High Costs and Lack of Charging Stations Stalling EV Uptake

The world is witnessing unprecedented growth in EV adoption, thanks to increasing public acceptance of electric vehicles and consumers’ desire for more sustainable and environmentally friendly options.

McKinsey projects that worldwide demand for EVs will grow sixfold from 2021 through 2030, with annual unit sales going from 6.5 million to roughly 40 million. However, making this growth happen will require an equally impressive increase in the availability of public and private changers. The US will need around 9.5 million charging stations by 2025 and 28.0 million by 2030 to keep up with the increasing number of EVs on the road.

The report says that the failure of EV charging infrastructure to keep up with the pace of demand will affect drivers’ shift from internal combustion engines.

The IEA data shows that EV sales closed to 14 million in 2023, bringing the number of EVs on the road to 40 million.  95% of these sales occurred in China, Europe, and the United States. Compared with 2022, the number of EVs sold is up 3.5 million or 35% more in 2023 and six times higher than in 2018, just five years earlier.  The number of EVs sold in 2023 also accounts for 18% of all cars sold that year.

Looking closely at the data, China still dominates in the share of EVs sold in 2023, accounting for just under 60%, just under 25% in Europe, and 10% in the United States.

The lingering question is whether electric vehicle sales will maintain their strong momentum in the coming years as technology advances beyond China. What factors are poised to drive the global expansion of electric vehicle adoption?

A surprising result of a McKinsey Mobility Consumer Pulse Survey released on June 2024, based on 30,000 responses from 15 countries, including the United States, Japan, Australia, China, Norway, France, Italy, Germany, The United Kingdom, South Korea, and Brazil shows that globally 29% of EV owners are likely to switch back to ICE, primarily because of difficulties with charging. In the United States, the world’s largest economy, the figure is even bigger at 46% or almost half of EV owners. Australia has the largest EV owners, at 49%, who want to revert to ICE.

The main reason EV owners wanted to revert to ICE is the charging stations are not good enough (35% of respondents), followed by the total cost of EV ownership being too high (34% of respondents), and driving patterns on long-distance trips are too much impacted (32%). Other reasons include not being able to charge at home (24%), needing to work about charging too stressful (21%), changing mobility requirements (16%), and not liking the driving experience (13%).

Only 9% of drivers of respondents surveyed in all countries say their existing charging infrastructure is enough to meet their needs.

However, while some EV owners want to shift back to traditional cars, 38% of those without an EV are considering buying a battery-powered vehicle (BEV) or plug-in hybrid electric vehicle (PHEV).

The survey’s key findings show that 27% of European EV buyers are open to buying a Chinese brand for their next purchase, 21% of car buyers consider autonomous driving functionalities a key buying factor for their next car, 59% of EV buyers want to use more digital connectivity services in the future, and 37% of EV buyers consider buying their next vehicle online.

When it comes to these more enthusiastic EV buyers, the survey notes that they are younger, live in urban or downtown areas, and are more tech-savvy. They also have higher disposable income and can charge at home.  In contrast, the highest barriers to EV adoption are low familiarity with the technology and high perceived costs.

The high cost of EVs and high interest rates are slowing EV uptake in the US

A report from Bank of America released in June 2024 says that EV prices limit the widespread adoption of EVs in the US. This adoption has sharply slowed in 2024, reducing the projections by a year or more. According to the report, only 3% of EVs in the U.S. are priced at less than $37,000, compared with more than half of gas-powered or hybrid vehicles.

BofA’s analysis assumes that most US consumers will buy an EV if the price is competitive with an internal combustion engine vehicle.  However, they project that EV price competitiveness with ICE will not happen until 2028 and beyond. “This means OEMs have little incentive to ramp EV production despite what might be higher levels of demand at lower prices. As such, we expect EV penetration to inch higher from 2024 to 2027, but after 2027 it could accelerate” (Walton, 2024).

Electric vehicles are essential to achieving climate goals. They are often featured as a solution to adapt to and mitigate climate change by limiting warming well below 2°C or within 1.5°C, which aligns with the Paris Agreement.

However, as the McKinsey survey and the BofA report both pointed out until EV prices can compete with traditional cars and the number of charging stations is adequate to eliminate range anxiety, most people will still hold off shifting to EVs.