With nearly 40 percent of US respondents saying they would still not consider an electric vehicle even if gas prices were as high as six dollars per gallon – what are the implications for the automotive industry?
Gas prices were on a roller coaster last year in the US. After hitting record highs in March 2022, gas prices surged even higher.
The US national average eventually reached five US dollars per gallon in June 2022. While gas prices began to decline shortly after this, several regions in the US saw another record high in October, keeping Americans on the edge of their seats.
For many individuals, the prospect of gas savings and a lower cost of ownership is enough to consider switching from traditional ICEVs to EVs. And with some consumers becoming more environmentally conscious and drawn towards sustainability, these constant changes in gas prices serve to make EVs a viable option for more and more consumers.
However, nearly 40 percent of US respondents report they would still not consider an EV even if gas prices were as high as six dollars per gallon. This is primarily due to these respondents placing a higher trust in combustion engines, or because they maintain a preference for a specific brand or vehicle.
In a Simon-Kucher study*conducted in July/August 2022, we found that consumers tend to overestimate price changes, in some cases to an extreme. Only about 20 percent of those surveyed in the US accurately estimated the latest changes in gas prices. So how do these price changes and constant fluctuations impact customers’ perceptions of EVs?
Interest in EVs picking up with higher gas prices
Within the US, respondents in the West were more likely to consider an EV than respondents in the Midwest, South, and Northeast. This is likely due to the higher market penetration of EVs in the West and a more extensive charging infrastructure. Approximately 50 percent of EV registrations in 2021 were in Western states, led by California, which indicates an increasing consumer awareness and confidence in EVs in that region.
Again, among respondents in the Midwest, South, and Northeast, the main reason for not considering an EV was primarily due to a higher trust in combustion engines. However, respondents in the West listed a wider range of reasons as to why they might not consider an EV, including having a specific brand or model preference, and EVs being more expensive.
How can manufacturers make EVs an attractive and sustainable alternative?
Our study makes it clear that higher gas prices increase the attractiveness of electric vehicles for certain consumer groups. However, it is not a strong enough force to prompt a mass adoption of EVs in the near to long-term future, especially given the past year’s volatility.
Different factors are slowing the adoption of EV’s, despite their green credentials, such as creating zero tailpipe emissions. Take, for instance, the EV battery. It can take 20 minutes to an hour to charge a battery to 80 percent capacity, even when using the fastest charging stations. In comparison, it takes less than five minutes to fill up a gas tank.
Additionally, consumers considering an EV will also have to consider the cost of electricity for charging, as those prices are trending upward as well, with an approximately 10 percent increase from 2021 to 2022.
In the long term, the cost difference between gasoline and electricity will determine the speed at which EVs can penetrate the market.
Some states, such as Massachusetts and California, have implemented regulatory laws similar to those already in place in many European countries, which will require that all new cars sold must be zero emissions vehicles by 2035. While this will bolster EV adoption and consumer confidence in select states, EV manufacturers will still have to overcome additional barriers in other states.
Automotive manufacturers and infrastructure providers can increase the attractiveness of electric vehicles by improving price, range and charging infrastructure, as well as model selection.
Manufacturers should consider educational campaigns to boost consumer awareness and confidence in EVs, particularly for those hard-to-convince segments. This helps to dispel myths, increase the understanding of how EVs operate, and introduce the terminology required for charging EVs (i.e., DCFC 150 kW).
However, the EV sector is not without challenges. Batteries are vital for the EV business, and it’s important to understand the electric vehicle battery landscape as well. We have explored the current market challenges and innovative solutions for EV batteries in this blog.
Stay tuned for instalment three of this four-part series, where our automotive experts will next explore different EV market segments and how to target them in the short-term future.
For further insights on how to accelerate EV adoption or adapt your business for EVs, contact our growth specialists.
*Simon-Kucher 2022 Gas Pricing Study insights available upon request.