent this year.”
Statistics Canada hasn’t released its EV sales results for 2023 yet, but with strong growth in the vehicle market last year over all, there’s little doubt it will be yet another banner year for battery-powered transportation.
Chevrolet, for example, posted its best-ever year for the Bolt EV and Bolt EUV, selling 14,075 units in 2023 in Canada, an increase of 121 per cent over 2022. Increased availability and pent-up demand owing to supply shortages are playing a role, certainly, but that’s still an impressive year-end result. (It also shows how hungry consumers are for lower-priced EVs; the company’s pricier Ultium-based EVs fared much worse, as InsideEVs noted.)
Volvo also sold a record-breaking number of all-electric and plug-in hybrid vehicles last year. They made up 35 per cent of Canadian sales (or roughly 4,500 cars) up from 30 per cent in 2022. ”It’s important to acknowledge the dynamic nature of the automotive market,” Matt Girgis, managing director of Volvo Car Canada, wrote in an e-mail. “While there may have been a slight dip in consumer interest in ZEVs, we need to consider the contributing factors.” Those include, he added, government policies, technology, interest rates, pricing transparency and overall affordability.
BMW’s chief financial officer Walter Mertl recently told reporters the company now generates most sales growth from electric cars and that the “tipping-point” for gas-powered combustion engines has already passed.
The good news for EV demand is that interest rates are likely to fall and Canada’s new EV sales mandate should help gradually drive down vehicle prices and push automakers to build more mainstream models.
That’s not to say the road to 2035 will be pothole free. Hitting the federal sales targets for new zero-emissions passenger vehicles – 60 per cent by 2030, and 100 per cent by 2035 – will involve winning over millions of EV skeptics and heel-draggers. The most eager buyers have already bought into the market, and from here on out, each new EV sale will be harder than the last.