By Ray Birch
COSTA MESA, Calif—Things could get “very interesting” for electric vehicles (EVs) over the next few years, according to Experian, which is emphasizing that both the market and lenders are still trying to figure out numerous questions, but the trend lines are clear.
“There's still a lot of questions on battery health and what happens to the car once the battery health declines,” said John Howard, Experian’s director of product management for automotive. “I think OEMs are still trying to get their arms around that, as it impacts valuation of the car. There's still a lot of unanswered questions when it comes to EVs.”
But that’s not slowing consumer demand, according to Experian data. New EV registrations have brown more than 250% over the last five years. According to Experian’s Automotive Consumer Trends Report, in Q2 2022 there were more than 1.7 million EVs in operation in the U.S. today—compared with more than 400,000 EVs in Q2 2018.
“This number may seem small compared to the 284 million vehicles on the road, but data show it is growing exponentially. Additionally, new EV registrations continue to ramp up, comprising 5.7% of all new vehicle registrations in Q2 2022, up from 1.5% in Q2 2018,” Howard said.
Quick Acceleration
Howard told CUToday.info that EV adoption is accelerating at a speed not many people would have predicted a few years ago.
“I think the challenge we have now is supply,” explained Howard, noting demand would be even higher if there were more EVs coming off the assembly lines. “A lot of customers don’t want to wait eight to 12 weeks. I am interested in an EV, but for what I want on my car everything is reserved for the next two years.”
Howard said lenders should be paying attention to the fact the interest in EVs is no longer just being driven by Tesla alone.
In addition to the growth of new EV registrations over the past five years, Experian data also show the types of EVs consumers prefer are shifting, partly due to more models being introduced.
“For example, SUVs comprised just 17.84% of new EV registrations in Q2 2018, with sedans making up 81.89%. However, in Q2 2022 SUVs made up 59%, followed by sedans at 35.77% and sports cars at 3.28%,” Howard said. “The types of electric vehicles consumers are gravitating towards mirror that of the larger automotive industry, with the obvious exception of pickups due to limited availability. We can attribute part of the allure of electric vehicles to the newer variety of makes and models available,” said Howard.
Not Just a California Thing
Experian data show that EV growth is expanding well outside California. Multiple markets are seeing significant EV growth, Howard said.
“California still makes up the largest share of retail EV registrations at 36.6%, but there are other markets beginning to show significant growth,” he said. “For example, Tucson, Arizona shows a growth rate of more than 82% year-over-year as of Q2 2022.”
Other markets with notable year-over-year growth rates include Orlando at 77%, and Oklahoma City, Okla., at 75% growth.
“So, we're seeing so many markets take off in which I never thought we would have had this kind of growth—like Texas,” Howard said. “Oklahoma is another, and Illinois. Part of it is affordability, and part of it is in some colder states people are starting to realize EVs can sustain a winter.”
The Make & Model—of the Buyers
John Howard
Howard said that as growth continues in markets across the country, it’s helpful to understand which consumers are most likely to purchase an EV.
“One way is to identify what kinds of vehicles consumers drive directly before purchasing an EV—their ‘transition’ vehicle,” explained Howard. “The data show consumers who drive a plug-in hybrid are more likely to transition to an EV, with 23.5% of plug-in hybrid owners selecting an EV as their next vehicle. In contrast, only 3.2% of gasoline vehicle drivers and 8.8% of gas hybrid drivers opted for EVs as their next vehicle.”
Howard pointed out EVs are also beginning to defy the stereotypes.
“Because EV registrations aren’t just happening on the coasts, they’re expanding nationwide,” Howard continued. “Leveraging data that highlights trends like plug-in hybrids serving as a transitional vehicle will be essential knowledge for OEMs and dealers as more models are introduced and the automotive landscape continues to change.”
The View Through the Windshield
The lending landscape will evolve as EVs take greater share of the market, predicted Howard.
“As I mentioned, the lending competitive landscape will continue to evolve as more startup EV companies come online and most of them without a traditional captive lending arm. One thing that lenders need help with is understanding the buying and financing patterns of this new pool of buyers,” he said. “As affordability evolves with new and future models, leveraging data that helps understand what buyers in which markets are most likely to purchase an EV, their financing trends—as well as paying close attention to the growth in those non-California markets—is key. Lenders need to understand these buyers just as much as the OEMs do, making sure the right product is positioned for the right customer.”