Bloomberg: The US has crossed the tipping point for mass EV adoption

Since the advent of modern electric vehicles, pundits have pontificated about when the tipping point for mass adoption would be reached. The transition to a new technology tends to follow an S-shaped adoption curve. At first, only nerdy early adopters buy, and nay-sayers cite the slow sales as proof that the new thing will “never catch on.” However, once a certain tipping point is reached, the new invention becomes something that everyone wants, sales go wild, and manufacturers struggle to catch up to demand. 

Above: A Tesla Model 3 and a Porsche Taycan. Photo: Roberto H / Unsplash

The upward curve of the S (or the hockey stick, if you prefer) can be triggered by a “killer app,” by geopolitical events, or simply by the fact that the new tech has spread to enough people that the rest start feeling left out of the party. This often happens at different times in different markets, and this will certainly be the case for EVs, as auto markets look very different from one country to another.

A recent analysis from Bloomberg looked at EV adoption rates in major global auto markets, and concluded that the critical numerical tipping point for EVs is 5% of new car sales. Once EVs gain that share of the overall auto market, the adoption rate starts accelerating, and cars with plugs are into the mass-market phase. According to Bloomberg, this trend has held true in 18 countries, and the US is poised to be the next nation to join the plug-in club.

In Norway, EVs achieved a 5% market share in 2013, and they now account for almost 84% of the market. According to Bloomberg, a similar trajectory can be observed in other countries: Iceland reached 5% in 2017, and has now reached 52%; China passed the 5% milestone in 2018, and now stands at 17%; Ireland found the lucky charm in 2019, and has now reached the auspicious figure of 13%. A raft of other European countries cracked 5% in 2020, and are already well into double-digit market shares.

Judging solely by the market data, the US is now in position to turn up the voltage—in the fourth quarter of 2021, EV market share reached 5.3%. If Bloomberg’s pattern holds true, that share could grow to 25% by the end of 2025.

However, numbers don’t tell the whole story—there are important political and social reasons that the US, which pioneered EV technology, has subsequently fallen so far behind the other major auto markets. As Bloomberg points out, almost every one of today’s top EV countries turbocharged the market with a strong program of federal incentives and emissions standards. In Norway, EVs are taxed at far lower rates than gas-guzzlers, and electric drivers enjoy various perks such as free or reduced tolls and access to HOV lanes. The EU recently adopted new emissions standards designed to squeeze oil-burners out of the market by 2035.

In the US, by comparison, EV adoption has mostly been left to the gradual evolution of the so-called free market. The federal EV tax credit is an inefficient measure that really only benefits high-income taxpayers, and was phased out for Tesla, the main seller of EVs, a couple of years ago. The Biden administration tried valiantly to implement a comprehensive package of pro-EV measures, but all that survived (other than a vague and timid aspiration to make electrified vehicles half of new car sales by 2030) was a $7.5-billion package of infrastructure investment. That complex program includes loopholes that could allow states to direct part of the money to hydrogen infrastructure and other fossil fuel-friendly projects.

Unless there is some unexpected upheaval in US politics, after January 2023, federal support for EVs, such as it is, is likely to be terminated, and emissions standards at both the federal and state levels could be eviscerated over the next few years. There will be no tax on gas-guzzlers of the kind that was so effective in Norway. One state has already proposed an effective ban on free public charging stations.

Also on the gloomy side of the ledger: To date, 90% of the world’s EV sales have taken place in the US, China and Europe. In the rest of the world’s auto markets, which represent about a third of global sales, EVs remain a novelty. Bloomberg tells us that none of the countries in Latin America, Africa or Southeast Asia has reached the magic 5% number. Affluent countries have long used their poorer neighbors as dumping grounds for older vehicles, and we’re already seeing signs that automakers plan to shift production and sales of gas-guzzlers to the Global South and East as demand for them fades in the rich world.

Back on the bright side, global sales of EVs tripled in the last two years, according to the International Energy Agency. BloombergNEF reports that all of the net growth in global car sales in 2021 came from EVs, and predicts that that trend will be permanent. The market share of fully electric vehicles passed the 5% threshold on a global basis in 2021.

The transition to EVs will surely be uneven, and slower than we would like, but there can be little doubt that the era of fossil-powered autos has seen its peak.

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Source: Bloomberg