What’s holding EV sales back? It’s the price, stupid

Globally, sales of new electric vehicles (EVs) have hit a slump. While sales of EVs in Ireland continue to march ahead – albeit at a slower rate than in the previous two years – across the world, demand is now starting to slacken behind supply.

In the US and in some European markets, car makers are starting to fall back on the old reliables to prop up flagging sales. Tesla has dramatically cut its prices over the past year, a move that has propelled the Model Y crossover into the worldwide sales pole position, but which has equally spooked company investors who are now worried about potential sagging profit margins. Ford too has chopped the price of its Mustang Mach-E electric car, while also prepping an updated version using a far more affordable lithium-iron phosphate battery pack.

However, the simple fact is that EVs are starting to run into sales trough, and while the reasons for that are multifaceted, there is one overriding factor – the cost.

While all cars – indeed, almost every consumer product – have become more expensive over the past inflation-and-conflict-addled year, EVs remain, in large part, considerably pricer than their petrol, hybrid, and diesel equivalents. Ireland’s best-selling car, the Hyundai Tucson, is available as a hybrid and a plug-in hybrid, but Irish buyers continue to vote with their wallets, and more than 60 per cent of Tucson sales here are still rolling off dealer forecourts to the clatter of a diesel exhaust note.

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Market analyst S&P Global conducted a worldwide survey which found that almost half of all consumers consider EV prices to be too high. While those consumers also said that they understand that the technology underpinning electric cars is both (a) new and (b) expensive, they said that the resultant high prices are just too much for them.

The data from S&P comes at a particularly difficult time in an Irish context. While sales of EVs continue to rise this year overall, the trimming of the Sustainable Energy Authority of Ireland grant for EVs from €5,000 to €3,500 has had a noticeable impact. There are concerns that the market is stalling, as the Irish Government seems to ignore the best-practice advice from markets such as Norway, which is to announce incentives and then not to meddle with them until the market for electric cars matures sufficiently.

Geotab, a company that monitors and analyses the use and mileages of electric cars, has warned that we might be approaching a critical stage of electric car take-up in Ireland.

“With sales of electric vehicles stalling for the second month in a row, the Government needs to take stock and recognise that this is a ‘canary in the coal mine’ moment, with the real risk that it will not achieve its ambition of having 945,000 electric vehicles on the roads by 2030,” Geotab’s vice-president for Ireland and the UK, David Savage, told The Irish Times

“The reduction in EV grants is the sole cause for the drop in momentum. Ironically the Government was aware of this risk, with a report by the Parliamentary Budget Office published last year noting the fall in sales in Denmark when financial supports were withdrawn in that market.”

[ Why are global sales of electric cars starting to slow? ]

Savage, for one, is in no doubt as to the barrier for EV take-up. “Price is the deciding factor when making a car purchase and people are voting with their wallets as evidenced by the fall off in demand for the second month in a row,” Savage said.

“Realistically it is a mathematical impossibility for the Government to reach its 2030 target, but the real concern now is how much they will fall short by. There are serious implications as lower levels of EV ownership will drastically impede the Government’s ability to reduce transport emissions, with the Environmental Protection Agency reporting that transportation was the only sector where emissions rose last year.

“The October data also highlights clear issues for certain segments of the market with sales of electric light commercial vehicles continuing to stand in stark contrast to equivalent sales in the passenger car category. Business owners are effectively saying that the figures don’t add up and the only way to shift that mindset will be to dangle the carrot of financial incentives if they are to make the switch.

“With the level of Government funding for EV grants in Budget 2024 at a comparable level to the previous year, it is unlikely that purchase behaviour will change anytime soon.”

Globally speaking, the reluctance to spend big on a new EV is perhaps hardly surprising at a time then the average monthly repayment for a used car in the US market has now hit $533 (€491) – a considerably chunk of change for hard-pressed working families, especially so in a country so bereft of public transport options. Making the leap to an EV is clearly going to be beyond many.

While price overrides other concerns, the S&P study found considerable numbers of people are still worried about other facets of electric car ownership: 46 per cent said they were worried about how long charging-up takes and 43 per cent said the availability of charging points was a concern.

Most people in the report said they were prepared to spend between 30-60 minutes charging, but they were worried about the reliability of chargers. Interestingly, 51 per cent of the existing EV owners surveyed said that they had a home charging point, something that is reckoned to be de rigueur when it comes to electric motoring.

Range anxiety seems to have been defeated. Only 29 per cent said they would expect an EV to be able to cover more than 480km on one charge, while 19 per cent said they would be happy with between 400-480km, and 21 per cent said between 320-400km would be enough for their purposes.

It is also clear from the S&P report that the potential savings of running an EV are still the most important aspect for most buyers looking to make the switch. Sixty-nine per cent of respondents said fuel savings were the thing that mattered most to them, with 59 per cent saying that they were thinking of switching for environmental reasons. Only 31 per cent said that they wanted to switch for the driving experience.

Which leads to a worrying conclusion in the S&P report – 67 per cent of those surveyed said they are open to buying an EV for their next car. That is a considerable fall-off from the 86 per cent noted in the same survey in 2021, and at a time when the quality and variety of the EVs available is better than ever, and when the national charging networks are, in general, improving and expanding.

Of those looking at an EV purchase, 21 per cent said they felt the charging network was up to scratch for their needs, while 56 per cent said that it definitely is not (the ratios for those who already own an EV are 48 per cent and 43 per cent respectively).

Car manufacturers are starting to roll out lower-priced EVs, but it is a slow process. Citroen has shown us the new e-C3 hatchback, which will boast a range of 320km and a starting price below €25,000, but it will not arrive in Irish dealers until late next year. We will have to wait at least that long to see the circa-€27,000, 400km capable Volkswagen ID. 2, and the similarly-specified Renault 5 EV.

[ The Irish Times car buyer’s guide for 2023: The best electric cars ]

The slump in EV sales is part of a complex curve common to most new technologies. It peaks early on as tech-happy early-adopters get their initial fill, and then generally drops down before rising up to greater heights as the mass-market takes up the reins, happy that the new tech is mature enough to meet their needs. Satellite television, broadband and mobile phones all followed similar curves on the graphs.

The danger is the gap between the early and later peaks, and how long it might stretch out. Normally, this would be a concern only for the companies selling the tech, but when it comes to electric cars – and their ability to reduce or eliminate emissions from transport and travel – the concern is a truly global one.