US EV plans face failure over affordability

The aim to see plug-in electric vehicles constitute 50% of those on the roads in the United States by 2030 are doomed to failure unless prices fall.

A study from researchers at Indiana University’s Paul H. O’Neill School of Public and Environmental Affairs shows that the US is unlikely to meet this goal unless electric vehicles become more affordable for consumers.

The research was conducted by Professor John D. Graham and Eva Brungard, who is a research assistant at IU and has held internships at both an electric vehicle manufacturer and trade association, who warn affordability will be key if the US is to reach its target.

“We need to focus policy makers, automakers, and electric utilities on how to stimulate consumer demand for, and automaker offerings of, affordable electric vehicles,” said Graham.

In 2021, President Joe Biden pledged to achieve net zero carbon emissions economy-wide by 2050, a commitment that is now a formal US submission under the 2015 Paris Accords of the United Nations Framework Convention on Climate Change. As it stands, transportation is the largest contributor to US greenhouse gas emissions, and 58 percent of transportation emissions come from light-duty passenger vehicles, such as cars and light trucks.

The study said reaching Biden’s goal to cut emissions requires a transition from internal combustion engines to zero emission vehicles, such as plug-in electric vehicles, but a number of factors are slowing that transition, among them the price of PEVs. PEVs tend to cost $10,000-$20,000 more than their internal combustion engine counterparts, a price point that is slowing customer acceptance. Surging prices of raw materials used in making batteries and electric motors also have hindered a reduction in the price gap.

Graham and Brungard found that the midpoint of prices of all new vehicles sold in the US in 2021, both PEVs and ICE vehicles, to be roughly $45,000. Of the 108 total PEV models offered to US consumers in 2022, only 17 featured a base price below $46,000. Few of those affordable models are appealing to consumers. The good news is that the number of affordable PEVs on the market are increasing, but the dominant US producer of electric vehicles, Tesla, is not prioritising affordable models.

“Without more rapid penetration of plug-in vehicles into the affordable end of the new vehicle market, Biden’s goals could be impossible,” the study cautioned. “However, the commercialisation of plug-in models in Europe provide hope for reaching the benchmarks, but it will require sufficiently favourable public policies to spur greater consumer acceptance.”

“Instead of relying on unrealistic mandates from California and other states, the federal government needs a comprehensive electric-vehicle policy, performance standards and incentives, similar to what has been adopted in the European Union,” Graham said.