EV Transition: Too Fast, Too Pricey, Too Soon?

Summary

The transcript discusses the current state and future outlook of the electric vehicle (EV) market, highlighting the initial enthusiasm and subsequent concerns regarding range anxiety and affordability. It emphasizes the importance of a viable EV market, with only 43% of consumer preferences met by current offerings, particularly in the mass market segments. The conversation touches on the strategic decisions of automakers to target high-end consumers first and the challenges of producing affordable EVs. It also explores the role of plug-in hybrids as a potential stepping stone to full EV adoption, with 70% of plug-in hybrid owners likely to consider an EV upgrade. Infrastructure is identified as a key barrier to EV adoption, with a need for more reliable and widespread charging stations. The discussion also covers the impact of government incentives and regulations on the adoption of EVs, the political divide in consumer preferences, and the importance of considering the job market and autoworkers in the transition to EVs. The summary underscores the necessity of government support through incentives and the need for a market-driven approach to address environmental concerns and promote a fair energy transition.

Takeaways

• 🚗 The auto industry initially experienced 'irrational exuberance' with electric vehicles (EVs), but has since seen a more measured approach as people reassess the technology and its implications.
• 🌐 There's a current shift towards hybrid vehicles that are performing well in the market, indicating that the interest in energy transition hasn't waned, but the focus has slightly shifted.
• 🔋 Range anxiety remains a significant concern for consumers considering EVs, affecting their willingness to adopt the technology fully.
• 📈 Representative Hayley Stevens acknowledges a non-linear growth trajectory for EVs, with a recent uptick in sales figures, but also notes the need for a more gradual adoption curve.
• 💰 According to J.D. Power Consumer Research, the three key factors for consumers transitioning to EVs are the availability of suitable EV models, affordability, and adequate charging infrastructure.
• 🚦 Only 43% of the market currently has a viable EV substitute that meets consumer preferences, indicating a significant gap in the availability of EV options, especially in the mass market segments.
• 🏭 Automakers initially targeted the high-end market for EVs, which is attributed to the historical context of the auto industry and the belief that early adopters would be wealthier and more committed to energy transition.
• 🔧 The production of affordable EVs is challenging, especially for smaller models, which has influenced the market penetration and pricing strategies of EVs.
• 🔌 Plug-in hybrids are seen as a potential stepping stone to full EV adoption, with significant year-over-year growth and a high likelihood of plug-in hybrid owners considering an EV in the future.
• 🔵 The lack of charging infrastructure and its reliability is identified as the primary barrier to EV adoption, with a need for more widespread and dependable charging solutions.
• 💼 The government's role in providing incentives and supporting the development of charging infrastructure is crucial for the growth of the EV market.
• 🌱 There is a political divide in attitudes towards EVs, with Democrats showing more eagerness to adopt them, while Republicans are less inclined, reflecting broader societal and political tensions.

Q & A

What does the term 'irrational exuberance' refer to in the context of the auto industry?

The term 'irrational exuberance,' originally coined by Alan Greenspan, refers to the initial excitement and enthusiasm in the auto industry when a new technology or trend emerges, leading to potentially unrealistic optimism and rapid adoption before the market resets and a more stable growth pattern emerges.

Why is there a shift in focus towards hybrids in the auto industry?

The shift towards hybrids is due to a combination of factors, including consumer interest in energy transition, concerns about electric vehicles (EVs) such as range anxiety, and the performance of hybrids in the market. Hybrids offer a bridge between traditional internal combustion engine (ICE) vehicles and fully electric vehicles, addressing some of the concerns while still providing improved fuel efficiency and reduced emissions.

What are the three key factors consumers consider when transitioning to an EV according to J.D. Power Consumer Research?

The three key factors are: 1) Availability of an EV model that meets their needs, 2) Affordability of the EV, and 3) The adequacy and reliability of the charging infrastructure.

How does the market coverage of EVs compare to ICE vehicles?

Market coverage of EVs is significantly less than that of ICE vehicles. Only 43% of the market is covered with a viable EV substitute relative to consumer preferences, with premium segments having more coverage at 73%. This indicates a need for broader availability of EV options to meet the preferences of the mass market.

Why did major automakers initially focus on high-end markets for EVs?

Major automakers started with the high-end markets for EVs because they believed that early adopters were likely to be wealthier individuals who were less sensitive to the higher costs and more committed to the energy transition. Additionally, automakers aimed to avoid past criticisms of being late to market with new technologies and wanted to establish a leadership position in the EV sector.

What is the current state of plug-in hybrid growth compared to EVs?

Plug-in hybrid growth has been strong, with a year-over-year growth of 36%. However, EVs still outsell plug-in hybrids by a ratio of 4 to 1, primarily due to the greater availability of EVs in the market.

What does the satisfaction data from J.D. Power indicate about EV owners?

The data indicates that EV owners are generally very satisfied with their vehicles, particularly in the category of total cost of ownership. This suggests that despite initial concerns, EVs are meeting or exceeding consumer expectations in terms of performance and economic benefits.

What is the likelihood of plug-in hybrid owners considering an upgrade to a full EV?

According to the data, 70% of plug-in hybrid owners are very likely to consider stepping up to an EV, indicating a strong potential for future EV adoption among this group.

What is the primary barrier to EV adoption?

The primary barrier to EV adoption is the availability and reliability of charging infrastructure. Consumers need more and more dependable charging stations to feel confident in the transition to EVs.

How does the current state of charging infrastructure in the U.S. compare to the needs for widespread EV adoption?

The U.S. is currently lagging behind the necessary infrastructure for widespread EV adoption. Despite significant funding allocated for charging stations in the bipartisan infrastructure bill, the construction has been slow, with only a handful of stations built so far.

What role do government incentives play in promoting the adoption of EVs?

Government incentives play a crucial role in making EVs more affordable and attractive to consumers. They can help offset the higher upfront costs of EVs and encourage a faster transition to cleaner energy vehicles.

What is the perspective of autoworkers and the impact of the shift to EVs on jobs in the auto industry?

The shift to EVs presents a challenge for autoworkers, as EVs typically require less labor to assemble. However, there are also opportunities for new jobs in manufacturing, infrastructure development, and other areas related to the energy transition. The key is to ensure that workers are not left behind and are provided with opportunities to transition into new roles.

Outlines

00:00

🚗 Auto Industry's Shift to Electric Vehicles

The first paragraph discusses the auto industry's transition to electric vehicles (EVs), which initially saw a surge in enthusiasm, but has since experienced a slowdown. The speaker notes that while there's been a temporary pause, the interest in energy transition hasn't waned, with a current focus on hybrids. Range anxiety and affordability are highlighted as concerns for consumers. Representative Hayley Stevens acknowledges the fluctuation in growth but remains optimistic about the market. The importance of meeting consumer needs, affordability, and infrastructure is emphasized, with current market coverage for EVs lagging behind consumer preferences. The paragraph also touches on the strategic decisions by automakers to target high-income consumers initially and the challenges of producing affordable EVs.

05:06

🔌 The Role of Hybrids and Charging Infrastructure

The second paragraph delves into the hybrid market, which has seen a resurgence with every carmaker offering hybrid versions of their vehicles. The paragraph discusses the consumer preference for hybrids as a stepping stone towards fully electric vehicles. The charging infrastructure is identified as a significant barrier to EV adoption, with the need for more reliable and widespread charging stations. The speaker mentions improvements in infrastructure due to government funding but acknowledges that there is still much work to be done. The discussion also touches on the political aspects of EV adoption, with differing views among Republicans and Democrats, and the potential impact on jobs in the auto industry.

10:07

🏭 Workforce Transition and Government Incentives

The third paragraph focuses on the impact of the EV revolution on autoworkers and the importance of creating new job opportunities in the industry. The speaker, Representative Stevens, highlights the enthusiasm of building trades for new plant construction and the need to responsibly transition workers. The paragraph also discusses the potential of government incentives to drive the shift to EVs, with a preference for market-oriented mechanisms like tax incentives. The speaker suggests that while the Biden administration has taken significant steps, more tax credits might be necessary to stimulate the market. The importance of considering externalities associated with gasoline use and the role of taxes in balancing prices is also mentioned.

Keywords

💡Auto Industry

The auto industry refers to the sector of the economy that designs, develops, manufactures, and sells motor vehicles. In the context of the video, it is central to the discussion as the script addresses the shift from traditional internal combustion engine (ICE) vehicles to electric vehicles (EVs), and the challenges and opportunities this transition presents.

💡Irrational Exuberance

This term, coined by Alan Greenspan, describes an investor or market enthusiasm for a particular sector or asset class that drives prices to levels far above what is justified by underlying fundamentals. In the video, it is used to describe the initial hype around electric vehicles and how the market has since adjusted to a more measured pace of adoption.

💡Hybrids

Hybrid vehicles combine a conventional internal combustion engine with an electric propulsion system. They are mentioned in the script as an alternative to fully electric vehicles that are gaining traction in the market. Hybrids are seen as a stepping stone to full EV adoption, addressing consumer concerns like range anxiety.

💡Range Anxiety

Range anxiety is the concern of an electric vehicle running out of power before reaching a charging station. It's a significant factor that the script identifies as hindering wider EV adoption. The term is used to illustrate the psychological barrier that prevents some consumers from fully embracing electric vehicles.

💡Plug-in Hybrid

A plug-in hybrid vehicle (PHEV) is a type of hybrid car that can be charged from an external source of electricity, unlike traditional hybrids that are only charged through regenerative braking and the ICE. The script discusses the growth of PHEVs as a transitional technology between ICE vehicles and full EVs.

💡Infrastructure

In the context of the video, infrastructure refers to the network of charging stations required to support electric vehicles. The development of this infrastructure is highlighted as a critical factor for the widespread adoption of EVs. The script notes that the current infrastructure is insufficient and that improvements are necessary.

💡Tax Incentives

Tax incentives are financial benefits provided by the government to encourage certain behaviors, such as purchasing electric vehicles. The script discusses how tax incentives can influence consumer behavior and the adoption of EVs, with references to the Inflation Reduction Act and the desirability of more tax credits for EVs.

💡Emission Requirements

Emission requirements are regulations that set limits on the amount of pollutants that vehicles can emit. The script touches on how manufacturers must balance their product portfolio to meet these requirements, which is driving the shift towards more environmentally friendly vehicles like EVs and hybrids.

💡Energy Transition

The energy transition refers to the global shift from fossil fuels to renewable energy sources. In the script, the energy transition is a recurring theme, with discussions on how the auto industry is adapting to this change by developing electric vehicles and the societal implications of this shift.

💡Market Coverage

Market coverage in the context of the video pertains to the availability of electric vehicles across different market segments. It is discussed in relation to consumer preferences and the need for a wider range of affordable EV options to facilitate a broader transition to electric mobility.

💡Regulatory Structure

The regulatory structure refers to the set of rules and policies that govern a particular industry or sector. The script examines how different regulatory structures in various countries can impact the demand and adoption of electric vehicles, with a comparison between the U.S., European, and Chinese markets.

Highlights

The auto industry is experiencing a transition to electric vehicles (EVs), with initial enthusiasm followed by a reset as people take a step back to evaluate.

Hybrid vehicles are seeing renewed interest as they offer a middle ground between traditional internal combustion engine (ICE) cars and full EVs.

Representative Hayley Stevens acknowledges the initial growth spurt in EV adoption has slowed, but this is not unexpected given the nature of technological adoption curves.

Consumers are looking for EVs that meet their needs, are affordable, and have reliable supporting infrastructure.

Currently, only 43% of the market has a viable EV substitute that aligns with consumer preferences for brands, segments, and price points.

Premium market segments have better EV coverage at 73%, but there is a need for more mass market options.

Automakers initially focused on high-end EVs to be ahead of the curve and target early adopters with higher incomes.

Making affordable EVs is challenging due to the cost and complexity involved in producing smaller, cheaper electric vehicles.

Plug-in hybrids offer a halfway step towards full EV adoption, with significant year-over-year growth.

EVs are currently outselling plug-in hybrids 4 to 1, largely due to greater availability of EV models.

Consumer satisfaction with EVs, especially in terms of total cost of ownership, is very high according to J.D. Power Consumer Research.

70% of plug-in hybrid owners are likely to consider upgrading to an EV in the future.

The availability and reliability of charging infrastructure is the biggest barrier to EV adoption.

While there have been improvements, the US still lags behind Europe in terms of EV charging infrastructure.

The Biden administration has made significant efforts to promote EVs through incentives and infrastructure investments, but more may be needed.

A carbon tax on gasoline, rebated to low-income consumers, could accelerate the energy transition more effectively than mandates.

Looking at global regulations and consumer trends can provide insights, but the US market has unique challenges and opportunities.

The transition to EVs is creating tension between the need for an energy transition and the potential impact on autoworker jobs.

New job opportunities are emerging in manufacturing and infrastructure related to the EV transition.

The government has a role to play in providing incentives and addressing externalities associated with gasoline use to level the playing field.

Transcripts

Course, you know the auto industry. So you took it apart and put it back

together for President Obama and attorneys, you know, Evans where are we?

Isn't as bad as it looks right now, because at first it was really the cat's

meow and now the blue is off the road. Look, it's so like so many things.

You start something new, people get excited about it.

You do get a new often and do a little bit of irrational exuberance, to borrow

Alan Greenspan's famous phrase, and the world kind of resets.

And so that's what's happening. You had a lot of early adopters, you had

a lot of enthusiasm. And I think as this is settled down,

people have taken a step back and taken a look around.

As you know, there's been a much greater emphasis on hybrids, which are doing

really well. So people haven't given up the idea of

an energy transition. They're just a little worried about EVs,

particularly about the range anxiety. Representative Hayley Stevens of

Michigan served with Steve Rattner on President Obama's auto task force and

her district outside Detroit has a lot at stake in the move to EVs.

She acknowledges that there's some hesitation after an initial spurt, but

says it should come as no surprise. We were never expecting a linear

trajectory of growth. We've certainly seen big numbers coming

out 18%, a million easy sold. Very pleased to see where we are this

year, technically over the last year, in the year before that.

But we realize it's it's going to be a little bit more of a curve than just

that straight linear line. It's not so much that consumers don't

want EVs as it is that they want them at affordable prices.

According to J.D. Power Consumer Research, there are three

key factors that consumers look for to transition to an EV.

The first is, is there an EV substitute that meets their needs?

The second is can they afford it? And then the third is will the

infrastructure work for them? So when we break down those first two

and we look at where manufacturers really have the most impact today, we

compare availability of EVs to ICE and only 43%

of the market is covered with a viable substitute, and that's relative to

consumer preferences, consumer preferences relative to the segments,

the brands and the price that they want to pay.

You know, premium segments have more market coverage at 73%.

But now as we're poised to move into that early majority phase, there's just

not enough coverage for for mass market segments.

If part of the problem with EVs are the prices, why did the big automakers start

with the high end of the markets? Steve Rattner says it was understandable

given the history of the industry and some of the mistakes made in the past.

Look, I think part of what went on in Detroit specifically is the industry

have been criticized for decades as being behind that.

It missed, you know, missed SUVs. It was compact and system.

It's that. And so they really wanted to be ahead of

the curve. And GM going back to its investment in

Cruise and so forth, was determined to be ahead of the curve.

I think they also made a determination, which I'm not sure was wrong, that the

early buyers were probably going to be high end people because they had the

income. They didn't matter as much that the cost

to the car was greater. They had more commitment perhaps to the

energy transition aspect of it. And making an inexpensive EV is tough.

It's really tough. Making anything small and an expensive

in Detroit is tough, but it is especially tough.

So I don't think it was it may not have been absolutely perfectly fine, but you

don't get everything 100% right. There is, of course, a middle course for

those in the market for a new car that is environmentally friendly or at least

friendlier, going halfway with a plug in hybrid, which may provide a gateway to

the full EV down the road. Last year, year over year growth was

50%. Plug in hybrid, year over year growth

was 36%. But these outsold plug in hybrids 4 to

1. And the reason is because there are a

lot more EVs available than than plug in hybrids.

You know, there's a consumer element to this question.

And then also the manufacturers manufacturers have to balance their

portfolio and meet the emission requirements.

But from a consumer standpoint, we do collect data from both owners and plug

in hybrid owners. And our ownership data tells us that

overall, consumers are very satisfied with EVs, more so than perhaps in almost

every category that we measure, and especially in that category of the total

cost of ownership. It's much higher satisfaction for Ed's.

But that said, he he has a great introduction to EVs in our.

The other shows that 70% of plug in hybrid owners are very likely to

consider stepping up into an EV. There are people who want to go right

into EVs, and as I said, a lot of the early adopters have and there are others

who are committed and believe in climate change or they just simply want to save

money on fuel doesn't matter and they're going to take the hybrid step.

We have hybrids have been around a long time and they again, they went through

their own sort of cycle. They caught on for a while and then you

kind of forgot about them. And now every carmaker is going to have

a hybrid version, I think, of most of their cars.

And I think it's great for people to have a set of choices.

And then there's the question of charging your new EV when and where and

how, and will that high speed charging station be there when you need it most?

The number one barrier to adoption is available infrastructure and the

reliability of infrastructure. There needs to be more infrastructure

and it needs to be more reliability reliable.

Now there we have noted some improvements during the past year with

the implementation of all of the Navy funds and and really getting that fast

charger on some of the interstates that we've noticed a 5% improvement.

One of the issues of some race is the charging stations, the infrastructure

for charging stations. I mean, you followed I followed what

happened with Hertz as they really wanted EVs in a big way.

And then I read the article actually on Bloomberg that said one of the problems

I never thought about, when you go pick up your electric vehicle at a strange

town, you wonder, how am I going to get charged at my local motel?

Where are we on the infrastructure? And how much of a challenge is that?

First of all, I thought that the Hertz thing was fascinating and the idea that

never occurred to anybody that that if you fly into Omaha, you're going to want

to know where to get your car charge and not know.

Well, look, we're way behind. I think there was something like $7

billion in the infrastructure, bipartisan infrastructure bill for

charging stations. And at least an article I saw in The

Washington Post said that literally seven have been built seven And so we

have a long way to go on the charging thing because Americans, we have much

longer commutes than they do in Europe and range and range.

Anxiety, rightly or wrongly, is very real in this country.

And so we've got to fix we've got to fix the charging infrastructure as the

government, the US government done enough.

You mentioned some of what's been done and I think most people think that the

basic research has done more than has been done before.

Is it enough by the administration is absolutely done

more than has been done before. There's no question between

infrastructure, between certainly the IRA, which is off the charts success.

If you define success as people taking advantage of the tax incentives and

things that are in there, I think we've done more than enough.

Now, look, the one thing that we should have done in this country still can can

do, although highly unlikely, is a huge tax on gas.

I'm a market guy and you want the market to operate as best you can as opposed to

government regulation or mandates. And if we had a 50 cent tax on gasoline

rebated to low end consumers, so they were kept completely whole, you'd see a

hell of a lot faster energy transition. Of course that so than in Europe.

And that's part of why Europe is well ahead of us.

So what about that European model or China for that matter?

We're subsidizing EVs and EV charging stations, but how much does the

regulatory structure in one country affect the EV demand and adoption in

another? I think it's incredibly important to

look at the global regulations and look at those trends for consumers as well as

industry. It's a bit early to really connect all

the dots and understand that if if regulations and consumer interest in in

one market will apply to our market. But when we do look at data within our

country, which is so vast and large, I mean we we stratos fy consumer sentiment

down to the zip code level. And within the US, as you know, several

states have adopted that zero emission policy in our data shows that in many of

these are states that have adopted those zero emission requirements, we are

seeing more adoption as we go into these policy issues.

Obviously, we end up with politics. You mentioned about the Trump

administration putting tariffs on. And even now, as I look at the Biden

administration really pushing EVs, I don't know how that's playing in my home

state of Michigan and Ohio just like that, because it's generally thought,

with rightly or wrongly, that that is not good for auto workers.

Well, so it's also interesting, I saw this the other day is that if you look

at polling data, Republicans basically say, I'm never going to buy any of it.

Democrats say I'm can't wait to buy an even.

So even things like this, that should be a more a political choice as to what car

you buy have become politicized. The problem with EVs, with Michigan or

Ohio, as you well know, is that they require less labor to put together.

And so you get into this tension between the energy transition, which I'm sure

the autoworkers in principle believe and.

And the fact that it could have an impact on jobs.

But look, we have to go through this energy transition for the sake of the

planet. We have no choice.

And therefore, if it has some impact on auto jobs, we just have to find help

these people find other things to do. Representative Stevens sees the need to

make sure the autoworkers in her home state of Michigan aren't left behind in

the move to EVs. But she also sees new job opportunities

as well. My building trades are very enthusiastic

to see new plants being built, being rehabbed every time I talk to our

building trades union. They are unions, they are busy, they are

at max employment and they're working many long hours.

And so that's an exciting piece on the infrastructure side and the

manufacturing side. We got with the Inflation Reduction Act

also in investment dollars to rehabbing manufacturing shops themselves for this

energy transition. But we can't be naive to how we need to

responsibly deal workers in. But we cannot have an electric vehicle

revolution without the workers. But in the end, the story may come back

to government incentives. How big and for how long?

And as much as the Biden administration has done already, it still may not be

enough. Certainly, we're thrilled that we got

the tax credit piece done. And I think if it was solely up to

Democratic lawmakers from Michigan, we would have done more.

And we hear that from those who are in the intersection between distribution

and the dealership world, that more tax credits might be desirable here.

How much of it is up to the government as we try to get to EVs and how much it

really is up to the consumer and the auto companies providing products that

really are affordable that people will buy?

As I said, I'm not a big government mandate guy.

I much prefer the market to work. I think, as economists would say, there

are externalities involved with burning gasoline.

You're damaging the environment and you're not paying your share of the cost

of cleaning it up or the costs of preventing it in the first place.

And so it is appropriate, I think, for the government to use market oriented

mechanisms like taxes or incentives. And we prefer incentive.

Everybody likes incentives better than taxes.

But I think taxes are also important in order to essentially equilibrate the

price and make it fair to all concerned.