Electric Vehicles, The Evolution of Transformation
The buzz around Electric Vehicles (EV) continues to make headlines as we see more global adoption. In a recent study by Allied Market Research, the Global EV market was $162 billion in 2019 & projected to be valued at $802.81 billion by 2027 with Asia - Pacific leading the charge with an expected share of $357.81 billion while North America’s slice of the market should reach $194.2 billion.
Those are some pretty staggering numbers, leading us to question, should we be concerned that gas vehicles will soon be extinct? If these projections inspire you to say goodbye to the fuel pumps for good and race to get your hands on a Tesla like over 600,000 people did in 2020, you are not alone. Though combustion engines won’t be obsolete any time soon, some countries are headed that way. According to the 2020 BloombergNEF Electric Vehicle Outlook Report, 13 countries have already announced stopping production of the combustion engine. That combined with the surprising number of 500 EV models available globally by 2022 gives us pause to consider the future of the gasoline automobile and what it means to the industry.
Here are some other meaningful findings of the report; While EVs held only 2.8% of new car sales in 2020, by 2040 they will dominate the industry at 58% of new vehicles sold.
To be sure the global market is growing and embracing the change more quickly than America. Let’s break it down & see what those dollars translate to in actual vehicles here in the good ole US of A. In August 2020, there were over 1.6 million electric vehicles on the US road, which is exponentially higher than the expected 1.4 million forecast by 2024.
How Does the Surge of EVs Affect the Used Car Industry?
“Gas is still king for now” says Jeff Dyke, the President of Sonic Automotive, in a recent interview on CNBC. He continued, ‘In America, gas and hybrid electric are the play’ and ‘we are so far away from America being electrified until manufacturers and charging station issues are fixed. When manufacturers get it right and we’ve got plenty of stations to charge the cars then we’ll start selling electric cars.’ He also added that the growth of Sonic will come from their new Used Car Centers that are a hybrid or phygital model.
The projections stated earlier seem to be at odds with Jeff Dyke’s point of view. A popular saying in automotive is ‘nothing happens until a new car is sold’. As more and more Americans adopt new EVs, as they are with the Tesla brand, the cycle begins: there will be a more urgent demand for charging solutions and naturally, the trade cycle increases used EVs locally and globally. Dealers are learning to navigate the delicate inventory balance while an uncertain consumer demand evolves.
As for the U.S. market, there is a new proposal which could make a difference. The 2021 version of The Green Act includes some interesting tweaks to the current EV tax credits. Though, if passed, it will reduce the $7,500 tax credit to $7,000, the new bill includes up to a $2,500 tax credit when purchasing a used EV, but the vehicle must be at least two years old and the sale price but be less than $25,000. This may level the playing field for the adoption of EVs in the U.S., making the used vehicle pricing more accessible for consumers, turning inventory more quickly and maintaining a fair profit for Used Car dealers.
Whether you are a fan of EVs or prefer a combustion engine, it is clear we can no longer put our head in the sand . . . they will continue to gain a larger share of the industry, both new and used. According to a report from McKinsey, with used car sales double that of new, the big industry will continue to enjoy a stable, largely countercyclical market, whether gas or electric. Vroom vroom!