US dealers' plea for EV mandate pause raises demand questions

A coalition of US car dealers have written to President Biden to urge the administration to reconsider its EV incentive regime amid what the group describes as a "surging" supply of unsold BEVs.

Despite acknowledging that there are "many excellent" battery electric vehicles on the market, the coalition warns that customer demand is not keeping up with the large influx of BEVs arriving at dealerships as a result of government policy.

"Today, the supply of unsold BEVs is surging, as they are not selling nearly as fast as they are arriving at our dealerships – even with deep price cuts, manufacturer incentives, and generous government incentives," the letter says.

The Biden Administration's Inflation Reduction Act revised the regime for tax credits in 2022 with the aim of bolstering domestic EV manufacturing.

And the Environmental Protection Agency (EPA) has proposed further regulations that could require that up to two-thirds of new vehicles sold in the U.S. are electric by 2032.

"Your Administration has proposed regulations that would essentially mandate a dramatic shift to battery electric vehicles (BEVs)," say the letter. "With each passing day, it becomes more apparent that this attempted electric vehicle mandate is unrealistic based on current and forecasted customer demand."

Demand questions

The auto industry has been flush with dour demand outlooks for BEVs in 2024, but the evidence is far from conclusive. While consultancy Bloomberg NEF projects minimal growth in US EV sales to 1.2mn units, its peer S&P Global predicts 2.1mn sales in 2024, which translates to 88pc annual growth.

The dealers also warn that the BEV industry is entering a transitional phase, saying that "early enthusiasm has stalled" as the market moves beyond early adopters. This accords with new research from consultancy GBK, which finds that projections about lagging 2024 EV demand are due in part to the challenge of cracking mainstream consumers after early adopters have been served.

"EV automakers in the US have targeted tech-savvy and design-conscious early adopters, however a broader swath of U.S. households are now considering EVs or hybrids. These more mainstream, budget-conscious potential buyers will dominate the next wave of adoption," GBK says.

Enjoying EV inFocus? Hit follow on Google News to get us in your feed.

EV executives have lamented the high interest rate environment as a constraint on EV demand, chief among them Tesla boss Elon Musk. And a new Automotive Insights Report from research firm Loopme finds that the macro environment has led to 57pc of US consumers putting off car purchases beyond the next twelve months. However, the study is more optimistic on EV demand than it is on demand across the wider auto industry.

"Those looking to buy electric vehicles have a significantly shorter sales cycle: respondents who said they are likely to purchase an electric vehicle are over 67pc more likely to consider purchasing a vehicle within three months compared to ICE buyers," the report finds.

EV inFocus - Google News

Read full articles from EV inFocus and explore endless topics, magazines and more on your phone or tablet with Google News.

Google News

Skin in the game

However, any criticism of the rate of EV adoption by the dealership lobby ought to be taken with a grain of salt, since the prospect of widespread EV uptake threatens to eat into dealers' slice of the automotive industry pie.

Several EV makers have opted for a direct sales model, bypassing dealers altogether. After Tesla inaugurated the strategy to great success, fellow US pure plays Lucid, Rivian, and Fisker have followed suit.

However Fisker has begun introducing dealer partnerships in conjunction with its direct sales in a bid to jolt its sluggish delivery rate. The California firm now has over 100 dealer partners, and is looking to court dealers at the National Automobile Dealers Association Show in Las Vegas next month, it announced this week.