What’s putting the brakes on demand for EVs?

We’re going through a rough patch for electric vehicles. Last week, Tesla — the biggest domestic producer of EVs, hands down — reported its revenue from auto sales fell 7% from a year ago. Tesla has rolled out price cuts and incentives to keep up sales, as consumer demand has fallen and competition, especially from low-cost Chinese producers, has risen.

Meanwhile, General Motors just announced it’s delaying a new electric truck plant and a new Buick EV. 

As Americans got the bug for electric vehicles over the past several years, sales more than doubled to about 7% of all new-vehicle sales nationwide. But lately, that growth has slowed down. 

Consumers are facing high interest rates on EVs that already cost more than comparable gas-powered models. They’ve got range and charging station anxiety. 

“Seems to be plenty of supply, and demand has fallen,” said Karl Brauer, an analyst at iSeeCars.com. “And we also see stacking up of EVs at dealerships and reduction in production capacity at multiple manufacturers.”

And with oversupply has come lower markups for new vehicles and outright price declines for used ones. This time last year, “the average used EV was around $40,000,” Brauer said. “And in June of ’24 it was $28,000.”

Part of this is simple consumer preference, according to Columbia Business School climate economist Gernot Wagner.

“General Motors is printing money selling massive gas-powered SUVs,” he said.

Globally though, consumers are going the other way, per Wagner. “China is racing into this future. It has much cheaper electric vehicles. So BYD famously sells an electric SUV for $10,000.”

Chinese EV-makers are also giving European competitors a run for their money. “But what the EU has is domestically-built, cheap, small vehicles — which the U.S. for the most part just doesn’t,” Wagner said.

And lower prices would help, said Garrett Nelson at CFRA Research. 

“The average new vehicle price is now about $48,000. Tesla has been promising a $25,000 mass-market EV for some time now; we think it’ll be more in the $30,000 to $35,000 price range,” he said.

CEO Elon Musk says a more affordable Tesla will be out next year. 

Meanwhile, as automakers pull back on their EV plans, “they’re pivoting more towards hybrids,” Nelson said. “The hybrid market actually grew at a higher rate than the EV market last year.”

Nelson doesn’t see that as backsliding in the march towards an all-electric future — he just thinks it’s going to take a bit longer to get there.