We've got a problem. There aren't going to be enough EVs for everyone who wants them in the United States.
And if new policy incentives expected from the Biden administration have a similar impact to EU policy incentives this year, we've got a big problem. Let's break it down.
January 2020 vs. December 2020 EV Adoption
In January 2020, BCG projected a market share gain of 1% per year for US battery electric and plug-in hybrids combined between 2021 and 2025, for a total EV market share growth of 5% in that period.
However, a Consumer Reports survey in December illustrates the potential imbalance: 4% of US drivers say they "plan to get" an EV for their next vehicle purchase, and additional 27% "will consider it" for their next purchase. Given the 6 year average buying frequency for vehicles in the US, most of these "next purchases" will happen between now and 2025.
So there will be enough EVs for the "plan to get" crowd, but not enough for any of the "will consider it" crowd, unless automakers substantially increase their new EV production. A delivery increase in the US won't come at the cost of a reduction in EU deliveries: the delay of the US rollout of VW's ID.4 shows that.
Cash for Clunkers 2.0 Will Accelerate the Crunch
Included in the array of federal policy changes expected from the new Biden administration to increase EV adoption are measures to restore the full EV tax credit for manufacturers that have phased out (Tesla and GM), and direct car buyer rebates for EVs, similar to the original Cash for Clunkers program in 2008 that rebated the trade-in of inefficient vehicles for purchases of fuel efficient cars.
We can see the potential impact of favorable policy in the market dynamics of the EU in 2020:
New car sales in the EU overall were down 20% due to the COVID-related recession. But new EV sales during that same period: up 137%! (Source: EV Volumes)
Compare that to the US market dynamics in the same period and same recessionary conditions: overall market down 15%, EV sales up just 4%. The main difference between the two is regulatory policy, which neatly illustrates the potential impact of US policy changes in 2021 and beyond.
Used Electric Vehicle Market Trends in 2021
Used car prices are shaped by a number of complicated factors. Pricing on used electric vehicles is even more complicated given the rapid innovation in underlying technology and major increases in both supply of new EVs and market demand. Throughout the year, we'll be tracking and reporting on used EV market trends, but here's what we're looking for in 2021 that could shape the used market in major ways:
- Battery uncertainty will continue to depress prices for used EVs: This underlying consumer concern is holding back the used EV market and is the primary reason that Recurrent launched our used electric car battery health reports.
- Rapidly increasing demand for EVs that outpaces auto makers' ability to deliver new EVs may result in increasing prices for used EVs.
- The full restoration of tax credits on new Tesla and GM vehicles may cause a reduction in price for the used equivalent for models from those manufacturers though (the reverse of what happened early last year where used Chevy Bolts increased in price across the board when tax credits on new Bolts were phased out).
How Recurrent Can Help
If you're a current EV owner thinking about when to sell your EV and upgrade, you should sign up for our monthly EV battery health reports so you can eventually sell your car at a premium by showing your battery history.
If you're thinking about buying a used EV, keep in touch with us and we'll continue to provide market trends and other research throughout the year.
If you're a dealer, we'd love to have you join us at Recurrent to provide certainty to your shoppers with our used EV reports.