Electric vehicles accounted for 5.6% of the total US auto market in Q2, according to a new report from Cox Automotive. While that share is still pretty small, it carries major implications.
Why? Because 5% is the tipping point after which EVs skyrocket from niche to mainstream, according to a Bloomberg analysis of 19 countries. It happened in Norway in 2013, in China in 2018, and in South Korea in 2021. Five percent is apparently the threshold where people go from thinking “My neighbor has an EV…that’s odd” to “Three people on my street have EVs…I think I want one, too.”
This adoption pattern isn’t exclusive to electric vehicles—you see it play out across the tech industry. It is called “the S curve”:
- When a new technology (such as TV or the internet) is first introduced, it is only used by a small number of early adopters. Growth is relatively slow.
- But that growth accelerates in dramatic fashion once the normies catch wind (for EVs, the 5% mark).
- In the final stages of the S curve, growth once again stagnates as the holdouts hold out.
So will this happen in the US?
Hypothetically, yes. If the US follows the same EV adoption pattern as other countries that hit the 5% threshold, then a full 25% of new car sales would be electric by the end of 2025, per Bloomberg. That would smash forecasts by a year or two.
But to get there, the industry has to overcome a number of hurdles.
- First, the cost. The average EV costs $66,000 in the US, which is $20k more than the average price for all new cars.
The lack of a dense fast-charging network is also hindering EV adoption in the US. In a recent survey, 61% of Americans who said they weren’t gung-ho about buying an EV cited the uncertainty around finding a charger.
- Looking ahead…projects are underway to build more chargers across the fruited plain. The Biden administration will hand out $7.5 billion for electric charging infrastructure to states, while GM and Pilot announced a partnership recently that would increase the number of fast chargers available in the US by 20%.
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Buying a Car Will Never Be the Same
Another significant development in the automobile business is how buying a car will never be the same. Most likely if you are shopping for a new car, you will not find one on any car lot you visit. The days of having hundreds of new car inventory on dealership lots are gone.
Shoppers who come into a dealership to purchase a vehicle will find that there is effectively no inventory. They must wait months for a vehicle, and the only way to get one is to place a deposit on an incoming unit. The first chance to get behind the wheel for a test drive will be when it arrives at the dealership.
To understand how the automotive buying process has changed, we must first understand how we got into this situation.
Today’s cars are computers with wheels. Even an inexpensive new car can contain more than 100 microchips, powering everything from climate controls to shift timing. Luxury cars, mini vans, and vehicles with more advanced entertainment and comfort technologies, can use more than 150 chips.
As we know, the chip shortage that resulted from the Covid-19 pandemic was due to the lockdowns when a number of people began working at home, children learning at home, and playing more video games. Chip manufacturers shifted their limited supplies of microchips to the computer industry, and when the car manufacturers began opening back up there just wasn’t enough chips for the auto industry.
Arguably, these are not the sole cause of the new vehicle shortages we are seeing. The supply chain is a complex system and the problems we are witnessing will not be remedied soon. However, the way we buy a new vehicle will never be the same.
Buying a Car Today
If you are shopping for a new car today, you will need to do most of your research online. Websites like Kelly Blue Book, Edmunds, and Consumer Reports give you an idea of the products and brands that will meet our needs. Of course, having the guidance of an automotive sales professional is invaluable, such as Mike Columbus who helped prepare this information and is our featured guest this month on the show.
First determine a few things like the type of vehicle that you want. Do you want a sedan, a SUV, or a truck? What features are important? Do you want leather or cloth seats? Is a sunroof important? Are the miles per gallon (MPG) important? Do you want a gasoline powered vehicle, an electric vehicle, or a hybrid which combines electric and gas power for a higher-than-normal mpg?
Knowing these things, you can begin to research the vehicles that are being manufactured and decide which meet your needs. In fact, you can use our Affiliate Partner site AskOtto to provide such details and let AI (Artificial Intelligence) help locate vehicles that match your criteria.
Remember that just because a manufacturer advertises that they have a product, reality may be that it is not even being built. Additionally, exterior color selections are limited, and interior color is even more restrictive.
Once you know the vehicle and features you want, you will need to find a dealer that can review trim levels, colors, and most importantly… availability. Typically, you will find availability divided into three categories.
- Vehicles that have been built and are in transit to the dealership.
- Vehicles that have a to-be-built date,
- Vehicles that must be allocated, which are vehicles the dealership requests the manufacturer to build.
Now all that is needed is a little bit of patience. Here is why…
Vehicles that have been built and that we are waiting to be delivered can still take several weeks or months to arrive. There is also an ongoing truck driver shortage and dealerships are at the mercy of a trucker delivering the vehicle when it is convenient to them.
The second category, vehicles that have a to-be-built date are dependent on the supply chain to have all the parts available to build the vehicle. These could take 4-8 months before the vehicle arrives at a dealership.
Vehicles that fall into the third category are vehicles that we request the manufacturer to build. These are typically colors that aren’t readily available or a vehicle with a high microchip count. These could take eight months to a year to arrive.
If you are looking for a good deal, the best possible factor is finding a dealer that does not add a market adjustment price increase to their vehicles. There are dealerships that are marking up vehicles $2-10k dollars over MSRP (Manufacturer Suggested Retail Price. Almost all auto buying discount programs have ceased, making buying at MSRP a pretty good deal at this time.
Finally, you must be ready to place a deposit on an incoming unit, wait for it to arrive, and then take it for a test drive. Now the final paperwork can be done to complete the process and you can drive your shiny new car home.
For those that do not want to go through all the steps above, or the long wait, the used car market, especially certified pre-owned (CPO) vehicles, offers the best alternative. Often CPO vehicles will have a warranty that is better than the original factory warranty.
Future of Car Shopping
Future predictions are that the entire car buying experience will take place online. In recent years, manufacturers have offered a program for certain vehicles to be built online and picked up at your local dealership. Inventories will never be what they were in the early 2000s, and dealerships will only showcase a handful of vehicles available for test drives.
Haggling and negotiating will all be a thing of the past. Manufacturers like a one-price model and will enforce dealerships to adapt.
The Mobility Tech & Connectivity Show
Wednesday July 27th, at Noon Central (US & Canada)
About the Guests…
Mike Columbus is a Honda Sales Professional based in the Seattle, Washington area. He also is the founder of Mike’s Rides for Lives – a non-profit organization that helps put people into cars who are not able to so on their own. You can visit him on the web by going to www.mikecolumbus.com.
Kelly Saunders is an Automotive Education Specialist. She helps people get into a new ride by doing the research so that consumers can be better informed about things that automotive professionals think are basic knowledge. Visit he on the web by going to www.kellysellscars.com.
In the News…
Tesla sells most of its Bitcoin holdings
Tesla, which made waves last year when it revealed a major investment in Bitcoin, has now sold off most of its holdings of the cryptocurrency. The electric car firm has offloaded 75% of its Bitcoin, which was worth about $2bn at the end of 2021. Tesla said it bought traditional currency with its Bitcoin sales. Tesla’s $1.5bn investment in Bitcoin, revealed in February 2021, prompted a surge of demand in the currency. The price of the notoriously volatile cryptocurrency soared last year to almost $70,000 in November before crashing.
Average new car transaction price hits $48,043, setting new record
Average transaction prices (ATP) for new cars hit record highs according to data from Kelley Blue Book. In June ATPs went to $48,043, which is $895 more than the month before. It obliterates the previous high of $47,202 from December 2021 and marks the first time ATP for a new car in the U.S. has crested $48,000. The average transaction price for a battery-electric vehicle was more than $66,997, climbing $2,444 over May. Tesla led the way among all ranked automakers for a month-over-month increase in ATP at 5.3%, followed by Ford at 4.7% and Subaru at 4.1%.
EV Sales Hit New Record in Q2 2022
New-vehicle sales in the second quarter struggled, up only modestly from the first quarter and down more than 20% from Q2 2021. The reasons are well documented – tight inventory, high prices, consumer sentiment dropping. There were a few positive notes in the Q2 sales numbers, and among them EV sales stood out the most. Sales of battery-powered electric vehicles – pure EVs – jumped to 196,788, a record high and a 13% increase from Q1.
GM and Pilot Plan National Electric-Vehicle Charging Network
General Motors and travel operator Pilot will develop a national network of 2,000 electric vehicle charging stalls at travel centers to make it easier to recharge near highways. The companies said the stations will be co-branded “Pilot Flying J” and “Ultium Charge 360”, powered by EVgo and open to all EV brands at up to 500 Pilot and Flying J travel centers. The companies did not disclose the financial investment. GM and Pilot said the program is targeting installation of charging stalls at 50-mile intervals. It is part of its GM’s previously announced nearly $750 million investment in EV charging infrastructure.
Innovative ‘sand battery’ is green energy’s beacon of hope
Two young engineers have succeeded in using sand to store energy from wind and solar by creating a novel battery capable of supplying power all year round. Tommi Eronen and Markku Ylönen are the young founders of Polar Night Energy and have just rigged the world’s first sand battery to a commercial power station in Finland.
How it Works: After piling 100 tons of sand into a steel container, the sand is heated by wind and solar power. This heat can be stored and redirected by a local energy companies, providing warmth to buildings in nearby local towns. This happens through a process called resistive heating, where the sand is heated by the friction of electrical currents. The warmth occurs when electricity passes through any material (like sand) that isn’t a super conductor. The sand battery is already working to heat homes, businesses, and the local swimming pool in the Kankaanpää district of Finland.