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Why electric cars aren't making it big in the US

Americans still prefer large cars with petrol engines

Why electric cars aren't making it big in the US - cover graphic

By: Juan Felipe Munoz

Published by: Brian Potter

Mar 21, 2024 at 8:08am ET

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While awareness of environmental issues and the impact of humans on nature is growing worldwide, there are still societies that are reluctant to embrace the inevitable change. Electric vehicles are not the solution to all the environmental problems caused by internal combustion vehicles, but they can help reduce emissions from urban and rural transport.

They have their advantages and disadvantages, so legislation should not exclude other solutions. Ultimately, any useful technology should be welcome.

Among the major economies where the automotive industry is a key driver of prosperity is the United States, which has been slow to adopt electric vehicles. Although there has been some progress in recent years, these cars still play a minor role in the industry and are simply not selling. Why? Here are the four main reasons ...

1. Petrol station culture

SUVs and pick-up trucks have caught on in America. The need for more cargo and interior space and more power outside the cities made them very popular with US consumers. Americans like everything big: shopping centres, airports, highways, car parks, plates of food, cups of coffee and of course, vehicles.

No other country has as many generously sized vehicles as the United States. As a result, vehicles are powered by large engines, and these are thirsty for petrol. A lot of fuel is needed to move vehicles, whose average weight in 2023 was 2,254 kg for SUVs and 2,649 kg for pick-ups.

The vast energy resources available in the US have made it possible for consumers to get around in this way without worrying about refuelling. The American economy relies heavily on the oil and petrol industry, as does the consumer culture.

That's why muscle cars, pony cars, huge trucks, big vans and SUVs have proliferated more than anywhere else. It will take time to change this mentality of easy access to petrol. And it will take even longer to move from this traditional way of driving to a completely new reality in which this fuel no longer plays the main role.

Large SUV, pickup market share 2023 and global sales 2022 - graphic

2. Prices at the petrol pumps

The good state of the US economy in terms of the availability of energy sources has a direct impact on petrol prices across the country. The price of fuel in the United States remains much lower than in many other countries where government environmental protection policies result in high fuel taxes.

In Germany, for example, the average price of a gallon of petrol in February 2024 was the equivalent of over USD 7, compared to only around USD 3.50 in the US. Due to the relatively low cost of operating an internal combustion vehicle in the US, there is currently no strong financial incentive for consumers to switch to electric vehicles.

Petrol prices by country March 2024 - graphic

3. Laws are not helpful

As a result of increasing competition from China and its plans for global expansion, the US government has begun to take measures to prevent or discourage their arrival.

The IRA, the Inflation Reduction Act, is intended to promote the local production of electric cars and their components. Despite good intentions for the US economy, the law puts local BEV manufacturers in a difficult position.

In an attempt to take China out of the equation when it comes to battery production and metal suppliers, the IRA simply makes it harder for companies like Tesla, General Motors, Ford or Volkswagen to produce locally given supply chain constraints.

The lack of competitive raw materials could make the IRA a barrier to US automakers producing BEVs. It's another reason for consumers to delay the switch from internal combustion engines to electric vehicles.

2023

2024 2025 2027

40% of battery raw materials must come from the USA or from countries with which the country has concluded a free trade agreement.

No battery components manufactured in China. No battery metals mined or processed in China. 80% of battery raw materials must come from the US or countries with which the country has a free trade agreement.

4. A political controversy

US citizens are preparing for the election campaign that will decide the next president. The most promising candidates are Donald Trump and Joe Biden, and electric vehicles will be a major issue in the battle for the White House.

Biden versus Trump - graphic

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On the one hand, the current administration is trying to assert the country's interests against the IRA, and on the other, there is strong rhetoric that automatically associates BEVs with China. The political uncertainty is forcing some automakers to postpone their electrification plans, which sends a negative message to potential EV customers.

More Market Observations:

What are the most popular cars in Europe and the USA among private individuals?

How global are car brands?

The author of the article, Juan Felipe Munoz, is Automotive Industry Specialist at JATO Dynamics.

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