Energy transition: will electric vehicle sales ever catch up? | The Excerpt

On Sunday’s episode of The Excerpt podcast: Sales for electric vehicles in the U.S. and worldwide will reach their highest levels ever this year. But a big sticking point remains. Even with tax incentives and rebates, the price for EVs is still thousands of dollars higher than their gas-guzzling cousins. The Biden administration set 2030 as the goal for when half of all new vehicles sold would be electric powered. The question is, can we get there? Duncan Wood, vice president for strategy & new initiatives at the Wilson Center, a non-profit thinktank, joins The Excerpt to talk about the possibilities and what it will take for this growing market to mature.

Hit play on the player below to hear the podcast and follow along with the transcript beneath it. This transcript was automatically generated, and then edited for clarity in its current form. There may be some differences between the audio and the text.

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Dana Taylor:

Hello and welcome to The Excerpt. I'm Dana Taylor. Today is Sunday, May 26th, 2024. Electric vehicles are in demand. Sales here and in markets around the world will reach their highest levels ever this year, but a big sticking point remains. Even with tax incentives and rebates, the price for EVs is still thousands of dollars higher than their gas guzzling cousins.

The Biden administration set 2030 as the goal for when half of all new vehicles sold would be electric powered. The question is, can we get there? Our guest today is Duncan Wood, the Vice President for Strategy and New Initiatives at the Wilson Center, a non-profit think tank. Thanks for joining us, Duncan.

Duncan Wood:

Great pleasure to be with you, Dana.

Dana Taylor:

EVs have always embodied the dream of a carbon-free future, but there seem to be speed bumps on the way to getting there. What do you see as the biggest obstacles here in the US right now?

Duncan Wood:

I think there's a number of issues that are facing the manufacturers, the OEMs, as we call them, for EVs. First of all, we see the incredible lead that the Chinese auto industry has developed over the past 10 years or so in producing, manufacturing electric vehicles and really getting them up to a world-class quality. Secondly, I think that we see the challenges that are being faced by the manufacturers here in North America when it comes to securing access to the electric vehicle battery materials that they need.

And by that I'm talking about the classic critical minerals of lithium, cobalt, nickel, and manganese, as well as the rare earth elements that are so important for the permanent magnets that we find in EV engines. And that's a real challenge that we've been engaged in trying to unravel for the past four years now and we're making progress. And of course, the third challenge that we see is in terms of consumer take up. Because whilst we're selling record numbers of EVs, a lot of analysts are saying that this is disappointing.

There's not nearly as many sales as we were hoping for by this point, and that it's going to be a struggle to reach that goal of 2030. And that consumer take up side of things involves a number of factors. One is cost, absolutely. The other one is what's classically known as range anxiety. And the third one is, is this electric vehicle going to be reliable in the long term for me?

Dana Taylor:

Well, you mentioned China, how are other countries making the transition to EVs?

Duncan Wood:

So China's an extraordinary example, which has sunk a lot of money into this quest to electrify transportation. But at the same time, of course, they've been producing a lot of the classic internal combustion engine vehicles or ICE vehicles as we see them. And China has engaged in very unfair trading practices internationally, essentially selling their vehicles at very low prices, if not lower than cost, then at the price that we would recognize as being dumping on global markets. Now, they have had an incredible headstart.

But when you look across the Atlantic to Europe, the Europeans have been seeing a higher take up for EVs as well. And a lot of that has less to do with providing incentives for consumers, but more penalties for those who continue to drive internal combustion engine vehicles. And that's to do with the very high price of gasoline. It's to do with the taxes that are on those vehicles. And in some cases, it's to do with environmental charges that are placed on those vehicles when they circulate in city centers.

And so we're seeing a very varied approach around the world. Here in the United States, of course, we've seen an approach which focuses on really essentially dumping a huge amount of money into the market in the form of tax credits for people to encourage them to buy electric vehicles, as well as production credits for the manufacturers. And those hundreds of billions of dollars that were authorized through the Inflation Reduction Act a couple of years ago, they're moving the market.

I often describe this actually as a seismic shift in the way that we look at the EV supply chain. It's moving the market, but it hasn't succeeded yet in really pushing us to the tipping point where a majority of consumers want to buy EVs.

Dana Taylor:

I want to go back to some of the hurdles in this market shift to electric vehicles. What are the key barriers standing in the way of Americans being able to buy EVs?

Duncan Wood:

So I think that there are two big barriers towards creating a reliable and resilient supply chain for American or North American EVs. And I say North American because we have to recognize that vehicles produced here in the United States really do rely upon a North American supply chain involving Canada and Mexico. But the big problems that I see are, number one, we're playing catch up.

We didn't get into the game early enough, which means that we haven't really advanced in terms of battery technologies and in terms of the vehicles that are being sold at a consumer friendly price. Of course, we all know the brands that are out there that cost many tens of thousands of dollars that would really class as luxury vehicles, but we've had a really tough time bringing the price point down for EVs so that they're accessible to a majority of consumers.

The second big challenge, which is connected to that, is to do with the supply chain itself. And the fact is is the Chinese have been out there for over a decade securing access to those critical minerals that I mentioned earlier on, not just in terms of buying up the production in places like South America and in Africa, Indonesia, Australia, et cetera, but also in terms of the processing and refining of those materials, the majority of which today either takes place in China or in third countries in facilities which are owned by Chinese companies.

So we really do see this monopoly that exists right now on the part of the Chinese in terms of the critical minerals and battery technologies. We're catching up fast, and I do believe that American innovation will be an extraordinarily powerful tool in allowing us not only to catch up, but eventually to leapfrog over the Chinese. But at this point in time, we really are playing that game of catch up.

Dana Taylor:

You've written about a global race between the world's car makers. The Biden administration recently announced tariffs on EVs and other imports from China to help American car manufacturers. How might this impact prices and availability here in the US?

Duncan Wood:

First of all, I think we have to recognize that the option of placing such a high tariff on vehicles coming in from China would not really have been considered by a US administration 10 years ago. We were still then in very much a free trade mindset. But it's fascinating to see that both the Biden administration and the Trump administration, which came before it, was much more willing to use tariffs to try to shift the balance of trade.

The second point that I'll say here is that as you're trying to achieve multiple goals as a government, and in the case of the Biden administration, there is the one of electrification of transport, which really is about the decarbonization of transportation for climate goals, at the same time as you're trying to achieve your geopolitical goals in terms of the strategic competition with China, at the same time as you're trying to increase the competitiveness of US businesses and making sure that investment and jobs either stay here in America or come here to America.

And then of course, you layer on top of that the electoral cycle, the whims of democracy as it were, and you begin to see that the policy options available to you are actually quite limited. And so what we've seen now is that partly because we're in election season, that there is this willingness on the part of politicians to talk more openly about the use of tariffs and to really promise that these will come into play as a way to protect US drug North American manufacturers and really to drive that success on their part. But the problem is is that as you correctly identify, the consumer is going to end up paying the price.

Dana Taylor:

Duncan, there's been some talk about profit disincentives for car companies, specifically the fact that with gas-powered vehicles, there's a much bigger profit margin than with EVs. How much of a factor is that?

Duncan Wood:

I think that it's a major factor, and we're trying to overcome that by the production tax credits that are included in legislation like the Inflation Reduction Act. We're trying to lower the cost of doing business here in the United States, and I think that those will help ultimately. But as we are in this phase of trying to catch up to the Chinese, I think that it's very, very challenging to be able to lower that cost profile in the manufacturing process.

Now, one thing that we do have in our favor is this integrated North American manufacturing platform that I mentioned earlier on. There are some things that could be done cheaper in the United States, some things that could be done cheaper in either Canada or Mexico. And allowing for that specialization across the three countries of North America is a big competitive advantage that we have to recognize here in the United States.

So I'm confident actually that US or North American manufacturers will actually catch up and be able to increase their profit margins on EVs by lowering the costs without having to raise the prices of those EVs. And I think that in particular, as we see more resilient supply chains, not just for the technology, but for those critical minerals that are needed in EVs, then we'll begin to see greater price stability allowing for greater certainty in the market, which will allow in turn companies to actually become more profitable from the EV side of their business.

Dana Taylor:

The rebates and tax write-offs that you mentioned, they've been touted as big incentives that maybe aren't working as well as originally hoped. What are your thoughts on that and how policy shifts might help boost incentives for consumers?

Duncan Wood:

So I think that number one, there is still a great deal of concern on the part of the consumer, not just about the initial sticker shock of an EV or the ticket price there, but really about am I going to be able to charge my vehicle? And I have to say that the progress that's been made over the past couple of years with regards to building out the charging network for EVs across the United States is really disappointing. The money has been there, but it takes a long time to get these projects up and running.

So although for the past two years we haven't seen a huge amount of progress, I think that now it's beginning to kick in. So over the next couple of years, let's say the next two to five years, we'll see a lot more charging stations being installed across the United States, primarily in urban areas. But in some work that we're about to publish here at the Wilson Center, we're also talking about importance of building out the charging network in rural areas to encourage take-up outside of cities.

Changing building codes so that apartment buildings, condominiums have enough capacity for the residents to charge their electric vehicles in their parking spots underneath the building. It's a process of changing the mindset. And to change the mindset, we're going to have to actually spend the money and make the progress in building out that charging network.

Dana Taylor:

Google recently announced that its Map app will start sharing charging station information to help EV drivers navigate longer trips. Between finding charging stations on your route to the need to download apps on your phone to locate places to charge your car, do you see the system evolving soon?

Duncan Wood:

Yes. I think that the application of technology to the EV conundrum is going to be critically important. It's not just identifying where the EV charging point is, it's whether that EV charging point is actually in service. One problem that we've observed over the past couple of years, and you may have seen this yourself, is that as you drive around and you're looking for a charging point, often that charging point is damaged or is out of service.

So we need to not only think about the installation of those charging points, we need to think about their maintenance. And a lot of this comes down to questions of human capital and the talent that's available. We've got to think about training our workforce here, not just to build the charging stations, but to maintain them and make sure they're in good working order.

Dana Taylor:

And then finally, what to you is the most surprising part about why the transition to EVs has been so difficult?

Duncan Wood:

Call me naive, but when I saw the Inflation Reduction Act sail through Congress, there was this enormous sense that we were on the verge of something very, very big just because of the scale of the money that was involved and the commitment of the US government to make that happen. And so there was that moment of enormous optimism that in fact, this was going to be possible.

And I think the big surprise for me is how slow it's been to put a lot of that money into play in the market. It's there, it's available, but these things take a great deal of time. As incredibly powerful as the US government is, the enormous resources that it has at its disposal, and that incredible moment of bipartisan cooperation that got the Inflation Reduction Act through Congress, they're still dealing with the speed of government question.

Dana Taylor:

Duncan, thank you so much for joining me on The Excerpt.

Duncan Wood:

Thank you so much, Dana.

Dana Taylor:

Thanks for our senior producers, Shannon Rae Green and Bradley Glanzrock, for their production assistance. Our executive producer is Laura Beatty. Let us know what you think of this episode by sending a note to [email protected]. Thanks for listening. I'm Dana Taylor. Taylor Wilson will be back tomorrow morning with another episode of The Excerpt.