By Wayne Mitchell, global director, sales and marketing
It may seem like everyone you know is driving an electric vehicle (EV) or is planning to buy one in the near future.
On the contrary, adoption of EVs in the United States is very low – lower than in other major markets like China and Europe. Despite increasing 83%, EVs accounted for just 3% of new car sales in the U.S. in 2021. By comparison, this figure stood at 9% in China, and 14% in Europe. While it may not seem like a big deal that EV sales make up such a small portion of the market, consider the bigger picture.
The bigger picture
As part of its climate initiatives, the Biden Administration is in the midst of a major push to encourage the take-up of EVs. The White House has announced an ambitious goal for EVs to account for 50% of all new car sales by 2030 – that’s a 43% increase as a share of the total market in under a decade. The administration’s first step towards achieving that goal is to establish a national EV charging infrastructure to make it easier for EV drivers to get around. At a projected cost of $5 billion, the national infrastructure will include 500,000 charging stations across the country, which will be built over the next five years.
However, this initiative alone is unlikely to help propel uptake of EVs to achieve the administration’s goal. Even a proposed $7,500 tax credit for the purchase of an EV might prove insufficient. Increasing EV sales by such a significant amount in such a short period of time will undoubtedly have significant implications for automakers, supply chains and product/motorist safety. While traditional automakers have recently increased their EV offerings, we’ve also seen many face recalls of these products due to safety concerns.
A potentially bumpy road ahead
It’s important to note that much of the technology used in today’s EVs is still in its infancy. Recent recalls attributed to EV lithium-ion batteries underscore the challenges facing automakers and battery suppliers in making a stable and reliable product to power these vehicles. Recent news reports about lithium-ion battery fires have done little to encourage would-be buyers to take the next step. Recalls that result from fire risks can also prove financially and reputationally costly for automakers. In one recent event, a major global automaker and its battery provider saw their share values tumble 3.9% and 2.8% respectively as a result of a battery cell related incident.
In order to achieve the administration’s target of 50% new car sales, EV manufacturers will also need to scale up their production so that there are sufficient vehicles to satisfy consumer demand. Ongoing supply chain disruptions will make this difficult, as manufacturers struggle to secure parts, including key semiconductor chips. However, should this demand fail to materialize as expected, and supply outstrips market demand, automakers will face financial burdens that will need to recouped elsewhere, potentially passed on to consumers.
Finally, in this drive to 2030, and the industry’s longer-term migration from combustion to electrification, a great deal of technological innovation will be necessary. While innovation has many benefits, it also takes time and trial and error. Under pressure to achieve rapid (and successive) gains, automakers and component suppliers will need to ensure that stringent testing and quality standards are upheld at every stage.
Trusted by the world’s leading brands, Sedgwick has managed more than 5,000 of the most time-critical and sensitive product recalls in 60+ countries and 20+ languages, over 25 years. To find out more about our experience within the automotive sector, visit our website.