About 7% of new US car and truck sales in 2023 were electric, 1.2 million vehicles. Of these, about 55% were Teslas. These numbers make sense based on US manufacturing and driving habits, so I don’t expect fast sales growth in 2024.
Currently home owners are the only major group of private drivers that save on fuel cost from owning an EVs. Home owners pay relatively little for electricity, about 11¢ per kWh, and they can generally charge their EVs conveniently, at home, overnight. Charging is more expensive and inconvenient for apartment dwellers. As a result, in 2023, some 95% of US EV sales went to home owners. Over 2 to 3 years they could hope to recover in gasoline savings the $7000 more that their EVs cost compared to petrol-powered vehicles, but they still have to drive a fair amount. A full charge of 80kWh EV at home will cost about $8.80 at current rates. This will power about 250 miles at a cost of 3.5¢/mile = $8.80/250.
The cost of gasoline is about 16.5¢/mile = $3.80/gal/ 23mi/gal) suggesting that you save 13¢ per mile by owning an EV. In order to recover the extra $7000 cost of the car in two years, you’d have to drive 27,000 miles per year, or 74 miles per day. To recover the difference in three years, you must drive 50 miles per day or 18,000 miles per year. This is more than most people drive.
EVs also offer reduced maintenance, but customers can balance this against the inconvenience of long charge times and spotty availability of chargers. My sense is that the fraction of Americans who benefit and drive 50-75 miles per day is about 7%. This fraction will increase as EVs get cheaper, but families that can benefit already own an EV.
The average Tesla costs today about $3000 more than the equivalent petrol car, but that still makes it relatively expensive, and it seems that the price differential was intentionally set to match sales to Tesla’s production capacity. Tesla could make EVs cheaper than petrol cars and still make a profit on each, but if they did this, they would have too much demand. Other US auto makers are mostly lose money on EVs and are unmotivated to lower prices. Based on this, my sense is that it is unlikely that sales will be much higher in 2024 than the 1.2 million sold in 2023.
The Chinese have plenty of new EVs, and they are eager to export. Their car market is currently about 50% EV, with companies like BYD selling EVs for as little as $12,000. The Chinese government subsidizes production and powers their EVs with cheap electricity by burning coal. These cars do not seem very good, compared to Tesla, but at this price they would flood the market if allowed to compete. The US government has kept them out with tariffs and with complaints about slave labor. Trump has promised a yet higher tariff, 100% on Chinese cars, if elected. The intent is to preserve US jobs and manufacturing. This is one of those situations where tariffs are good, IMHO.
Hybrids are a third option, cheaper than EVs, high mpg than normal engines. Though they are sometimes touted as a transition to EVs, to me they’ seem to suit a completely different demographic: those who don’t own their own home and drive a lot. Toyota makes the most popular hybrids in the US. They cost about $4000 more than the equivalent petrol car, $30,000 for a Prius vs $26,000 for a Corolla. When using a Prius in the city, you’ll get about 50 mpg, spending 7.5¢ per mile ($3.80/gal / 50 mpg = 7.5¢). This implies a gas savings of about 9¢ per mile vs an ordinary Corolla. Based on this, you have to drive about 27,000 miles per year in the city to recover the cost difference in two years. That’s a lot, and your performance is typically worse with a hybrid: you have a heavier car with a small engine. Maintenance cost is also higher with a hybrid than with an EV: you still need oil changes, fluid changes, belts, etc. and the mpg advantage vanishes on the highway. A hard driving home owner is better off with an EV, IMHO, an apartment dweller with a hybrid. Hybrids also should make sense for taxis and local-haul trucks. I can imagine hybrid sales rising in 2024, perhaps as high as 15% of vehicle sales. What we’re all waiting for is more near-shore manufacturing (or mandates), and this is not likely in 2024.
Robert Buxbaum April 28, 2024