Once Great Expectations
What’s Up with EVs
Affordability seems to be at the top of everyone’s minds these days. It’s discussed at kitchen tables. It underlies most media stories. And it’s front and center in our elections. Recent US political winners ran campaigns based on affordability politics.
So, if we want to encourage consumption of a certain product, we should be doing everything we can to make it more affordable, right?
Unfortunately, here in the US we are doing just the opposite with Electric Vehicles (EVs).
This newsletter favors encouraging people to drive EVs. More people shifting to EVs will lead to numerous positive real-world impacts, including improvements in air quality and public health, decreased dependence on fossil fuels, and a reduction in greenhouse gas emissions, not to mention a better driving experience and likely lower costs of ownership over the life of the vehicle.
And most of us in the US probably also want EVs to be made domestically to support local industry, promote job creation, develop resilient supply chains, and decrease dependence on other countries.
It’s hard to imagine US-based automakers thriving in the future if they don’t offer competitive EVs, right?
But now, as governments retool their approaches in starkly different ways, the prospects for EVs in the US don’t look promising.
China is racing ahead. In 2025, more than 50% of China’s new car sales will be electric—five times the US market share. That’s likely because, in China, EVs cost less than local gasoline-fueled cars. Contrast that to the US, where EVs command about a $14,000 premium over gas comps.
It’s not easy to do head-to-head price comparisons of EVs from China and the US because, in general, the Chinese ones are smaller and come with fewer fancy features than those made and sold in the US. But the price differences are amazing. Mini EVs can be purchased in China for as little as $5000 to $7500. The BYD Seagull (with a about a $10,000 sticker price), while smaller, seems otherwise to be pretty comparable to the Nissan Leaf ($29,000). The Tesla Model 3 is bigger and fancier but starts at about $42,000 in the US.
Chinese EVs stack up very well on the affordability front.
China will manufacture about two-thirds of the world’s EVs in 2025. China dominates the EV battery business too, with a global market share of about 80%.
China’s advantages primarily result from years of hands-on industrial policy—targeted subsidies, investments in battery supply chains, big roll-outs of charging networks—and the accompanying economies of scale. These factors have turned its auto sector into a global powerhouse. Beijing now seems to be reducing purchase subsidies, but other policies, like trade-in bonuses and quotas for “new energy vehicles,” are expected to sustain this powerful momentum.
In the US, it’s the exact opposite. The Trump administration has reversed the nation’s federal support for EVs in every way possible. The Biden era $7,500 tax credit for EVs expires this year, infrastructure funding is frozen, and ambitious EV goals have been shelved. The federal government even blocked California and like-minded states from setting their own zero-emission targets.
What does this mean for the global outlook?
The good news: All indicators suggest consumers prefer electric cars.
The bad news: Policy choices, not just consumer enthusiasm or technological advances, will dictate where EVs are made and bought. For now, China looks assured of the lead position in the EV race, as US manufacturers have to figure out how to catch up with much less government help at their back. The future still looks electric, but its distribution is anything but equal.
But there is something we can do. As we note time after time, public policy matters hugely! Environmentally minded citizens, together with people who want US manufacturing to be competitive, can work to:
build voter support for leaders who will address this gap and
intensify their advocacy and engagement right now at the state and local level. If federal retrenchment persists for the time being, state-level policy could be decisive to keep America’s clean car momentum alive.
Let’s get to work.
Onward,
Mark, government AND the auto industry are to blame for the colossal failure of EVs to catch on more quickly in the US. Primarily because of:
(1) Lack of consumer education: there remains a high level of misunderstanding and needless apprehension about charging, battery technology, and "range anxiety". Where were the PSAs during football games and Bachelor episodes to de-mystify charging speeds and plug types? Even in EV-saturated San Francisco, I've had friends own one for months without realizing they could charge in their own garage from a standard wall outlet. (Yes, trickle charging is slow, but overnight adds back more range than the typical daily commute; apart from road trips, it's been the only way I've charged my car for the past ~5 years.)
(2) Lack of effective positioning: American consumers have an unfortunate preference for ever-larger trucks and SUVs, and even though the vast majority don't use those for towing and off-roading, the lower performance EVs deliver has proven to be a barrier to adoption. But, given the ongoing affordability crisis, I would've preferred a focus on sub-$30k EVs across the board, largely marketed as "second cars for suburbanites". I'm fully confident most folks, once owning an EV, have their range anxiety dissipate, and that would be the gateway to full EV ownership.
Without bringing the public along on EVs, there won't be a realistic push for the policy initiatives needed to keep America competitive.
Hi Mark, how does the Biden Era 100% Tariff on EVs fit into this discussion? If we aren't making them in the US, shouldn't consumers be allowed to get them from China?