If we grade the performance of electric vehicles (EV) on a curve – and that is really the only way to make sense of most economic trends in a year like 2020 – you have to give this automotive category high marks.
While it is true EV sales are down 15% year-to-date, according to the most recent analysis from the Valuation Services group at J.D. Power, the category actually outperformed internal combustion engine sales, which suffered a 23% decline so far this year. This positive eight-percent difference points to a few key trends that are lifting the prospects of EVs over the mid-to-long-term horizons.
The first is the remarkably strong improvement we are seeing in the retention rates of EVs. We have seen a steady rise in this metric since 2015 – when retention rates for three-year-old cars were only 20% across the category – to 27% today. While a significant gap remains with ICE cars (which on average retain 48% of their original value after three years) the gap is closing, since there has been little-to-no change in the retention of conventional vehicles.
Another trend that is elevating the prospects of EVs revolves around how quickly the infrastructure to support the category is developing. Currently, there are approximately 26,000 EV charging stations that together offer 82,000 outlets for vehicles across the country. The overwhelming majority of these are Level-2 charging stations that take up to an hour to provide a vehicle with 20-25 miles of range. However, there are now close to 4,000 rapid charging that can recharge vehicles to 80% of capacity in just 30 minutes. As a result, the charging infrastructure is now in place to allow most EV owners to drive across the country.
Rising Consumer Confidence
This underlying infrastructure has put a huge dent in the range anxiety that was depressing demand for EVs just a few short years ago, which in turn is driving demand for new and used models in the category. From a market-share perspective, new sales of battery electric vehicles have crossed the 2% mark (up from the 1.9% at this point in 2019), keeping the category on a projected pace to account for 6% market share by 2025.
● Decliners: Despite a 20% decline in year-to-date sales, the Tesla Model 3 remains the top EV seller today. For its part, Jaguar I-PACE experienced slight declines in sales through this point in the year.
● Maintainers: Meanwhile, the Tesla Model X managed to hang on to its sales performance through this point in 2020 unscathed. Sales have, impressively, remained flat. Chevy’s Bolt has also stayed the course in year-over-year sales so far.
Tax Incentives Lay Foundation for EV Surge
Looking ahead to whatever shape the “new normal” automotive market is likely to take, it will be important to factor in the role that tax incentives can play to support automakers that are elevating their presence in the EV market.
So far, only Chevy (General Motors) and Tesla have entirely worked their way through the $7,500 tax credit program offered to new EV buyers – with Ford close behind. That tax credit, which begins to phase out for vehicles at the beginning of the second calendar year after a manufacturer has sold 200,000 eligible plug-in electric vehicles in the United States, is still widely available to most manufacturers.
Taken together, the emergence of high-quality EV offerings from a variety of new players is combining with maturing infrastructure, rising consumer confidence and compelling tax incentives to lay the foundation for a very interesting 2021.
David Paris is Senior Manager, Market Insights, at J.D. Power Valuation Services. With over a decade of experience in the automotive industry, David is an expert in the analysis of new and used vehicle market data. David is responsible for the creation of data-driven insights on new and used vehicle market performance and author of Guidelines, a monthly in-depth review of the automotive industry.