Electric vehicles (EVs) will make up a significant portion of new light-duty personal vehicles sold over the next decade. Despite recent media coverage depicting EVs as floundering novelties akin to the Bricklin or DeLorean, the raw facts demonstrate that EV adoption is on the rise. Legacy original equipment manufacturers (OEMs) are figuring out how to cost-effectively produce EVs and develop EPA-approved bench testing procedures that yield more accurate real-world electric range figures—which, in turn, will boost consumer confidence.
In 2023, more than 1.2 million EVs were sold in the United States, constituting more than 7.6% of total new light-duty personal vehicle sales. The EV segment’s 2023 performance builds on its 5.9% and 3.2% showings in 2022 and 2021, respectively. Leading economists and industry experts project that more than 25% of new light-duty personal vehicles sold in the United States will be electric by 2030.
More bullish projections show that EV sales could account for 30% of new light-duty vehicle sales by 2030 if the public and private sectors double down on expanding the fast-charging infrastructure needed to support EVs. While by the end of 2023 the EV charging grid in the United States included approximately 78,000 public charging stations and 170,000 ports, many more will be needed.
As substantial investment continues to flow into charging infrastructure, the sector is replete with opportunities for companies to become first-movers in the public EV charging space–there are, however, risks. EV stakeholders must not take their collective eye off the ball when it comes to cybersecurity of vehicle-to-vehicle (V2V), vehicle-to-grid (V2G), and vehicle-to-everything (V2X) communications because these access points could give rise to national security concerns and corporate legal exposure. This Insight explores these issues and the opportunities they present for OEMs, dealers, investors, and consumers alike.
Miles per gallon of gasoline-equivalent, or MPGe, is the metric that measures the fuel efficiency of vehicles that run on nonliquid fuels such as hybrid and fully electric vehicles. In other words, a vehicle with a rating of 99 MPGe can travel 99 miles on the electrical equivalent of one gallon of gasoline, which is pegged at 33.7 kilowatt-hours (kWh). MPGe ratings must be displayed on the Monroney labels of every new vehicle and on fueleconomy.gov to provide consumers with a clear understanding of the vehicle’s capabilities. OEMs must conduct bench tests for calculating an equipped vehicle’s MPGe ratings as set forth in the procedures of 40 CFR §§ 600 et seq.
Importantly, the bench tests date back to 2007 and often do not capture variables that impact a vehicle’s MPGe range such as optional electronic equipment, wheels, or tires. This optional equipment can cause more than a 10% delta between the various model trims within the same carline. This variance demands that OEMs develop alternative bench tests that best capture accurate EV ranges to inspire consumer confidence in the brand and mitigate against legal exposure from the US Federal Trade Commission, EPA, and/or private actions.
Some legacy OEMs have struggled to manufacture cost-efficient EVs because they have invested in building entirely new standalone plants for EV production on fully independent platforms. The fixed costs of these factories and the tooling capital is immense, and has caused legacy OEMs to lose as much as $35,000 per EV. If a legacy OEM was behind in the R&D race for EV development, they were forced to buy a component manufacturer and/or a startup’s architecture, which led to more costs per vehicle.
However, one OEM has deviated from the status quo and is building petrol, diesel, hybrid, and electric vehicles on the same platforms and assembly lines—without sacrificing an inch of build quality or efficiency. This process, once thought of as a pipe dream, now serves as a blueprint for other legacy OEMs to follow. The ability to cost-effectively manufacture popular EVs is a welcome sight for independent dealer networks because this legacy OEM’s EVs do not sit on dealer lots long before the final sale.
EV range anxiety is driven by three main factors: (1) a scarcity of fast public charging stations, (2) unreliable public charging stations, and (3) the lack of a definitive investor model that yields monetary returns on significant upfront capital investments.
While the media has portrayed these issues at times as “insurmountable roadblocks,” the blueprint forward was laid more than 100 years ago when public and private partners built the US network of gasoline stations. At the time, the automobile industry was hindered by a minimal number of gasoline stations that often pumped unrefined gas that stalled out engines. What solved the problem? Government incentives for private investors to build out gasoline stations on major county, state, and federal highways and federal regulations that standardized gasoline octane levels.
Similarly, the selective application of federal incentives for private investors will attract investments into building out a reliable EV fast-charging grid. Charging reliability is predicated on industrywide buy-in on the US Department of Transportation’s regulations for installing proper underground wiring, consistent access to high-voltage electricity, and charge station hours of operability. Private investors can also improve charging station reliability through the imposition of contractual penalties on operators for system outages, lack of maintenance, or the failure to update software.
In exchange for investing in EV chargers, stakeholders can monetize these investments through selling advertisements, data utilization, retail partnerships, and energy sale-backs to the electrical grids. Utility companies charge higher rates during peak demand, which can complicate the profitability rubric for investors.
In order to address this imbalance, utility companies must be willing to enter into alternative rate structures or other energy supply solutions for charging stations. Further, the current nonintervention from the federal government on data privacy and connectivity standards could chill investment due to the potential national security risks, including exposure to the electrical grid. While more regulation is not the solution to every problem, it would be welcomed here.
V2G is a technology that enables energy to be pushed back to the power grid from EV batteries. With V2G technology, an EV battery can be discharged based on different signals, such as energy production or consumption nearby. For EV fleet companies, V2G technology allows operators to aggregate the energy capacity of fleet vehicles and unlock untapped revenue streams.
As V2G adoption continues to become more mainstream, the need for effective energy services management between EV operators, owners, and charging station operators is critical. Navigating the complexities of V2G market access will be an ongoing challenge, evolving alongside advancements in technology and regulations.
Despite economic conditions and lingering range anxiety concerns, the data shows that EV market penetration in the light-duty vehicle segment is growing. As legacy OEMs refine their MPGe bench-testing and lower costs through manufacturing efficiencies, EV sales will continue to grow across demographics.
It is imperative that federal, state, and local governments work together with private investors to incentivize the expansion of the United States’ fast-charging network and monetization opportunities. Infrastructure is often an afterthought in connection with emerging technologies but, here, it holds the key to securing a carbon-neutral future.