Electric vehicle sales in the second quarter of 2024 were a simulacrum of broader industry trends. In many ways, the sales were an extension of what we saw in Q1: Legacy automakers like General Motors, Ford, and Hyundai witnessed double-digit percentage growth compared to last year, whereas Tesla continued to slip.
As Elon Musk’s company pivots to artificial intelligence and robotaxis, its passenger vehicle business seems to have taken a backseat. Sure, Cybertruck production is ramping up and there’s now a refreshed Model 3, which InsideEVs can confirm is excellent. But the rest of the lineup needs upgrades. The facelifted Model Y isn’t due until next year and the Model X and Model S, in their current forms, are way past their expiration dates.
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The EV market is complex.
It's certainly way more complex than previously thought. Sales are rising, but not at the levels brands expected. The early adopter phase is long over. To appeal to the new wave of buyers, many of them middle income households, all EV-related anxieties need to vanish. That means hitting the sweet spot with driving range, charging infrastructure and ownership costs.
Can Tesla’s rivals now play a bigger role in the broader adoption of EVs and fill the sales void that’s being left behind?
Analysts certainly think so, but it won’t be easy. According to them, Tesla could continue to lose its EV market share by a few percentage points each year for the rest of this decade. So Ford, General Motors, Hyundai, Kia and others have a golden opportunity to step up. But some major roadblocks include high interest rates, a string of EV-ownership-related anxieties, the threat of a new U.S. president reversing pro-EV policies and the challenge of making new affordable models appealing.
How they navigate these obstacles will ultimately decide who comes out on top.
What’s Hurting EV Sales?
Edmunds’ sales data (excluding direct-to-consumer sales from Tesla, Rivian, etc.) suggests that less than half of current EV owners are repurchasing EVs.
“If you have an EV and you trade it into a dealership, you're still under 50% of the time buying another EV,” said Ivan Drury, the director of insights at Edmunds. About 30% of those customers are going back to gas cars whereas others are opting for hybrids and plug-in hybrids. “Everybody is hurting because of interest rates, range anxiety, charging anxiety, all those anxieties,” Drury said.
EV range has increased over the past few years as battery manufacturers continuously improve the energy density. The charging infrastructure is growing, but probably not at the rate it needs to. Moreover, Tesla’s firing of its Supercharging team was a major blow to the overall charging landscape in the U.S. At the same time, the pool of potential new EV buyers has also increased. That means the limited number of models with over 300 miles of EPA range isn’t enough to drive mass adoption.
“Four or five years ago people were buying EVs as additional cars, not replacement cars,” Drury said. Now buyers are considering EVs as their only cars. But they’re hesitant due to concerns like high costs and inadequate charging infrastructure.
“The dynamics have changed to where now we're talking about mainstream buyers with mainstream concerns," he said. "That is a very different segment of the population than the early adopter.”
Overall Trajectory Looks Good
Despite the decline in new Tesla sales, the market is headed in the correct direction because there are clear signs of others stepping up.
General Motors increased its EV sales by 40% year-over-year thanks to models like the Cadillac Lyriq and Chevy Blazer EV. Ford’s EV sales were up 61% thanks to the Mustang Mach-E and F-150 Lightning. Hyundai, Kia, Toyota and many others witnessed record EV sales in the U.S. this quarter.
“The market has taken a drastic turn. You're seeing that the other options are now viable. Tesla has legitimate competition. We're seeing that people are willing to switch brands,” Drury said.
Part of what drives sales are attractive lease deals, cashback offers and many discounts. Several EVs have leases starting under $300 per month, like the Hyundai Ioniq 5 and Ioniq 6, Nissan Ariya, Tesla Model 3, Toyota bZ4x and more. Many of them have 0% APR. “We have about 69% of all EVs from dealerships that are leased, and that makes it very enticing,” Drury said. Customers may be saying, “If you make it cheap enough, I might just roll the dice and do it," he said.
What’s Next?
“We are forecasting roughly 25,000 fewer Tesla units will be delivered [in 2024] versus 2023,” said Loren McDonald, the CEO of analytics firm EVAdoption.
EVAdoption forecasts U.S. BEV sales to reach 1.21 million units in 2024 versus 1.13 million in 2023, a 7% increase. In the best-case scenario, where sales of models like the Chevrolet Blazer and Equinox EV take off and Tesla sales rebound, EVAdoption projects a year-over-year increase of 12-15%.
By the end of the year, GM will offer 10 EVs in its portfolio, the most by any automaker in the U.S. And so far this year, its EVs are already crushing it. All new Ultium-based EVs witnessed double-digit percentage growth in the first two quarters of this year. Even the hulking Hummer EV, starting at a shade under $100,000, is finding buyers.
In addition, automakers are racing to launch the next generation of affordable EVs, many of which are expected to be available in 2026.
Tesla is working on “several affordable models” that Musk said would use a mix of existing platforms and new tech. Ford is developing its new “skunkworks” EVs that include a $25,000 pickup truck, SUV and an EV for rideshare purposes. GM is developing the next-gen Bolt EV. The adorable Kia EV3 is also confirmed for the U.S. and is expected to arrive after 2025.
“These new affordable ones will have to sell themselves on merit. It can't just be cheap because if all I want is cheap, I can get a cheap used EV right now,” Drury said. That’s certainly true because the average transaction price of a used EV has plummeted in recent months.
Where Dealerships Can Step In
Even though EV start-ups like Tesla and Rivian rely on direct-to-consumer sales, most of the U.S. car-buying population still relies on dealerships.
People seem to enjoy walking into a showroom, feeling the touch and smell of a new car, exploring the features and speaking to sales staff in person. That means dealerships now have a chance to truly embrace EVs and contribute to the decarbonization that a rapidly warming planet desperately needs.
“People buy the same car over and over again, they go to the same dealerships over and over again—they just want trust,” Drury said.
They love loyal customers because they will sing the praises of the product, the dealership and the brand, according to Drury. Brands like Toyota and Honda have built their entire reputation on loyalty and reliability. “If you're hesitant to go outside of your dealer network, now that's not a problem because the brand you like might actually have an EV," he said.
Even if Tesla sales plummet, the conditions are increasingly ripe for others to step up and shine. Legacy automakers already have the reputation and sales framework in place. Millions of existing loyal customers could be open to switching to EVs if their anxieties vanish. To emerge as worthy rivals to Tesla, they need to start offering reliable and cheap models that owners can feel confident about.
Barring something that’s beyond the realm of predictability, like a pandemic or some global downturn, or a disastrous policy change after the presidential elections, it’s pretty clear that EVs are here to stay.
Contact the author: suvrat.kothari@insideevs.com
