EV share continues to rise but has hurdles to clear


Electric vehicle share of U.S. light-vehicle sales has reached the “hockey stick” moment analysts have been forecasting for decades, but there are hurdles to clear before the industry achieves significant EV scale, said Kristin Dziczek of the Federal Reserve Bank of Chicago at the organization’s 29th annual automotive insights symposium on Wednesday.

EV share of new-vehicle sales has climbed to about 6 percent, despite the pandemic and supply chain challenges. And investments from automakers and policymakers, along with incentives from the Inflation Reduction Act could be levers to boost EV sales, said Dziczek, a policy adviser in the Federal Reserve Bank of Chicago’s Research, Policy and Public Engagement division.

The Inflation Reduction Act “gives us a lot of incentives… they are quite substantial, and really could move the needle on EV production battery component and mineral supply chain and adoption, as well as many state incentives to anchor these investments in communities,” she said.

Despite the EV potential, many challenges lie ahead, Dziczek said, including uncertain demand, labor shortages, supply chain woes, high commodity prices, regulatory changes and union negotiations. Experts are highlighting these hurdles and others at the symposium Wednesday and Thursday.

Automakers have invested millions to scale EV manufacturing. On average, manufacturing plant capacity remains below 80 percent, which is typically the marker for profitability, Dziczek said. Three-quarters of plants that build EVs are below 80 percent plant utilization, she said.

“The concern that I have is that as battery-electric vehicles ramp up, their capacity utilization in those plants is very, very low,” said Dziczek. “As EVs take over more of the market, we’re going to lose that capacity utilization in the ICE plants. So the rationalization of these plant investments may still be a few years out, but certainly is an issue for union negotiations later this year.”

The U.S. is far behind in the transition to EVs compared with other countries, such as China, Dziczek said. Some other countries have higher EV production, higher adoption, more battery plants and more control over the battery supply chain.

“The Inflation Reduction Act’s regulatory phase that we’re still in is really going to be critical to determine how the foreign entities of concern will be implemented,” she said.