US EV Market 2023: What's Holding It Back?

The electric vehicle (EV) market has steadily risen, driven by environmental concerns, technological advancements, and changing consumer preferences. However, despite the growing momentum, significant challenges still hinder the widespread adoption of EVs in many regions, including the US. In a recent panel discussion—titled Winning the Global EV Race—at the Battery Show North America, industry experts shed light on some of the key factors holding the EV American market back.

Regional disparities

The EV market in the US is not homogeneous. According to Chris Nevers, Sr. Director of Public Policy at Rivian,  “some East Coast and West Coast states have embraced EVs with incentives, standards, and robust charging infrastructure. On the other hand, several states have lagged in adopting EV-friendly policies and infrastructure.”

These disparities can significantly impact overall EV sales. A manufacturer may be more incentivized to sell EVs in a state with favorable policies, resulting in uneven distribution across the country. The key takeaway is that regional differences play a substantial role in shaping the EV landscape in the US.

The supply vs. demand dilemma

One of the primary obstacles to achieving higher EV penetration rates in the US is a lack of available vehicles. While it may seem unreasonable in a market eager for clean and sustainable transportation options, the issue is production bottlenecks. Michael Sander,  Senior Advisor at Avicenne Energy, pointed out, "If you don't have vehicles available for customers to buy, you can't achieve 70% penetration."

This challenge isn't just about making more EVs but also ensuring a diverse range of options to cater to different consumer preferences and needs. While the market has seen substantial growth in EV offerings, it's essential to balance producing enough vehicles and diversifying the product lineup.

Weight and charging network density

Vincent Pluvinage, CEO of OneD Battery Sciences, believes that two critical metrics accurately predict EV penetration rates: vehicle weight and charging network density. Lighter vehicles are more conducive to achieving longer ranges with reasonable battery sizes. Additionally, charging network density correlates with the adoption of EVs. Regions with a higher density of charging stations tend to see higher EV penetration rates.

For example, Pluvinage noted that in the Bay Area, where charging infrastructure is abundant and commuting distances are shorter, EV adoption rates are notably high. In contrast, states in the Midwest, where longer distances and fewer charging options exist, face a more significant challenge in promoting EV adoption. These factors underline the importance of both technological advancements and infrastructure development.

Policy and regulation

Government policies and regulations play a pivotal role in the success of the EV market. In the United States, various federal and state-level policies impact EV adoption. These include tax incentives, emissions standards, and trade agreements like the US-Mexico-Canada Agreement USMCA.

Antonio Rivera, EM Practice Lead at Arentfox Schiff LLP, highlighted: “Besides the commercial risks at play, there's also the intricacy of compliance with federal regulations. The Inflation Reduction Act (IRA) imposes specific origin requirements related to final assembly, critical mineral sourcing, or battery component sourcing. In addition, the USMCA has its distinct originating requirements separate from the IRA. Country of origin requirements hold considerable significance in the US, and industries are subject to varying regulatory prerequisites. In this context, it is imperative to diligently track the supply chain and the origins of products as they are developed.”

The panelists discussed one noteworthy challenge: the evolving landscape of foreign ownership. With foreign companies investing in the US EV industry, questions arise about how ownership will affect domestic production and market dynamics. Addressing these concerns while fostering innovation and competition is a balancing act.

The US EV market faces various challenges, from production bottlenecks and regional disparities to policy complexities and shifting consumer preferences. Winning in the EV race means striking a balance between adapting to specific market conditions, fostering innovation, and diversifying vehicle offerings. As the industry continues to evolve, the road ahead for EVs is paved with challenges and plenty of opportunities.