Why the Electric Vehicle Isn't Mainstream: Customer Pain Points
Demand is strong, but the market hasn't caught up to customer expectations
Electric vehicles can travel the same distance as conventional vehicles at half the cost, while the price of maintaining them is one-third that of a regular car, according to the US Department of Energy.
However, non gasoline-powered vehicles are still far from mainstream. Why?
Electric vehicles - the landscape today
Political support for electric vehicles is limited – just ten US states passed Zero-Emission Vehicles legislation – and charging infrastructure is largely confined to pro-ZEV states and owners of Tesla vehicles. The Zero-Emission Vehicles program is a California state regulation which requires automakers to sell a certain quota of electric cars and trucks in California and 9 other states.
What’s more, a number of customer pain points persist in the market, which not only complicate the purchasing experience but prevent consumers from understanding the true cost of an electric vehicle as well as where, when and how to charge it.
“We find that people largely support incentives for electric vehicles and think that utility companies should make it easier to charge [them], but also that automakers should expand and offer a variety of vehicle types as plug-in models,” Shannon Baker-Branstetter, manager of Cars & Energy Policy at Consumer Reports, said at CEWeek 2019.
Kindra Cooper for CCW Digital
Most electric vehicles are compact cars or sedans, whereas car sales in general show consumer interest effervescing around SUVs, crossovers and pick-up trucks while sales of sedans and compacts have declined in recent years. What’s more, the availability of EVs varies by state. ZEV-adherent states naturally have wider EV dealership networks, charging infrastructure, consumer choice and more lenient fees.
The consumer benefit of electric vehicles is obvious in terms of cost savings, especially given that the average US household spends a fifth of its total family expenditures on transportation. However, the market hasn’t mobilized quickly enough to offer a solution to a near-universal customer pain point: budget constraints.
In addition to stocking limited vehicle types and styles, automakers still sell EVs at premium prices, largely due to the price of lithium-ion batteries, which accounts for nearly half the retail price of an EV. Battery prices have already fallen an estimated 80 percent since 2010, and will drop another 45 percent by 2021.
Utility companies have a large stake in EV uptake in terms of investing in charging infrastructure and incentivizing consumers to lower their electricity bill, such as offering discounted rates at night. Using a smart charger, owners of electric vehicles can set timers to charge their cars only during off-peak hours.
“People may not know that they can save money on maintenance and fueling,” said Baker-Branstetter, who testifies at hearings with the EPA, DOE, DOT, and CARB. “They may not know about tax credits and other rebates, so the price may seem higher than it really is.”
Customer pain points prevent the market from growing
Given the relatively fringe status of electric vehicles in the general car market, customers invest more time and effort searching for, buying and getting accustomed to an electric vehicle than a conventional car. In fact, even the dealerships may know little about electric vehicle technology or sell a limited number of models because they have little to no incentive to elevate EV sales.
“Most dealerships make most of their money on maintenance, and electric vehicles don’t have a lot of maintenance,” said Baker-Branstetter. “It’s a great benefit for consumers but there’s a misalignment of current incentives.”
In response to overall decline in retail sales, manufacturers across industries are gravitating towards direct-to-consumer marketing and distribution channels. In the auto industry, Tesla leads the pack. In March, the electric automaker announced it would shutter most of its showrooms and shift to exclusively online sales.
It also upped production of the mass market-intended Model 3, which retails for $35,000. Before the Model 3, Tesla’s most affordable offering was the Model S, starting at $85,000.
To ease initial qualms of buying such an expensive item online without test-driving beforehand, the company bragged in a blog post that it would make returns so easy for customers that, “Quite literally, you could buy a Tesla, drive several hundred miles for a weekend road trip with friends and then return it for free.”
While Tesla’s announcement might ease the purchase process for customers in non-ZEV states, Baker-Branstetter says there’s still a learning curve after purchase in terms of deciding where and when to charge, determining the cost of charging and understanding the vehicle’s range (travel distance per charge). Range varies depending on driving styles and weather, with consumers reporting a 30-50 percent drop in range in adverse climate conditions.
However, the potentially deal-breaking customer pain points associated with buying and owning an electric vehicle have nothing to do with the product. Rather, they’re the consequence of an immature market.
“Offerings are limited, [the cars] cost more, the dealership experience is not as smooth as buying an internal combustion engine vehicle and you need to do extra research,” said Baker-Branstetter.
Despite these barriers, electric vehicle sales grew 81 percent last year. In California, non gasoline-powered cars accounted for 10 percent of car sales and 10 percent of vehicle sales in the entire country.
“That has to do with the [Tesla] Model 3 increasing production as well as people taking advantage of tax credits,” she said.
Political support a scattershot affair
About one-third of all public chargers are located in California where ZEV legislation originated, showing the strong correlation between political support for EVs and corresponding infrastructure investments. Currently, Volkswagen is investing $2 billion in Electrify America, a VW subsidiary that owns and manages electric vehicle charging networks, while public and private investors are eyeing gaps in the market.
“Utilities are becoming larger players as well,” said Baker-Branstetter. “There are quite a few utilities around the country that are either proposing or have already been approved to do pilots to invest in chargers and other incentives for electrification.”
Public policy is pivotal in determining whether adoption of EVs will be fast or slow. The Trump administration’s opposition of carbon emissions policies and lobbying from oil companies to impose fees on electric vehicles could hamper penetration.
“Some of [the fees] are fairly reasonable and in line with paying a reasonable equivalence of the gas tax in certain states,” said Baker-Branstetter, “but some are very high and punitive and would actively discourage electric vehicle use by charging them more than traditional vehicles to use the roads.”
General Motors and Tesla have maxed out their tax credit at a cap of 200,000 vehicles sold, at which point the tax incentive phases out over the next 15 months. In April, a bipartisan group of lawmakers to expand the EV tax credit by 400,000 vehicles per manufacturer, which would “lift electric vehicle sales for automakers that have committed tens of billions of dollars towards meeting global emission requirements,” according to Reuters.