The US Electric Car Dilemma: A Race to Catch Up
The US is lagging behind in the global electric vehicle (EV) revolution, but why?
Despite a recent surge in EV sales, the US still lags behind many countries in electric car adoption. With sales of battery-powered cars reaching 1.2 million last year, a five-fold increase from four years ago, and hybrid sales tripling, it might seem like the US is finally catching up. But here's where it gets controversial: the boom was largely driven by a government subsidy, which has now expired.
The End of an Era: Subsidies and Their Impact
A government subsidy, offering up to $7,500 (£5,588) off certain electric vehicles, plug-in hybrids, or fuel cell cars, was a major catalyst for the sales boom. However, with this incentive gone as of September, carmakers are bracing for a potential sales slump. Industry leaders like Ford's CEO, Jim Farley, and General Motors' CFO, Paul Jacobson, have expressed concerns about a significant drop in EV demand.
Global Comparison: The US Lags Behind
The US, the world's second-largest car market, lags behind in electric car sales compared to many other regions. In the UK, for instance, battery electric and hybrid cars accounted for nearly 30% of new sales last year, according to the International Energy Agency (IEA). Europe saw one in five sales as electric, while in China, the world's largest car market, such vehicles accounted for almost half of overall sales, and are expected to become the majority this year. Countries like Norway and Nepal have even higher adoption rates.
Policy Differences: The US vs. the Rest
Analysts attribute the slower adoption in the US to comparatively weak government support for the EV sector. Unlike China, the UK, and Europe, which have implemented robust subsidies, trade-in programs, and supportive regulations, the US has been more hesitant. Former President Joe Biden aimed to increase EV take-up, targeting 50% of all US car sales by 2030, and implemented measures to boost demand and investment. However, President Donald Trump has pushed to scrap many of these initiatives, including the $7,500 credit, arguing that they force people to buy cars they don't want.
The Affordability Factor: High Prices and Tariffs
Electric cars have become more affordable in the US, but they still cost more than comparable petrol-powered vehicles. Chinese carmakers like BYD, known for their low-priced EVs, have been effectively shut out of the US market due to high tariffs on Chinese-made cars, supported by both Biden and Trump. As a result, the average transaction price of an electric car in the US was over $57,000 in August, according to Kelley Blue Book, about 16% higher than the average for all cars. The least expensive battery car, a Nissan Leaf, costs around $30,000 (£22,000), compared to several models available for under £20,000 in the UK.
The Future of EV Sales: Uncertain Times
The end of the tax credit, combined with tariffs on foreign cars and certain car parts introduced by Trump, has left analysts uncertain about the future of EV sales. While Hyundai has announced plans to offset the loss of the tax credit by lowering prices for its Ioniq EVs, Tesla has increased the cost of monthly lease payments for some of its cars. Stephanie Brinley of S&P Global Mobility expects a challenging year ahead, with overall car sales predicted to fall by roughly 2% in 2026. The impact of new tariffs and the loss of incentives will be a double whammy for the industry.
The Impact of Policy Changes: A Setback for EV Investments
Trump's policy changes, including the removal of subsidies and the introduction of tariffs, could significantly reduce carmakers' investments in electric cars. Katherine Yusko, research analyst at the American Security Project, describes it as "a big hit to the EV industry." With the playing field no longer level, the US has a lot of ground to make up. However, Stephanie Brinley cautions against declaring the US behind, arguing that the industry is still testing technology alternatives, and it's too early to say if electric is the only and best solution.
And this is the part most people miss...
The US's position in the global EV race is a complex issue, influenced by a range of factors, from government policies and subsidies to market forces and consumer preferences. As the industry navigates these challenges, the future of electric vehicles in the US remains an intriguing and evolving story.
