The latest Gallup report sheds light on the current state of the electric vehicle (EV) market. Currently, only 16 percent of Americans are engaged with the EV market, either as owners or potential buyers, a figure that has remained stable over the past two years. This small number has prompted some automakers to scale back their EV investments while dealers struggle with moving units off their lots.
There has been slight momentum in 2024. According to Kelley Blue Book, nearly 269,000 electric vehicles were sold in the U.S. in the first quarter, a 2.6 percent increase from the same period last year, but a 7.3 decrease from the final quarter of 2023.
What’s behind this lackluster adoption? Industry analysts agree on three specific roadblocks: price, infrastructure concerns, and range anxiety. According to the Kelley Blue Book Report, EV ownership is currently skewed towards upper-income Americans with 14 percent owning an EV and 61 percent of lower-income respondents expressing disinterest in EVs.
The most recent S&P Global Mobility survey corroborates Kelley Blook Book’s study, citing affordability as the main reason consumers are holding back on adopting EVs. 48% of survey respondents consider EV prices to be too high.
A New York Times article from December 2023 highlights slow progress on infrastructure development, stating that “a robust federal charging network is still years away.” Only 28 states and Puerto Rico had either awarded construction contracts or accepted bids by December 15. The rest of the states are much further behind on EV infrastructure construction.
Slow infrastructure development only exacerbates the third hurdle, range anxiety. S&P Global states, “Charging concerns are second only to vehicle cost among reasons cited for those respondents against buying an EV.” 46 percent of respondents were concerned about the time required for charging and 44% were concerned about the availability of charging stations.
While these findings are useful, they don’t sell vehicles. So, how can you move more EV metal? Let’s look at a few tools to address the roadblocks hampering EV unit sales.
Interest in EV Incentives
It’s tax season and EV buyers – and dealers – can receive notable tax incentives associated with a sale. Since January 1, auto dealers have received reimbursement from the U.S. government for nearly $580 million in upfront EV tax credits, according to a Treasury report released on April 12. Previously, American consumers purchasing cars could only benefit from the $4,000 used EV credit or the new $7,500 credit for EVs when they submitted their tax returns the following year. To encourage EV sales, some dealers are now offering buyers cash incentives at the time of purchase to alleviate the wait between the sale and the tax return. This gives customers the choice of either waiting up to one year to receive credit on their next tax return or getting the credit at the time of sale with the dealership.
While the Treasury Department has reduced the number of EV models eligible for U.S. tax credits, those makes and models on the list trend toward middle-level price points including the Volkswagen ID.4, Nissan Leaf, GM’s Chevy Blazer EV, and Cadillac Lyriq.
As the Kelley Blue Book report notes, middle-aged buyers are interested in EVs but feel priced out of the market thanks to the soaring prices for new vehicles and stubborn interest rates on loans. Dealers who leverage OEM incentives combined with tax credits can make a compelling case to those buyers who are already swayed toward the ‘concept’ of an EV.
Used EV options
In the US, there are two used cars on the road for every new one. Plummeting prices, soaring inventory, and tax season mean that a wave of car shoppers will be looking to find a bargain in the used EV market. Many of these buyers have been interested in an electric car for a while but have been priced out of modern technology. Pricing used EVs to sell while meeting revenue goals is a dealer’s objective – but there are some issues.
Accurately evaluating the value and sales price of a used EV is challenging. While estimating the sale price of a used gas car is standard practice for dealers, when it comes to EVs, the odometer is not the only predictor of performance or reliability. The functionality and remaining life of the high-voltage lithium-ion battery directly determine the current and future range of a used electric car.
A battery in good condition means the car will have more range between charges, and most likely, many more years of functional driving. A battery that is slightly more degraded will mean a shorter range but may make a lower-priced bargain car right for the right owner. Determining the true condition of a battery can be prohibitively expensive and invasive with most dealers lacking the resources to perform chemical or electrical testing.
Fortunately, dealers can use the aggregated EPA Range Score to assess battery life, vehicle value and sales price. Most EVs (over 94 percent) hold their charge well with a score of 90 or above. Battery life reduces over time, but even used EVs can go over 225 miles on a charge and the average new EV goes over 250 miles. Another way to check range is Recurrent’s Range Score, which uses data from 100 million recorded EV miles, to help with the value adjustments.
EV Protection
Attaching a vehicle protection product optimized for EV vehicles is required to maintain value. The majority of vehicle service protection plans sold today cover parts that are not even in an EV, while not including the critical parts such as the battery. With mileage range a key concern for EV buyers, dealers can boost their sales and consumer confidence with the right protection.
It is possible to move more EV metal with the right plan in place. Our proven team of EFG experts are here to help you increase your sales and F&I revenue, no matter whether the vehicle is an ICE or EV. At EFG Companies, we’re more than an F&I provider, we’re your business partner in the retail automotive industry. Contact us today to learn more about how our team can help you achieve your winning strategy.