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Wednesday, June 5, 2024

When Will EVs Become Mainstream : 10 Years Later : 2014 Predictions

In June of 2014, we attempted to determine when EVs would become mainstream in the US. At that time, some of my EV-enthusiast friends were convinced that the legacy automakers would switch to 100% EVs any day; while EV detractors said that EVs were just a passing fad or a west coast niche product at best.

Our prediction here at carswithcords.net was between these two extremes. We assumed that EVs would be successful and follow the sigmoid adoption curve that many technologies follow. Although, people do not buy new cars as often as they buy new phones, so the timeline would stretch over half a century. Here's the graph from that 2014 estimate: 

EV Adoption Curve - 2014 Estimate

Now it's 10 years later. How'd our prediction fair? Here's a graph comparing our old estimate to the actual sales in the US.

As you can see in the graph, the actual sales tracked just below our estimate from 2015 through 2020. However, in 2021 things changed. US EV adoption jumped up; 2022 continued this upward trend. Our estimate had this "knee" occurring in 2025. I'm happy to see the upward trend coming sooner than the estimate, but I'm cautiously optimistic that the uptrend will continue. There are factors that may slow adoption in 2024 and bring it back in line with our prediction.

Several black swan events occurred during this time window where we see EV sales exceeding the prediction. The two events most relevant to our discussion are the supply-chain shock and hyperinflation. The pandemic caused supply-chain disruptions for several products. Automobile production was particularly hit hard. Chip supplies from anti-lock brake systems to infotainment units were in short supply. Since EVs are newer designs, they use newer, more abundant chips. This meant that, although impacted, EV production was not hit as hard by the chip shortage and supply chain issues.

Second on our list of things impacting the automotive sector is inflation. Inflation in the US was over 8% in 2022. The high inflation rate was in response to economic stimulus from the pandemic and other factors. To fight inflation, interest rates were increased. High interest rates particularly impacts new car sales since most car purchases are financed. EVs are still generally on the more expensive end of the new vehicle spectrum. Given this current higher price point for EVs, EVs are generally purchased by higher-income households. These households are likely to be less impacted by vehicle interest rates either because they can make higher monthly payments or because these households simply buy the car outright without financing it. So, just as with the chip shortage, EV sales are impacted by this issue, but not as drastically as non-EV car sales. 

We'll find out more about the interest rate impact after inflation returns to a normal 2% rate, interest rates are lowered, and we have published a trailing year's worth of data. So even though we've waited a decade to see how this has progressed, the transition is far from over; in many ways, it is still beginning. The Tesla is over 20 years old and the Nissan Leaf has been on the market for over 13 years, yet the transition to EVs is nascent.

Both of these events worked to give EV sales a relative percentage boost. The supply chain issues were resolved in 2022, while inflation continues to be an issue throughout at least the first half of 2024. These events impacted EV sales volumes, but they suppressed non-EV sales to a greater degree. It is important to note that these are transitory events. I would not extrapolate this growth rate into 2024 and beyond.

EV sales in the US (and globally) are growing and the overall trend is up. However, reality is rarely the smooth curve of predictions. Many factors ebb and flow to make the "actuals" a bumpy ride. Picking the signal out from the noise is the tricky part.

Not Just About The US

For a more complete view, I've added global EV sales and China EV sales to the graph. As you can see the US is a laggard compared to these. However, EV prices are continuing to drop, battery ranges are increasing, recharge times are improving, and the number of places to plug in continues to grow. These will cohere into an EV tipping point by 2026 and the steep acceleration phase will begin (even for the US).    

Thanks for reading my blog.



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