America's car dealers have long been accused of not being especially inclined to sell electric vehicles. That's certainly not true of every retailer, of course, but it is a sweeping, broad trend that has defined the business for more than a decade. But with the global auto industry headed in the direction of rapid electrification, is that really still the case?
Well, if you want to know what the dealers are thinking, just ask them; they'll tell you. That leads off this Monday morning edition of Critical Materials, our daily roundup of auto industry news. In addition to that item, we have the latest on Toyota's hybrid victory lap, and why fears of battery fires are keeping EV sales a bit down in South Korea. Let's dig in.
30%: Dealers Aim To Get Biden To 'Bend' On EV Mandate
The headlines elsewhere call this current moment a "slowdown" in sales of electric vehicles. The truth is a bit more nuanced; 2023 represented a record year for EVs and 2024 is expected to be similar, if not better, but the rate of adoption is slower than many industry officials and analysts predicted.
But one trend we're looking at closely this year at InsideEVs is how much of that slowdown is based on time on dealer lots—meaning, how long a car sits unsold at a store, which is a traditional metric for supply, demand and industry health. Last year, a lot of the "slowdown" headlines came from data about EVs spending more time unsold on dealer lots. But how much of that is from dealers being disinclined to move them?
If you want to know where the dealers' heads are at—and how that plays into each automaker's strategy in the coming years—look no further than Automotive News' coverage of the recent National Automobile Dealers Association conference. It's all very telling, from the obvious ("We're focused on a demand-based, customer-centric approach so people don't feel forced into it," from Acura) to the intriguing ("Electric vehicle charging top of mind for BMW dealers") to the obvious ("Kia tells dealers its strategy is for both electrification and combustion.")
It does generally appear that the brands that are most successful so far in the EV race have not only compelling products, but also a dealer network willing to move them and provide customers with necessities like education and fast charging. Sounds obvious, right?
But the most telling stuff is what dealer leadership says. Here's outgoing NADA chairman Geoffrey Pohanka, who stepped down after his tenure recently ended:
During an NADA Main Stage session on Friday, Pohanka said he is very concerned about the industry's rapid transition to electrification and noted that automakers and others now see it's not going as easily as first imagined.
"It's unfortunate that our government appears to be on the road to banning [the] sale of gasoline-powered vehicles," Pohanka said.
He pointed to upcoming EPA and NHTSA legislation that calls for raising the nation's corporate average fuel economy to 58 mpg by 2032.
[...] If the government fails to change proposed rules, Pohanka warned, it could lead to a significant reduction in vehicle sales, billions of dollars in federal fines against manufacturers and the loss of thousands of manufacturing jobs.
Pohanka urged dealers to talk to their legislators at state and federal levels about regulations to convince "your manufacturer to take a stronger stand with federal government regulators."
It's key to remember that in addition to having an ironclad lock on how new cars are sold in every state, dealers also have tremendous lobbying power, and they're openly saying they plan to flex more of that muscle to get the Biden Administration to "slow down" on mandates that could lead to an eventual all-electric market.
At the same time here, Pohanka says he's worried about Chinese automakers:
"This gives an opening for affordable Chinese electric vehicles to enter the European market and take market share," Pohanka said. "China has a 10-year head start on electrified vehicles. Their electric cars are very well made, beautifully designed and very competitive."
[...] While Pohanka acknowledged that there were waves of European, Japanese and Korean brands arriving in the U.S. in the past, those were opportunities for dealers, he said.
"The Chinese EV wave could be a similar opportunity, but something quite different," Pohanka said. "A giant wave that could sweep away some auto manufacturers, along with its dealers."
Maybe I'm reading too much into this, but the NADA's plan seems to not be to invest in EVs, work with manufacturers to increase their adoption and intensify their focus on education to stay ahead of BYD's inevitable U.S. debut, but to push back regulations and close off the U.S. market so it stays a primarily gas-powered one as long as possible.
After all, changing tactics and doing things differently than in the past aren't among the dealer industry's strong suits; yet another story says dealers are still hesitant to move away from paperwork in their business. That alone tells you a lot.
And Pohanka's sentiments were echoed by his successor, Gary Gilchrist, who Automotive News said "taking on upcoming EPA and NHTSA rules will be a key focus area of his tenure."
"Never before in our nation's history has the government committed so much time, energy and resources toward a single goal of changing the way that the millions of new vehicles Americans buy every year are fueled," said Gilchrist, president of Gilchrist Chevrolet-Buick-GMC in Tacoma, Wash.
[...] "I hear from dealers every day that NADA needs to do more on EPA," Gilchrist said. "That's a tough critique. Why? Because I've been watching our efforts for the last year, and the team is working tirelessly to curb the implementation of the flawed and unachievable standards."
"The first thing we need to do is try to get the president to bend his policy in a more realistic direction," Gilchrist said. "That's the bottom-line intent of every single one of those meetings."
Well, now you know where the dealers are at on electric vehicles, pretty much officially. But to me, the kicker to that story says it all: "How we wrestle with today's tough issues will have a lasting effect for generations of dealers," Gilchrist said. Notice that's dealers, and not buyers, or America, or the auto industry, or the climate.
60%: Toyota's Hybrid Push Is Paying Off In A Major Way
But if you look at the car industry through a climate lens, there are some bright spots. While many second-wave buyers are nervous about EVs, citing range anxiety and charging availability concerns—two problems largely independent of dealers, let's be honest—they are buying more hybrids than ever. And while many ardent pro-EV supporters may balk at that, those new cars are still putting out much less in the way of CO2 emissions than purely gas-powered cars.
And it's a bit of a moment for a victory lap for Toyota, according to Reuters:
Toyota, however, is expected to offer a more upbeat outlook when it reports its earnings on Tuesday, helped by its heavy reliance on hybrids, which accounted for around one third of its total sales of more than 10 million vehicles last year.
"Pretty much every model we sell now is either exclusively hybrid or has a hybrid variant," Greg Davis, general manager of Walser Toyota, a dealership in Minnesota, told Reuters.
He said his outlet is trying to get the number of hybrid vehicles it sells up to 40%-50% of total sales, as Toyota moves to make its best-selling sedan in the U.S. market, the Camry, available only in a hybrid version.
My read on this is that it's good for Toyota, but largely for now. S&P Global Mobility has the same warning:
Despite the near-term sales boost Toyota is expected to report, analysts warn a major risk facing the world's top-selling carmaker is that it remains a laggard in pure battery EVs, which are widely viewed as making up the long-term future of the auto industry.
"Toyota's biggest risk is about consumer adoption of BEVs (battery EVs)," said Stephanie Brinley, an associate director at S&P Global Mobility.
"If consumer adoption of BEVs shifts again and speeds up, Toyota may not be fully ready with competitive BEV solutions."
After all, demand for more and better Toyota EVs is high, and the company has made bold promises for what's to come on that front in the next few years. At some point, it has to make good on them. But at the moment, more and more car buyers are at least considering electrification for their next purchase, and I do see that as a positive thing.
90%: Korea Faces EV Fire Anxiety Back Home
Korea's Hyundai, Kia and Genesis are outclassing a lot of rivals in EV sales, but it's not been without its headaches.
One challenge back home, according to Bloomberg, is that people in Korea are especially fearful of EV fires—even if those are statistically much lower than fires involving gas-powered cars.
According to a survey conducted by the Korea Transportation Safety Authority published in November, around half of EV owners said their biggest safety concern is a fire caused by a car crash, or during charging.
Several high-profile incidents have stoked that worry. In 2022, an electric van that had finished charging but remained plugged in caught fire in the parking lot of an apartment building in Busan, quickly spreading to four other vehicles, according to a report from the National Fire Agency. In 2020, a passenger in a chauffeur-driven EV died when the car caught fire after crashing into the wall of an underground parking lot.
That case resonates with Koreans, many of whom live in high-rise residential apartments. Fires at chargers in underground parking areas — a closed space where flames can spread quickly and fire trucks can have difficulty accessing — make drivers even more nervous. In December, the government banned the installation of chargers below the second basement level.
Blogs about how to open a car door in case of an EV fire are still popular on Korean website Naver. Tesla Inc.’s website shows passengers sitting in the rear of a Model S should pull a release cable hidden under the edge of the carpet to manually open the electronic doors when there’s no power.
To be sure, the concerns may be overblown, given there was a cumulative total of just 132 EV fires recorded as of June 2023. That compares to about 4,000 fires every year in gasoline-fueled cars in the country.
One other issue they're facing is that Korea has a huge glut of EV chargers, but they tend to be slower Level 2 chargers than the fast kind. Either way, it seems that dispelling myths about lithium-ion battery fires—as nasty as those are—is something those automakers will have to work on.
100%: Do You See Dealers Getting 'Better' At Selling EVs?
Despite all of that dealer resistance, America still had a great year for EV sales in 2023. Do you think dealers are coming around at all? What has your experience been like, if you bought an EV recently from one?