Many car dealers across the United States are expressing concerns about weak demand for electric vehicles (EVs), despite a record number of EVs being sold nationwide in 2023. Over one million EVs were sold last year, marking a significant milestone. However, some dealerships are struggling to move these vehicles off their lots. While the number of EVs on the road is higher than ever, sales are slowing as supply rises, particularly driven by government pressures on manufacturers.
Supply and Demand Imbalance
Ray Huffines, the owner of Huffines Auto Dealership in Texas, has extensive experience in the car sales business. He explains that the issue is largely driven by a mismatch between supply and demand. While manufacturers are producing EVs to meet government-imposed fuel economy standards, the demand from consumers isn’t matching expectations. Huffines believes that the government’s push for electric vehicles, including the threat of fines for manufacturers who fail to meet fuel economy targets, is placing dealers in a difficult position, with unsold cars piling up on their lots.
The Biden administration has set a target for half of all new car sales to be electric by 2030. While the government continues to push for this transition, many in the auto industry feel that automakers overestimated consumer interest in EVs. As a result, dealerships are caught between a surplus of EVs and a lack of consumer demand. Huffines and others are facing pressure from manufacturers to sell these cars, but the pace at which consumers are adopting EVs is not keeping up.
Pricing and Consumer Interest in EVs
Auto industry experts, like Auto Trader’s executive editor Brian Moody, suggest that the issue stems from manufacturers overestimating the market’s take rate for electric vehicles. Although there is demand for EVs, it hasn’t reached the levels expected by automakers. Moody believes that as EV prices decrease and features improve, the gap between supply and demand will begin to close. This could lead to more consumers considering EVs as a viable option in the near future.
Another factor contributing to the slow sales of electric vehicles is the complexity and fluctuation of tax credits. Some models that were previously eligible for a $7,500 tax credit under the Inflation Reduction Act have recently lost that eligibility. This change could have a significant impact on consumers’ decisions to purchase EVs, as the incentives play a crucial role in making these vehicles more affordable. The uncertainty around these tax credits adds another layer of difficulty for dealers trying to sell electric vehicles.