Low-Energy Fridays: What is the future of electric vehicles?

Policymakers often seem to take it as a given that electric vehicles (EVs) are the future. President Joe Biden promised that half of vehicle sales will be EVs by 2030, and his administration adopted regulation in an attempt to force that market outcome (though the final published rule was less ambitious). But there is a big question: Is transportation’s future dominated by EVs, or is it all just hot air? The answer is that we don’t know yet—but the complexity around this issue is worth understanding.

EV demand is growing quickly, but that’s expected in any nascent industry. EVs traditionally have a low share of light-duty vehicle (LDV) sales (i.e., cars, SUVs, pickup trucks), and it wasn’t until 2021 that they finally reached more than a 5 percent share of U.S. vehicle sales. Starting at such a small point means that growth will always seem massive. But the more prescient question—how much of the future LDV market can we expect to be EVs—depends on many factors.

If EV growth trends continue as they have in the past, then the United States could expect 20 percent of new LDV sales to be EVs by 2030 (well short of President Biden’s pledge). Factors that contribute to this continued uptake of EVs will likely be their falling cost relative to their past prices and their reduced maintenance costs compared to regular gasoline-powered cars.

But there are also good reasons to predict that EV adoption might fall below expectations. One is that EV costs haven’t declined as much as one might expect, going from $65,000 in 2022 to $56,648 in 2024. And in some cases, their costs are increasing. Material scarcity for certain components of EV batteries may play a role in this. For example, cobalt prices rose in response to EV demand and then fell when EVs didn’t sell as expected. There is also reason to think that other scarce materials like graphite may begin to impede the reduction of EV materials costs. Importantly, no matter how many economies of scale improvements are spurred by EV market growth, an EV can’t cost less than the materials that go into it. This limits the potential cost advantages an EV could have over a combustion engine vehicle.

Another looming question concerns the longevity of EV batteries, which can cost up to $20,000 to replace. Even though they’re guaranteed to perform as advertised for at least eight years, it’s unclear how common this repair will be beyond that timeframe (though a recent study found that 30 percent of model year 2011 EVs needed a new battery). This is a big deal—about 70 percent of LDV sales are for used vehicles, and it’s unlikely someone would buy an EV that comes with such a large repair bill attached. It’s faulty to compare new EVs to new combustion engine vehicles in market growth, because someone buying a used gasoline-powered car can expect roughly the same performance as when the vehicle was new. The range of a used EV, however, can be much lower than when originally purchased. Ultimately, the EV market is still too young for there to be good data showing which way used vehicle buyers will go.

We also know that almost a fifth of EV buyers return to using conventional cars, with the most commonly cited reason being charging convenience. This suggests that the demand for EVs might diminish and that consumers who lack convenient charging access (such as those living in apartments) might not be keen to switch to an EV. Additionally, there’s a big climate question around whether EV buyers are really replacing their gasoline-powered driving, as multiple studies have confirmed that EV owners don’t put as many miles on their EVs as they do combustion engine vehicles of comparable age. This suggests that many EV purchases are secondary vehicles that do not fully replace gasoline-powered cars.

All this is to say that there is a lot we still don’t know. Many people seem to prefer EVs, and in turn, we see rising EV purchases. While this positive development will hopefully reduce transportation-related greenhouse gas emissions and pollution, the caveat is that in climate policy, many energy transition scenarios explicitly require massive vehicle electrification globally. The International Energy Agency’s “Net Zero by 2050” report would require 86 percent of global cars to be electrified by 2050 to achieve net-zero global greenhouse gas emissions, while the International Renewable Energy Agency’s “World Energy Transitions Outlook” would require 88 percent. We don’t yet know how realistic these numbers are, but they represent a key assumption that underpins major policy decisions: that EVs will be cheaper, suitable substitutes for combustion-engine vehicles. Politicians frequently advocate for EV subsidies or low-emission vehicle mandates under this assumption, so its accuracy matters.

It’s safe to say we can expect a lot of growth in the future of EVs; however, that doesn’t make a large-scale transition away from gasoline-powered cars a natural matter of course or ensure that current policies can achieve such an outcome. But with few alternative ways to reduce transportation-sector emissions, climate policy discourse consistently gravitates toward vehicle electrification as the solution.