Brian Irwin, managing director and leader of the automotive sector of management consultancy Alvarez & Marsal, describes the numerous factors that are affecting the sale of electric vehicles in the U.S. 

A major influence over consumer demand for EVs in the last several years has been the Inflation Reduction Act of 2022, which provided incentives in the form of tax credits for purchasers. As of January 1 of this year, however, a number of vehicle models fell out of eligibility under the IRA, causing a reduction in sales growth in the EV sector.

Also impacting sales this year is the expectation of rising vehicle prices caused by a new union contract with automakers, with wage increases of up to 27% over a three-year period. Manufacturers without union contracts also boosted wages for their workers. That presented the industry with two options: either pass the increases along to consumers, or find ways to offset them through new efficiencies, possibly through asking for concessions from their Tier 1 suppliers. The latter option, says Irwin, is typically manufacturers’ “first line of defense,” but in the end, there are only so many savings that can be realized through internal efforts, and the sticker price on new electric cars will have to go up to some degree.

As a result, EV buyers today are finding themselves burdened with higher monthly payments, Irwin notes. Consumers, meanwhile, are demanding a wider choice of options, especially EVs in a lower price range, which are scarce in today’s automotive marketplace. “The issue is the availability of vehicles in the segment I want, at the price point I’m willing spend,” Irwin says.

Further contributing to the slowdown in EV sales is continuing concerns by consumers over the range of EVs, availability of charging stations, and charging time. Irwin believes those problems will eventually be solved, but in light of current realities, both government regulators and automakers have had to revise their bullish targets for transitioning to EVs by 2030. Now, instead of aiming solely for electric propulsion, they are also incorporating hybrid vehicles, and even some with internal combustion engines, into their calculations for the shift to greener cars.