Not long ago, EVs were the hottest thing around since the advent of smartphones 15 years earlier. Consultants and analysts were falling over themselves with outlandish projections of surging EV sales over the next several decades. Boston Consulting Group went as far as to forecast that EV and hybrid vehicle sales would top 50% of total cars sold in the US by 2030. Auto consultancy JD Power estimated that America’s EV sales would grow to a more modest 36% of total car sales by the turn of the decade. Now, most forecasts of US EV sales have been slashed to between 20% and 25% of total US car sales by 2030.
Sales of EVs in the US are projected to grow to 1.6 million this year, or 11% of cars sold in America. The forecast anticipates a huge boost in the current quarter, ahead of the expiry of a US$7,500 rebate for a new EV, or a credit of US$4,000 for used EVs and hybrids, on Sept 30. Tesla, General Motors, Ford, Hyundai and others are seeing increased demand for EVs from people who want to buy a car before EV rebates end and tariff-induced price hikes become effective.
EVs began to derail even before they could really take off. Here’s the thing: Clean energy cars are expensive. Indeed, the first Tesla Roadster, a two-seater sports car, rolled off the production line in 2008, around the time when oil prices shot up to a record US$147 a barrel. Benchmark WTI crude was selling around US$67 a barrel last week and edging lower. New EV owners often wonder about recharging the moment they take their car out of their driveway or experience range anxiety. Despite billions spent on charging infrastructure, there are still not enough charging stations in the US and around the world. In the longer term, there is concern about EV battery degradation. EV batteries degrade over time, just like the ones in your smartphone. EV owners wonder how long it will be before their battery has to be replaced. EV batteries are not cheap. To replace the one in your US$45,000 Tesla Model 3 EV will set you back US$15,000.
Normally, an EV battery should last up to 10 years or 100,000 miles. I know of one Tesla owner who bought a Model 3 seven years ago and now needs to replace his battery. He can’t sell his car because of the degraded battery. To keep it going, he needs to fork out another US$15,000. Petrol-based batteries cost just 3% of the car’s retail price, and they typically last three to four years.
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The sticker price remains the biggest psychological hurdle for EV buyers. An average subcompact SUV — such as the 2025 Hyundai Kona that runs on petrol — retails for between US$25,000 and US$32,000, depending on the version and the bells and whistles it comes with. A compact Hyundai EV in the US sells for about US$9,000 more than a comparable internal combustion engine model. Trump tariffs are likely to push US car prices up between US$3,000 for local SUVs and US$5,000 to US$7,000 for similar foreign cars. Until now, the EV rebate was some consolation for those looking to make the switch from a petrol-based car. Even then, a US$1,500 difference after including rebates is often big enough to dissuade most cost-conscious buyers from taking the leap. Without the rebates, EVs remain a bridge too far for middle-class car buyers.
Why EVs matter
The switch to EVs, or electrification of transport, is important not just because clean energy vehicles are good for the environment, producing no tailpipe emissions, which lead to cleaner air, and cutting greenhouse gas emissions that contribute to climate change. EV buyers also save on operating costs because charging is cheaper than filling a tank. EVs typically have about 20 moving parts, primarily in the electric motor, while internal combustion engine vehicles can have up to 2,000 moving parts in the engine, transmission and related systems. That means lower maintenance costs. Often, if something malfunctions, the EV maker can send you a software update over the air that will fix it.
The key to EVs is the batteries, which can also be used in drones, eVTOL (electric vertical take-off and landing aircraft), humanoid robots and other AI-powered consumer electronics. To build a cost-effective battery supply chain, you need scale. Strong EV sales would build a bigger battery supply chain, which, in turn, would help US firms develop better and cheaper drones, humanoid robots, eVTOLs and a host of other AI-powered gadgets.
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EVs are expensive in the US because local EV manufacturers and the battery supply chain lack the economies of scale that their counterparts in China possess. A Tesla Model 3 costs US$45,000. BYD makes EVs that retail for half that, or around US$23,000. BYD and its peers, such as Geely, Wuling, and Xiaomi, have aggressively cut costs to the point where they can now manufacture EVs for as low as US$15,000. Chinese EV makers are currently waging a “discount war”, slashing prices to boost demand. BYD has an edge over its rivals as it makes its own batteries. All its rivals buy batteries from giant Contemporary Amperex Technology Co Ltd (CATL).
Musk long touted a leaner, economical model of Tesla for US$25,000 for years, promising even cheaper cars to spur demand. A hundred years ago, Henry Ford had a similar strategy: Cut production costs to produce more affordable cars for the masses. Musk, however, is now pivoting to driverless robotaxis instead of making EVs that are driven for a few hours a day by owners. Tesla aims to shift from vehicle hardware sales to boosting recurring revenue with software-like margins. Musk is also positioning it as a leader in manufacturing humanoid robots.
Global car sales grew 2% last year to 89 million vehicles. EVs accounted for just over 20% of that. In the US, EV sales made up just 10% of total car sales last year. In China, pure battery electric cars made up 27% of new car sales, hybrid electric cars made up 21% of total sales and petrol or diesel vehicles made up 52% of total car sales. Analysts expect total EV sales in China — both pure battery electric and hybrid — to top 60% of total car sales this year. Within the broader EV definition, battery electric vehicles (BEVs) are expected to account for two-thirds of total EV sales in China by 2025.
EVs replacing petrol-based cars
China may be the ground zero of EV sales, but some countries in Europe are embracing clean energy cars as if their survival depends on them. Take Norway, for example. BEVs made up 88.9% of new car registrations there last year, the highest share anywhere on Earth. Sweden and Denmark follow with EV market shares of 58.4% and 55.6%. In the Netherlands, the share of BEVs and plug-in hybrids climbed to 48.5% last year. China’s EV sales were 40.9% of all auto sales last year. In Singapore, EV sales were over a third of all car sales last year. Singapore sales are currently running at over 40% of all car sales. The lowest EV penetration in the world is in a handful of African countries, India and Japan, with EV sales close to 2% of total car sales.
Japanese carmakers such as Toyota and Honda have long been criticised for missing the boat on EVs. As charging stations and range anxiety became major issues for car buyers, Toyota and Honda have rolled out more hybrids and a few plug-in hybrid models as well to satisfy demand, particularly overseas. The Japanese themselves love cars that run on petrol. South Koreans and their carmakers, Hyundai and its affiliate Kia, have taken a different tack. They have aggressively introduced new BEV and plug-in hybrid models. South Korea is now the world’s ninth-largest EV market, while Japan is not even among the top 25.
There are a few lessons to be learned from the way the EV rollout has panned out so far. First, government regulation on clean energy vehicles is a huge driver of EV adoption. Secondly, until EV makers reach certain economies of scale, government rebates are needed to drive EV sales. However, cash-strapped governments are withdrawing incentives for EVs, as the Trump administration is doing in the US and as its counterparts in Europe are doing. Thirdly, there is a need for governments and the private sector to partner in building charging infrastructure. Petrol-based cars have had a 100-year head start. There is a pump almost everywhere you go. Building adequate charging infrastructure will take time, but as it is developed, more EV buyers will be convinced that they need to make the switch to electric vehicles.
EV makers like BYD, Tesla and others also need to build cars that offer a longer range. EVs with a 500km (310 miles) range are already fairly common. Some EVs with a range of 700km to 800km, including the Lucid Air Grand Touring, Mercedes EQS and Tesla Model S, are expected to be rolled out over the next six months. That will go some way in addressing range anxiety. If your car can go 500 miles on a single charge, you really don’t have too much to be anxious about. Charger compatibility was an issue a few years ago, but that has been addressed. You can now charge your GM, Ford or Hyundai EV at a Tesla charging station or a Tesla at a charging station operated by EVgo, ChargePoint or Blink. Until now, the fastest EV chargers have taken 20 minutes as opposed to the two minutes it takes to fill up a petrol tank. The sweet spot for charging is 5 minutes. BYD is already experimenting with a 5-minute charger in China.
Trump’s tax and spending cuts may have eliminated EV rebates, but they are unlikely to push EV owners to internal combustion cars. Improvements in battery technology will eventually cut EV costs further, and advanced software, including autonomous driving capabilities, will lure more car buyers to their first EV. If you can rent out your EV as a robotaxi when you are in the office or asleep, you don’t mind paying a small premium. Years from now, the lull in 2025 would be seen as just a small bump in the road for the boom in AI-powered vehicles that are connected, electric and autonomous.
Assif Shameen is a technology and business writer based in North America
