Electric Cars: What's Preventing Mass Adoption?
Electric Cars are vehicles that are powered, either fully or partially, by a battery instead of a traditional combustion engine. They are a powerful weapon in the fight against climate change as they cut carbon emissions almost completely. Moreover, they are cheaper to operate, as electric cars can be recharged for less than the cost to refuel a traditional car. Even so, the market has not responded well: electric cars have barely captured 1% of the market. In this post, I will investigate the possible reasons why.
Two Types of Electric Cars
Just as there are a variety of technologies available in conventional vehicles, plug-in electric vehicles (also known as electric cars or EVs) have different capabilities tailored to different drivers’ needs. A major feature of EVs is that drivers can plug them in to charge from an off-board electric power source. This distinguishes them from plug-in hybrid electric vehicles (PHEVs), which supplement an internal combustion engine with battery power.
I will consider only EVs in this analysis.
Current Market Share
Despite often making headlines, electric cars have a tiny market share of the entire car sales industry in the United States. The graph below shows impressive growth in the market share of EVs but when we look at the scale to the left, we can clearly see the challenge facing electric cars — they barely exceed 1 percent of the entire car sales industry.
In investigating the EV market, I found the top three models by total car sales.
Unsurprisingly, Tesla wins the gold with its most popular model being the Model 3. We can also see that Nissan and Chevrolet are also doing quite well given how small the market really is. The Nissan Leaf takes third place with a total sales of 132,214, not far behind the Tesla Model S with a total sales of 157,992. There might be a reason why the Tesla Model 3 outperforms the other cars and in order to understand why, we need to investigate what the market actually want.
What People Want in an Electric Car?
A survey of 1000 participants by Castrol found that the average consumer would buy an electric car if it were below $40,000 and had a range of over 319 miles on a single charge. Now that we know this, let's see what is the state of the current market.
In the image above, I plotted the Manufacturer Suggested Retail Price (MSRP) of many cars against their ranges. I also highlighted the area that the survey participants consider to be the sweet spot for an electric car. The chart illuminates the reason why electric cars are not common yet.
We can see that most electric cars fall outside of the "golden zone" with the notable exception of Tesla's Model 3, the most successful electric car by total sales. It is now apparent that car manufacturers are simply not matching the expectations of the market.
There are two reasons why that might be:
- They do not possess the technology to produce a car in the "golden zone"
- They have not figured out what the golden zone is.
In my opinion, the former reason is more likely to be true.
Moreover, other external reasons exist that could dissuade people from buying an electric car. Firstly, the charging network could be too sparse to be reliable. Consumers are used to quick and easy refueling and electric cars need to match that comfort level to stand a chance. Secondly, gas prices could be plummeting and thus making combustion engine cars more competitive.
I believe that once the technology reaches a point where manufacturers can make more powerful and long-lasting batteries, more and more cars will fall into the "golden zone" and thus creating a boom in the industry.