Market Place Realities Cause Automakers to Change EV Plans
The automotive industry is continually changing. Yesteryear’s cutting-edge technologies yield to newer innovations. State-of-the-art factories become inefficient and obsolete. And even seemingly foundational market segments (like the formerly ubiquitous family sedan) lose significant segment volume to newer trends (crossovers and unibody SUVs).
Such changes, however, pale when compared to those we have witnessed over the last few years; and are arguably the most notable since the dawn of the automotive industry. Over the last decade, and especially within the last five years, the development and production of electric vehicles (EVs) have dominated the automotive conversation. Government officials, automakers, the political class, industry watchers, and others have been fixated on a retail market shift; from contemporary vehicles powered by internal combustion engines (ICE) and fossil fuels to battery-powered electric vehicles. In response, automakers have poured billions of dollars into battery development, new charging technologies, advanced software, and more.
This is no small shift. You would have to look back to the very inception of auto manufacturing to see such a dynamic play out. At that time, companies produced a variety of combustion, electric, and steam-driven motors to power vehicles. These variants competed for decades before gasoline-powered internal combustion engines achieved clear dominance in the mid-1910s. This happened for real and practical reasons. Engines powered by gasoline were easier to use and maintain. They used a fuel source that could be readily produced, was easy to transport and store for retail dispensing. And the engines themselves were typically smaller, more powerful, and efficient than the competing alternatives.
Looking at the contemporary landscape, we have seen different regulatory, environmental, and market factors compel automakers to pursue EV development and production. With many states and countries pushing to phase out the retail sale of ICE-powered light-vehicles by 2030 or 2035, there was enormous pressure for manufacturers to go “all in” on EV development. And despite many industry advocates and consumer groups warning that such deadlines could not be met in a cost-effective manner, the deadline and mandates advanced. Automakers responded, and in 2021, there was even a much applauded “agreement” among major automakers to end new gasoline car sales by 2040.
With that, official corporate product plans confidently stated that they would cease developing new ICE motors and transition their vehicle portfolios to all-EV product ranges. What emerged were technologically advanced vehicles with incredible refinement and power. Even detractors admit that they are impressive feats of engineering. But are those virtues alone enough for automakers to continue on the same trajectory they’ve traversed these past few years?
Apparently not. Changes are coming.
While pundits and market watchers frequently opine on trends and where the industry is going, no one knows the pulse of things to come quite like manufacturers tasked with engineering these products. After years of development, and tens-of-billions in research and engineering, automakers are scaling back their EV plans. And over the last year we have witnessed a slow-but-growing consensus that the current “all in” strategy needs to be revised. What’s more, while some state and federal government mandates sought to ban the sale of light-duty ICE vehicles (by 2030 or 2035, depending on the jurisdiction) the timeline is simply not possible to achieve.
Want proof? Look at some of the headlines over the last year and more:
Toyota Sees a Future for Gasoline Engines in an Electrified World
Even With $11,000 Discounts, Volkswagen Struggles to Sell Its Most Affordable EV
GM to temporarily cut production of two Cadillac EVs in Tennessee
EV euphoria is dead. Automakers are scaling back or delaying their electric vehicle plans
GM slow-rolls its all-EV aspirations
EV Inflection Point – BMW, Hummer, Chevrolet, and GMC, Are the Latest Brands to Pause, Reduce, or Stop Electric Vehicle Production as the Industry Slowly Admits that EV Market Share Stalled In the U.S. 27 Months Ago
3 Cars Fueled Record EV Sales for GM in August, But Dark Times Are Coming
Honda Is Suddenly Scaling Back EV Plans
What Ford’s surprise canceling of EV production in favor of ‘profitable’ ICE vehicles means for industry: ‘Thought that growth was going to continue’
There are many reasons for this shift, but slower-than-expected consumer demand, high material production costs, and the continuing challenges of fast-charging infrastructure all played a role. And the proof is in the raw numbers.
In New Jersey alone, and as of December 2024, there are roughly 220,000 EVs registered; with the total number of registrations increasing 42% from the year before. That’s impressive. However, it should be noted that the total EV volume is far short of the approximately 7.2 million vehicles currently registered in New Jersey. What’s more, the total EV registration numbers includes both Battery Electric Vehicles (BEVs), as well as PHEVs (for 2024 BEVs accounted for 77% of registrations, PHEVs made up the remaining 22%)
Now that’s vehicles registered, but what about yearly sales? Nationally, there were approximately 1.3 million new EVs sold in the United States, which is a 7% increase over 2023 sales. Still, the total volume of EV sales is roughly 10% of all new car sales in 2024, out of a total market volume of approximately 16 million units. Since vehicle manufacturers are making plans on projected national/international sales (and not just supplying one market like New Jersey), it becomes clearer why their “all in” on EV plans needs to be revised.
We’re obviously mixing total vehicle registrations in New Jersey versus total yearly new car sales volume nationally, but they each point to a landscape where EVs (and perhaps PHEVs) statistically account for a relatively smaller piece of the overall pie. And though sales are increasing year-over-year, it should be noted that they still account for a smaller overall volume compared to the rest of the market.
In addition to the mid-to-long term EV sales projections that are reshaping automakers production plans, in the short-term industry watchers anticipate that sales will fall due to the elimination of the national EV tax credit. To underscore this, monthly EV sales hit an all-time high in August in anticipation of the EV tax credit ending on September 30, 2025 (though New Jersey residents can still benefit from our native Charge Up New Jersey program for vehicles and charger installation). Meaning, customers are rushing out to purchase or lease a new EV before the deadline. Only time will see whether the spike in August EVs will be sustainable or dive steeply for the remainder of 2025.
So, what are automakers going to do? In response to these realities, they will now introduce more regular-hybrid or plug-in hybrid vehicle (PHEV) products and restart investments in ICE development to increase efficiency. This does not mean that EVs will disappear, nor does it mean that EV sales won’t continue to rise over time. Yet, it does seemingly indicate that any mandate to shift to an all-EV new car marketplace by 2030 or 2035 (depending on jurisdiction) is highly unlikely. And rather than focusing on a single type of propulsion, automakers will offer consumers a mix of traditional ICE-powered vehicles, EVs, and PHEVs to suit personal preferences and needs. What’s more, there has also been some automakers investing in extended-range electric vehicles (EREVs) that uses onboard gasoline powered generator to recharge a vehicle’s battery and reduce motorist range anxiety.
Critics may rightfully point out that this is how events should have unfolded organically; and certainly, there is something to be said about consumer choice, infrastructure limitations, and market realities. It takes years to develop a new vehicle, and every product produced consumes lots of money, engineering resources, and countless other to-dos before it is even offered for sale to the public. If setting up product plans takes a Herculean effort, imagine what it takes to change them mid-execution; then pass those accumulating costs along to consumers.
This “market correction” back to a mix of vehicles that lean more heavily toward internal combustion is a “win” for consumers and the larger market. From the onset, many critics have believed in an “all-of-the-above” new car marketplace, where motorists would have free rein to purchase a vehicle to suit their needs without the threat of deadlines or high transaction prices. And while many still believe that EVs may one day dominate the new car landscape, a more gradual shift in the medium-term will allow for PHEV and regular-hybrid vehicles segments to fill the void and address real world consumer concerns (new EV prices, charging infrastructure, range anxiety, etc.)
For our members and other small business owners, any “course correction” does not change a whole lot. Automotive repair facilities aim to service every type of vehicle, regardless of propulsion. Still, automakers plans to increase production of PHEVs and regular-hybrid automobiles will only increase educational opportunities for technicians to learn how to properly repair/maintain their patrons’ vehicles.
Are you surprised by this market shift? Are you well-positioned to repair or fuel regular-hybrid and PHEVs in the future? Let us know what you think.
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