The electric vehicle supply is currently growing much faster than the demand for these new models. Will this be a serious problem for automakers?

Currently, EV sales only account for 6.5% of the US auto market, which is much lower than what you might expect considering the news, push, and growth of available EVs in the market. In 2023, more than one million EVs should be sold in the United States, but that doesn’t put this market on the growth projection expected. Could the new EVs entering the market face serious problems going forward? Let’s discuss the most pressing problem.

The supply is much greater than the demand for EVs

Every automaker has invested heavily in this new area of the market, but you can’t force customers to transition to electric vehicles while gas-powered alternatives are available. Some might still report supply chain issues, but if EV inventories are at an all-time high at dealerships, the inventory issue doesn’t seem to be in the EV world. The extreme levels of supply should spell price reductions by dealers, but most won’t reduce EV prices, expecting customers to eventually make a move to electric vehicles and away from gas-powered cars, trucks, and SUVs.

Will automakers need to slow down?

It could be close to impossible for automakers to slow down and reduce the electric vehicle supply to allow it to match demand. Although the federal government expects 50% or more of vehicles sold in 2030 to be electric vehicles, they can’t force that action. This might require automakers to take a step back and offer EV versions of current gas-powered models or to transition to an EV-only lineup. Some luxury brands are already working toward that goal. Its also possible we’re seeing the challenges of new technology and growth in a market that’s relied upon gasoline for more than a century.

Is there more interest in EVs?

Reports indicate that more consumers are considering a new or used EV than ever before. This interest is a good start toward the future. Expanding the availability o EVs in every area of the automotive market will help grow sales but could be problematic while the supply is much greater than the demand for these models.

Cox recently reported the supply of EVs in stock is 350% greater than it was last year, which puts this supply at close to 92,000 models sitting on dealer lots. This figure represents a 92-day supply, which is much greater than should be the case for any vehicle. Comparatively, gas-powered vehicles typically have no more than a 54-day supply on dealer lots. The number of EVs at dealership locations doesn’t include Tesla, which doesn’t have dealerships but operates by selling directly to consumers.

Are high prices causing the bloated supply

Although consumer interest in EVs is higher than ever, the electric vehicle supply might not match up with demand until prices are lower. We expect luxury brands to have higher prices than mainstream models, but recently, even mainstream brands have been much more expensive than ever before. EVs from Ka, Hyundai, and Nissan are much more expensive than their gas-powered alternatives, and new owners aren’t eligible for the Federal EV Tax Credit when buying these brands.

Is a stepping stone a better option?

Some consumers might not move away from gasoline for fear of sitting at a charging station for a long time during a road trip. Instead of moving into EVs, these consumers are turning to hybrids. The hybrid market has much lower inventory levels than EVs, which supports the idea that most drivers would rather have a stepping stone from gas to electric, which is found in the hybrid market. Nationwide, the supply of hybrid models is 44 days.

A direct comparison of supply levels between hybrid and EVs can be found at Toyota. Currently, the Pris and RAV4 hybrid models have less than 30 days worth of models on dealer lots. The Toyota bZ4X has a 101-day supply at dealer locations, showing a direct comparison and where most consumers are looking for an alternative vehicle.

Although EVs are growing in numbers and more consumers are buying them than ever before, this area of the automotive market isn’t growing as fast as automakers are making these vehicles. Will the electric vehicle supply ever match the demand? It will, but this might not happen until later in the decade when sales are expected to be much greater. It will be interesting to see what the numbers are once more automakers offer nothing but EVs.