EVs are holding strong, but U.S. elections may rock the boat, report finds

Despite consumer and dealer malaise and ambitious automaker expectations, electric vehicles are settling into place and may still drive growth in the industry, according to the midyear Market Outlook Report from Dave Cantin Group and Kaiser Associates.

The EV sector may seem underwhelming compared with initial media reports and high expectations, but the report finds it's progressing at a rate similar to other consumer products.

"The industry is still doing well, but the easy money is long gone," Dave Cantin, CEO of Dave Cantin Group, an automotive mergers and acquisitions company, said in a statement. "Dealers are having to adapt to selling battery-electric and hybrid-electric vehicles, rising inventories, persistently high interest rates and new challenges like cybersecurity."

Kaiser Associates is a global growth consulting firm.

EVs are becoming a key part of major automakers' vehicle lineups; GM's EV sales in the second quarter were more than 21,000, surpassing its previous record of 20,000, the report said.

According to the report, dealers said EVs and hybrids were expected to increase vehicle share by roughly 2 percentage points in 2024 vs. 2023, though that growth was expected to be mostly driven by hybrids. Dealers prioritizing these sales say they do so mainly to diversify their offerings and take advantage of tax incentives, according to the report.

Dave Cantin Group singled out Rivian and VinFast as emerging "winners" in the EV sector. It cited examples of Rivian's deal with Volkswagen, announced in June, to enhance software development and VinFast's small but growing footprint of 18 U.S. dealerships.

Tesla's second-quarter earnings might have raised concerns — global vehicle sales fell 4.8 percent compared with the same quarter a year earlier — but the report advised not to count the automaker out, as it could benefit if other manufacturers buy carbon credits from it.

The auto industry is watching the November U.S. presidential election with keen interest. The report said a fed-up public might pressure the next administration to do something about high vehicle prices, which average about $47,000 for a new model.

Public coercion "opens the market for disruptors" — including cheaper foreign vehicle manufacturers — willing to offer lower-cost vehicles, the report said.

There also could be reversals of Biden administration vehicle pollution standards. The U.S. Supreme Court ruled in June to end the 1984 Chevron deference, which is widely expected to limit the power of agencies such as the EPA and NHTSA, which regulate tailpipe emissions and corporate average fuel economy standards on ambiguous statutes. The ruling could set off a chain reaction of rollbacks in alternative energy policies, reducing federal funding for infrastructure and lowering EV tax credits, according to the report.

Tesla is primed to benefit from such a scenario. If EV tax credits are diminished, traditional automakers might opt to buy carbon credits from Tesla rather than rather than ramp up their own electric vehicle operations, the report said.