Bad News for Tesla, Electric Vehicle Sales Have Plateaued

After years of rapid growth, it seems that the electric vehicle market is moving into stagnation. For years, electric vehicles made up just over 1 percent of the market, but everything changed in 2020 when growth accelerated with the help of a ‘flood’ of new electric models, better charging infrastructure, and larger incentives for purchasing electric vehicles.

Electric vehicle sales in the U.S. reached a record of nearly 6 percent of total vehicle sales last year, and are on track to surpass that this year, making up nearly 9 percent of sales to individual buyers just in June, according to JD Power.

With that growth came a series of ambitious targets. Tesla announced plans to produce 2 million vehicles this year alone. Ford announced production of around 600,000, while GM plans to produce about 150,000 electric vehicles this year.

However, as the industry runs out of enthusiastic new users, a plateau for the electric segment is on the horizon, some analysts say. The first signs of this appeared last month when Ford announced that it would have to reduce allocations for the long-awaited Mustang Mach-E.

– The spectacular growth we have seen in recent years is not sustainable. It simply isn’t possible – said Sam Fiorani, vice president at AutoForecast Solutions.

‘Wild West’ in the Electric Vehicle Market

The transition from early adopters, who will endure more ownership and quality issues, to more average and practical car buyers will be the next major growing pain for the industry, analysts say. Companies will find it nearly impossible to predict demand over the next few years as this new cohort of electric vehicle buyers enters the market.

– This is the closest to the Wild West that this industry has seen since the 1920s – said Fiorani.

With a lower barrier to entry for electric vehicles and a slew of new competitors in the segment, the avalanche of new electric cars has led to a buildup in showrooms. In June, there were twice as many electric vehicles at dealerships compared to gas-powered cars.

States with the highest share of electric vehicle sales are also currently growing the slowest in sales, according to a recent study by iSeeCars. California, Oregon, and Washington – where electric vehicle sales make up between 7 and 10 percent of the market – are currently among the states that are adopting new electric vehicles the slowest, the research showed.