Heading into 2023, Citi’s Global Auto Team reviewed its latest forecasts for global, light vehicle electric vehicle (EV) penetration. Unlike past forecasts, today’s forecasting process entails taking into account complex and evolving factors from near-term macroeconomic and inflationary pressures to new policies and subsidies (some of which have yet to be fully defined, such as the U.S. Inflation Reduction Act), near-term and long-term supply-chain pressures and uncertainties, and the latest capacity and product announcements from automakers.
To gain a better understanding of some of these factors in the U.S., we conducted a survey of U.S. consumers on EVs, focusing on areas such as purchase considerations and price elasticity. Comparing these results with those of a similar survey we ran in July 2022 yielded overall encouraging results for U.S. EV adoption. The key takeaways were:
- EV consideration is on the rise for existing new vehicle owners with 65% considering an EV versus 59% in our prior survey.Lessee consideration increased versus our prior survey and remains the cohort most likely to consider an EV. However, loan or cash buyer consideration also increased and grew at a faster rate. For non-owners, we noticed a slight decline versus our prior survey, but consideration remained quite high (>73%).
- Demand remains fairly elastic, i.e., sensitive to pricing, but we did observe some firming-up in the retention of potential demand versus our prior survey. We define the retention of potential demand as the percentage of respondents who would still consider purchasing an EV, on a sliding scale, at progressively higher price points than their current vehicle. Within this analysis, we also look to assess the potential revenue pool, defined as the retained demand (at individual price points) multiplied by the adjusted price. This metric also strengthened versus our prior survey.
Though U.S. EV penetration continues to lag other geographies, we continue to believe that the structure of the U.S. auto market lends itself well for a potential sharp and sudden inflection in EV demand. This is because vehicle density in the U.S. — the ratio of vehicles per household — ranks highest in the world at greater than 2x, with around 285 million light vehicles on the road. EVs have gained in popularity not only for being electric, but also for containing state-of-the-art connectivity and over-the-air (OTA) software updates often with next-generation advanced driver assistance systems (ADAS/L2+) features.
Separately, and on a global scale, our latest EV penetration assessment yields a number of takeaways, including: (1) a significantly higher plug-in hybrid (PHEV) penetration outlook in China, (2) slightly lower U.S. EV penetration assumed through 2030; (3) a stronger EV adoption outlook in Europe; and (4) a modestly higher EV penetration outlook in China, Europe, and the U.S. in 2025.
