Are EVs stuck in neutral?

Hey, everyone — Happy (almost) 4th of July. Since the fireworks fall on a Thursday this year, I figured why not shake things up and send out this week’s newsletter earlier than usual.

On another note — I want to bring you more value with this newsletter and looking for feedback:

1) What do you like most about this newsletter and want to see more of?

2) What do you do in the car industry? (if you’re in the industry)

Hit Reply and let me know if you have a couple of seconds… Much appreciated.

—CDG

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Every day I see more news about how EV sales could skyrocket next month, next quarter, next year, etc.

Naturally, I've chatted with a bunch of dealers about this. Honestly? Many are telling me they are “fed up” with hearing about electric vehicles. (more on this shortly…)

Even with those nice federal tax credits, EVs are still a niche (but growing) product, making up around 9% of the car market. And since most of the electric cars out there are still Teslas, it's no surprise retailers are feeling let down.

But while I can understand their frustration, I think there's a bigger picture here. I do believe we're on the brink of a possible shift that could skyrocket EV demand—IF certain conditions are met.

Why do I think that?

Admittedly, things aren't looking so hot in today’s EV market. Tesla reported another drop in quarterly sales, and Polestar’s delayed 2023 financials were underwhelming, to say the least.

Looking closer at the data, it's no secret that the demand for EVs isn't growing as quickly as it used to. In April, EV sales went up by only 12% compared to the previous year. But in 2023, the annual growth rate was over 50%. But that's not the whole picture.

If we go back to April’s sales and exclude Tesla from the data, EV sales actually increased 75% from 2023 to 2024. Meaning, that traditional OEMs are still growing fast, even if the initial hype has settled down.

The consumer perspective: EV buyers don’t just like their cars, they love them. 68% of non-Tesla owners told CDK Global that their EV is the best vehicle they’ve ever owned. Purchasing one can even be life-changing: the number of EV buyers who say they’ll never return to ICE is up to 73%.

These are some big numbers, and they suggest that there’s more to the EV market than meets the eye.

But like I said, turning things around all hinges on whether certain conditions are met. Let’s take a look at two of the major ones.

Condition 1: EV quality must improve

Car quality has been going downhill for a few years now. Brands are battling hard for market share, which means they could be rushing development and cutting down on testing and inspections.

The result? New cars are getting more and more customer complaints every year. But many EVs are dealing with issues on a greater level.

Of note: Many of these complaints relate to software rather than hardware, meaning most of the quality issues drivers experience are not severe or difficult to fix.

But manufacturers are shipping products before they are ready, relying on post-launch over-the-air updates to fix bugs that should have never left the factory.

Here’s the deal. When people buy from a brand they trust, they expect the same level of quality no matter what kind of vehicle they get. Basically, consumers don’t care if the technology is new or not—they just want a reliable car.

The dealer perspective: Poor EV quality (or better yet, poor VEHICLE quality) obviously puts dealers in a tough spot. Many service centers lack the equipment and experience to give EV drivers the same level of service as other customers. Even the best technicians in the industry are somewhat powerless when it comes to software. Poor quality can not only hurt the buying experience — it can also hinder the dealer’s ability to sell.

For EVs to really surge, car buyers need better, higher-quality product options. Hopefully the millions (or billions) OEMs have dumped into research and development will pay off.

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Condition 2: Charging infrastructure has to expand

Since EVs usually don't have the same driving range as gas-powered cars, having reliable charging is crucial to get car buyers on board. I think pro-EV or anti-EV individuals can at least agree on that. Which is why manufacturers and government agencies have teamed up to build charging stations across the U.S.

And if you think private-sector efforts are doing any better, think again. Using data from thousands of customer reviews, Harvard researchers found that about one in five public EV chargers in the U.S. are out of order at any given time because of damage, glitches, or all-out shutdowns.

On the global stage: Since many EV drivers charge at home, it's easy to think the infrastructure issue is overblown. For a clearer perspective, let's take a look at what's happening overseas. In China, drivers had access to over 2.7 million public chargers in 2023. The impact on EV demand? Huge. Analysts expect EVs to make up more than 40% of the country's new car sales by the end of this year.

The U.S.? Well… we have fewer than 200,000 public EV charging stations spread unevenly throughout the country. This isn’t up the snuff and buyers know that. Most Americans (56%) have little to no confidence that charging infrastructure will ever grow enough to meet demand, according to Pew Research. And — you guessed it — this lack of faith in public charging is eating at demand. Just 16% of charging doubters are interested in buying an electric car, compared to 58% of fans.

Wrapping up

It’s easy to blame slow EV growth on a lack of buyer interest, but I don’t think that’s what the sales data and buyer satisfaction scores show. Many consumers are pretty excited about EVs (and many DGAF…). Yet, the challenges outlined above are some of the reasons holding people back from making the switch. The real question is: are these temporary hurdles, or will they fundamentally reshape the EV market? The answer likely lies in how quickly the industry can address these issues.

The TikTok car dealer: Livestreaming negotiations to 1,000s - Last Thursday's guest was a vehicle acquisition pro who has garnered over 363,800 followers and received more than 10 million likes on TikTok with undoubtedly many more to come. George Saliba (@georgejsaliba) is the dealer principal at J&S Autohaus Group and the owner of SellMyEV.com. In this episode, he discusses his vehicle-buying philosophy and how he’s capitalizing on growing industries.

The auto tech whisperer: The next $300M exit - I sit down with Mark Boyd, legendary automotive tech founder and investor, to take a deep dive into dealership technology. We talk about how data and artificial intelligence is driving the industry forward and breaking down barriers between consumers and dealers.

Listen to the episodes here, and subscribe to the CDG Podcast on Apple, Spotify, or wherever else you get your podcasts. And thank you to Uber for Business, Cars Commerce, Auto Hauler Exchange, Private Auto, and CDK Global for making these episodes possible.

• Rivian deliveries remain flat in Q2, but things are looking up in the second half of 2024.

• The prospect of low-priced Chinese EVs reaching the U.S. from Mexico poses a threat to automakers.

• The average new EV now costs less than the average Tesla.

• How automaker merch capitalizes on brand awareness.

• Ferrari launches a battery replacement scheme for its electrified powertrain sports cars.

Thanks for reading. See you on the next edition…and try to keep all your fingers tomorrow ;-)

—Car Dealership Guy

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