Last year emerged as a record-breaking one for electric vehicle sales in the U.S., defying the prevalent narrative of dwindling EV demand. Automakers sold over one million pure-electric models in 2023, a nearly 50% increase compared to the year before. Sure, Tesla grabbed the lion's share of this pie, but it's worth noting that every car company that sells EVs in the U.S. also had a standout year of EV and PHEV sales.
However, the EV sales records coincide with something else—U.S. car dealers have orchestrated a staunch rebellion against EVs. After writing a letter to President Biden in November 2023, urging him to “tap the brakes” on the Environmental Protection Agency’s new emissions proposal, dealers last week wrote a second letter to Biden.
This time, the request was not to tap the brakes but to slam them.
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Car dealers request President Biden to pause EPA mandate again
The Environmental Protection Agency, the U.S. government's agency that establishes national pollution control standards, wants to increase the share of EV sales substantially by 2032. But car dealers have opposed this plan, citing low consumer demand among several other roadblocks.
The dealers—after getting no apparent response from the Biden Administration to their first letter—say in their second letter that “[i]t is uncontestable that the combination of fewer tax incentives, a woefully inadequate charging infrastructure, and insufficient consumer demand makes the proposed EV mandate completely unrealistic.”
The EPA is expected to finalize an ambitious and aggressive plan this year to slash emissions. Outlined over 262 pages, it has stated how the new regulations will remove millions of metric tons of particulate matter, carbon dioxide, carbon monoxide, sulfur dioxide, diesel exhaust, and air toxics by imposing restrictions on the sales of gasoline- and diesel-powered light- and heavy-duty vehicles.
The EPA is proposing to achieve this by increasing the share of light-duty EV sales to 67%, and commercial EV sales to 25% by 2032. Thousands of dealers across the country detest this plan. Some of their concerns are undoubtedly valid, like the fact that only 19 models qualify for the federal tax credits this year, compared to 43 last year, leaving customers with far fewer options.
This is because the U.S. Department of Treasury has revised its guidance surrounding the Inflation Reduction Act, encouraging automakers to establish a localized EV supply chain. This is aimed at further reducing reliance on China for critical components like batteries, leaving dozens of models ineligible with their current components and supply chains.
However, that's changing quickly. Several models are expected to regain their eligibility for tax credits in the coming months—the Volkswagen ID.4 recently qualified, and General Motors is optimistic that the Lyriq and Blazer EV will qualify as well. While the concerns around fewer tax incentives and inadequate charging infrastructure are true, the claim about insufficient consumer demand looks shaky.
In 2023, U.S. automakers rolled out EVs off their assembly lines at a record pace. The total sales of rechargeable models—including BEVs, hybrids, plug-in hybrids, and fuel-cell vehicles—amounted to 1.4 million. Of this pie, 1.1 million were fully electric models. Mercedes-Benz saw its U.S. EV sales rise by a record 139%. Volkswagen Group’s EV sales surged by 61%. Ford delivered over 72,000 EVs, a new record. Most other OEMs, including Volvo, Nissan, and the Hyundai Motor Group, saw their BEV sales soar.
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So why are the dealers pushing back against EVs? Inadequate charging infrastructure is one persistent issue. There’s also the fact that 43% of dealer profits emerge from parts, labor, and service, according to the U.S. Bureau of Labor Statistics data from 2019—EVs have fewer components and require far less maintenance.
That’s not the only reason they can represent a threat to dealer balance sheets. A skewed supply-demand ratio has increased the time EVs spend on dealer lots. By the end of November 2023, EV inventory levels reached a new high with 114 days of supply, Cox Automotive’s data showed. This is more than double the 53-day supply from the same period in November 2022. (Data excludes Tesla and Rivian due to their direct-to-consumer sales model.)
This is one of the reasons that prompted Ford to cut its production targets for the F-150 Lightning, while GM delayed its ambition of producing 400,000 EVs in North America in 2024—delaying the production of several models in the process.
But the dealers also bear some responsibility. There’s ample evidence that sales reps at car dealerships have blatantly lied about EVs, and coerced buyers to purchase gas cars. Some experts agree. They aren’t convinced that dealers are investing enough in educating their staff (and the customers) regarding EVs.
When I asked Loren McDonald, the CEO of EV consulting and marketing analysis agency EVAdoption, if dealers were simply bad at selling EVs, he said, “Yes and no. We’ve all heard the stories of clueless dealer sales reps when it comes to EVs.”
McDonald ran into a poorly informed sales rep at a Mercedes-Benz dealership a year ago. “He didn’t know if the EQB we were test driving had regenerative braking. He had to get a service technician to come out and try to figure it out—and he didn’t know how to turn it on. I finally figured it out myself,” McDonald told InsideEVs.
EVs, in a way, are a whole new language that needs learning, but dealers don’t seem to understand that. “Fundamentally, dealers and legacy automakers have yet to understand that they are selling a different product, one that is fueled by electricity and not gas,” McDonald said. “People are completely unfamiliar with the charging process, terminology, best practices, where to charge, how to charge, etc,” he added.
Over at the Sierra Club, a Washington D.C.-based environmental organization, a spokesperson used much harsher words to describe the dealers’ attempts to thwart the EPA’s efforts.
“Auto dealers are once again trying to block major progress on cleaner cars. For years, the Sierra Club has called out dealers (and automakers themselves) for failing to keep up with consumer demand for EVs,” Katherine Garcia, Sierra Club’s director of Clean Transportation For All told InsideEVs.
“The dealers have had years to prepare for the EV transition, but they’ve dragged their feet along the way,” Garcia added.
She thought this was unfair to Americans, especially those impacted by air pollution. “The dealers’ lobbying to weaken the EPA’s vehicle standards is an affront to American families. These important safeguards will protect families from car pollution, save drivers at the pump, and clean up climate emissions,” Garcia said. The negative impact of gas emissions on the environment has been broadly documented and proven.
McDonald suggested automakers might be behind dealers' woes due to some “strategic blunders,” like “bringing out BEV pickups for a segment that doesn’t see BEV pickups as meeting their needs of towing and range, versus large and mid-sized SUVs,” he said.
While electric pickups might not offer as much range, they still have a lot of demand—GM CEO Mary Barra recently said GM has 100,000 orders for its electric pickups, which includes the Silverado EV, Hummer EV, and Sierra EV. (The Tesla Cybertruck has over 1 million reservations, although selling them is not a dealer problem as Tesla sells directly to its customers.)
“The Chevy Bolt was the third-highest-selling EV in the U.S. in 2023. So clearly people are interested in EVs if the product is good, and fits their budget and driving needs and situation,” McDonald added. He also noted that more options were needed in the large and mid-size SUV segments, where volumes are generally high in the U.S.
“The Kia EV9 will likely do very well in 2024 and 2025. But where is the electric Ford Explorer? Where is the electric Chevy Tahoe?” he said.
Despite some of these “strategic blunders,” many automakers are all in on EVs—or at least they say. Regardless of how well they navigate the bumpy road ahead, they need dealers’ support to clear inventories, boost production, and keep the cycle going.
Whether dealers like it or not, the EV revolution is happening. Instead of writing letters that may go unread in the presidential inbox, dealers might find greater dividends in focusing on education—for both their staff and consumers. Investing in knowledge sooner rather than later could be a win-win for everyone involved.
Contact the author: suvrat.kothari@insideevs.com