President Biden’s climate goals include getting more Americans into electric vehicles. But what do drivers want? Kristin Dziczek Senior Vice President of Research at the Center for Automotive Research, says it will take three things: price, utility, and convenience.
She says overall vehicle sales were down last year by 15 percent because of the pandemic. But sales of electric vehicles increased. Sales, according to Dziczek, including battery electrics, plug-ins and all forms of hybrid were nearly 8 percent of the market this year from January through April.
“And it’s really dramatic especially in the battery-electric side.” Dziczek said. “These are the vehicles that plug in and use no gasoline at all.”
The Allegheny Front’s Kara Holsopple spoke with Dziczek about what the future holds for electric vehicles. The interview has been edited for clarity and length.
LISTEN to their conversation
Holsopple: What drives consumers to buy electric, pardon the pun?
Dziczek: Consumers care about cost. So is this vehicle cost comparable to what I would buy otherwise? Some consumers who were early adopters of electrification may have been willing to pay a price premium on buying an electric vehicle in order to gain these non-pecuniary benefits of owning an electric vehicle, like saving the planet and cleaning the environment and doing their part for climate change. Not everybody thinks that way, though.
We’ve seen over time when you look at even the hybrids, sales of hybrid and electric vehicles go up when gas prices go up. Gas prices are relatively flat in real terms right now, so seeing this share take off really divorces the electric choice from it being a purely economical to being about the performance of the vehicle or the environmental benefits of owning an electric vehicle.
Automakers are electrifying across the whole wide range of their products.
So price is one, utility is second. When the first hybrids came to our market back in 1999, we saw the first Prius hybrids in the United States and the Honda Insight. On the battery-electric side, there was the Nissan Leaf, the Chevy Volt, even the Tesla Model 3. These are not cars that every family would fit into.
The number one vehicle segment in the U.S. is the cross utility vehicle. That’s something like a Ford Escape or a Toyota RAV 4. Until we get electric vehicles and electric options in that segment, we’re not going to really take off. So the automakers are electrifying across the whole wide range of their products. We saw just recently the announcement of the Ford Electric F-150.
And the third thing, I think, is convenience. I think there’s a lot of expectation that the Biden administration is proposing building out more high-speed charging networks. There’s a lot more chargers popping up in people’s neighborhoods, so they’re feeling a little bit more confident that they can recharge almost as conveniently as they could refuel a gasoline vehicle.
Holsopple: How are some of these barriers like price and utility changing? What are some of the solutions?
Dziczek: For price, many governments around the world, including the United States, include a consumer incentive, and sometimes many consumer incentives. The current incentive in the U.S. is a tax credit of $7,500 maximum. Two producers are not currently eligible for that because they’ve gotten to the level where once you made a certain number of electric vehicles, your vehicles no longer qualify for this incentive.
But the Biden administration is expecting to expand consumer incentives. Just getting better technology, better processes and lower cost inputs and greater productivity at producing batteries brings prices down.
About utility, it’s happening now. Toyota has two models, the Venza and then their minivan, that they’re only offering a hybrid. You cannot get an internal combustion engine-only version. That’s really the first time that it’s not just we’ve introduced this vehicle as a hybrid, but we’ve had a vehicle in the market for a while. That’s a big change
Holsopple: You mentioned the Biden administration proposing possible incentives. Can you say more about what those would be?
Dziczek: Well, we don’t know a whole lot about what they would be. The legislation is being crafted right now. We know that the administration’s priorities are that they would incentivize people to buy battery electric vehicles made in the U.S. with high domestic content and by workers who make good wages. And that’s perhaps a sticking point.
To get average Americans into new cars, period, let alone new electric cars, is going to be a bit of a challenge.
The Biden administration] wants these vehicles to be purchased by average Americans. The average American household income is like $68,000 dollars and the average income of a new car buyer is north of $80,000. To get average Americans into new cars, period, let alone new electric cars, is going to be a bit of a challenge.
The industry is struggling to produce vehicles right now due to the chip shortage, the tire shortage, and the residual impacts from the Texas weather that impacted petrochemical production. There’s a whole lot of supply chain disruptions happening, like tie-ups at the port and COVID outbreaks in different parts of the world. This is a smooth-running machine until it gets stopped and disrupted and then things are all messed up.
Holsopple: On the research and development side is there something that the Biden administration would or could do to help manufacturers to meet demand for electrified vehicles?
Dziczek: One of the challenges, I think, with moving to more electric and electrified vehicles is they require more chips than the current vehicles do. This chip crisis is really going to bite hard on increasing electric vehicle production in the U.S. if we can’t get enough chips. So there is an incentive that they’re working on to try to get more chip production in the United States. The Secretary of Commerce mentioned just this week that they’re going to put out some money to leverage private investment to get more chip plants in the U.S. That can help, but it’s not going to help with this immediate crisis.
Now, there’s a second part of that, though, and that is that chips often go into electric and electronic parts and components and not all of those are built in the United States. So we may build chips in the U.S. and then send them somewhere else to go into the partner component and then come back for production. They are working on a number of incentives, including strict enforcement of the United States, Mexico, Canada agreement to try to get more of that supply chain in the United States.
Holsopple: How are carmakers reacting to Biden’s agenda as compared with previous administrations, Trump or Obama?
Dziczek: I think it’s still a pretty new relationship. I mean, they haven’t been working with this administration for that long. This administration has prioritized automotive, and the president often talks about he’s a “car guy.” I think that that’s welcome, that their needs are front and center and that they understand what they’re going through and what they need to do.
It feels like the train has left the station on electric vehicles. Markets around the world are moving this way.
But I think he’s challenging them, too. Most industry forecasts before Biden took office were that battery-electric vehicles would be about 20 percent of the market by 2030. The administration would really like them to accelerate that and move even faster and to get to even greater shares of the market being electric and electrified by the end of this decade if we’re going to be on target for the net-zero carbon by 2050.
I mean, that’s the pathway that’s laid out. Basically, you have to go faster to reach those broader climate goals. But I think there’s a lot of recognition that the industry is going to need some help and that there needs to be both carrots and sticks to incentivize that investment to happen in the U.S.
Holsopple: As automakers move towards electrification, would you expect vehicles to continue moving in this direction, regardless of which party controls the presidency?
Dziczek: Yeah, I do. It feels like the train has left the station on electric vehicles. Markets around the world are moving this way. Regulatory incentives around the world are moving this way. These are global companies. The underlying architecture of our vehicles is global.
The Trump administration was kind of rolling back some of the Obama fuel economy and greenhouse gas emissions regulations, but the auto industry continued through with more investments in electric and more commitments to going to electrification across their portfolio.
Because if the industry swings both ways — every time a Republican administration comes in, regulations are pulled back, so you can make a lot of gasoline vehicles, and then four years down the road, you get somebody who’s going to implement more stringent regulations — the only way to chart a course through that, when product cycles are six, seven or eight years, certainly longer than a presidential term, is to aim for a higher regulatory compliance and to think about how that fits into your global portfolio of products which are in every market moving to electrification.
Kristin Dziczek is the Senior Vice President of Research at the Center for Automotive Research