State regulations — such as California’s requirement that manufacturers sell a certain percentage of zero emissions vehicles — are what’s driving electric vehicle sales today, rather than consumer demand, panelists said at the 2017 Auto Finance Risk & Compliance Summit last month.
“[EVs are] under 3% of the market in terms of manufactured automobiles and essentially regulations drive that — it’s not the market forces,” said Anil Goyal, senior vice president of automotive valuation and analytics at Black Book.
California is the largest and most dominant state driving these zero emissions regulations — which don’t allow low-pollutant options, such as hybrids, to count — but there are about 10 other states enforcing this mandate as well, Eric Ibara, director of residual value at Kelley Blue Book, told attendees.
“If these states continue to enforce their mandates, we’re going to see very cheap new electric vehicles because that’s the only way manufacturers are going to be able to hit their targets,” Ibara said. “At some point, I think the manufacturers will band together to lobby the states harder because it’s kind of crazy to force people to buy vehicles they don’t really want.”
Demand has been limited because these vehicles can’t compete on range, convenience, and resale value, even as prices appear to be coming down with more affordable options, such as the Chevy Bolt and the soon-to-be-released Tesla Model 3, said Alain Nana-Sinkam, senior director of industry solutions at ALG.
“The fundamental thing we observe about the EV market is that consumers refuse to grade those vehicles on a curve,” he said. “They expect those vehicles to compete in terms of range, drivability, the ability to fit into their lives, and they expect them to compete on price.”
Hear more from the panelists about the electric vehicle market in the video below, the fifth in a six-part video series from the 2017 Auto Finance Risk & Compliance Summit held last month in San Diego:
