The electric vehicle (EV) takeover is the revolution that has yet to happen.

Despite expectations that gasoline-powered cars and their significantly higher carbon dioxide emission rates were to give way to greener alternatives, EVs are currently not selling well.

Does this global slowdown mean the EV boom was a temporary phenomenon?

Some major automakers’ recent actions seem to indicate this even as others double down on their commitments.

Stellantis Japan Ltd., a Japanese subsidiary of the European auto giant whose portfolio includes Fiat and Peugeot, exhibited its new models at a September event in Tokyo.

“We will develop all powertrains, from plug-in hybrids to gas engines,” said Managing Director Susumu Uchikoshi.

The company’s headquarters in the Netherlands has created a strategy to increase annual global sales of EVs to 5 million units by 2030.

This is about 80 percent of the number of new cars the consolidated company sold worldwide in 2023.

The company plans to have all sales of new cars, particularly in Europe, be EV models by 2030.

SLUGGISH GROWTH

Fiat’s fully electric 600e was introduced at the exhibition, but was accompanied by a caveat from Uchikoshi, who said the company’s focus was “not only EVs, but there are also hybrid vehicles."

"We need to suggest various options so that customers have choices," he said. "That is what we are supposed to do.”

The hybrid version of the 600e will be available in Japan next year.

The slowed growth of the EV market is not only reflected in companies’ moves, but figures.

According to Tokyo-based research firm MarkLines Co., the number of EV cars sold globally in 2022 shot up 66 percent compared to the previous year. In 2023, it rose by 26 percent.

Its rate of growth has since stalled. From January through July of this year, the EV market only grew 7.8 percent year-on-year.

While the market is still expanding, its rate of growth has slowed considerably.

In the U.S. auto market, one of the largest in the world, EV sales increased only by 5.6 percent year-on-year. Europe saw even smaller gains, bumping up 1.5 percent during the same period.

In China, the unit sales of new energy cars, such as EVs and plug-in hybrids, is expected to exceed 10 million this year.

One reason for rising sales is buyers can immediately obtain the country’s “new energy vehicle” license plates for EV and plug-in hybrids relative to the limited availability of plates for hybrid and gas-powered cars in large cities.

However, market growth has recently stagnated there as well.

According to the China Association of Automobile Manufacturers, the number of EVs sold from January through August was about 4.22 million, up 9.7 percent year-on-year.

Plug-in hybrids are, by comparison, currently popular because they also run on gasoline. 

The number of plug-in hybrid vehicles sold in the same period was approximately 2.82 million, an 84.2 percent jump compared to last year.

The largest reason is believed that consumers prefer plug-in hybrids because they have longer cruising distances than EVs whose batteries drain faster in cold temperatures. 

The slowing market growth of EVs is more apparent in Japan.

According to the Japan Automobile Dealers Association, the number of new EV sales, except for 660cc-class minivehicles from January through July decreased by nearly 30 percent year-on-year.

This year’s monthly sales saw year-on-year decreases except in July.

Based on the current climate, major European automakers are responding by revisiting their EV strategies.

Swedish auto giant Volvo Cars in September withdrew its plan to exclusively sell EVs by 2030.

In February, Mercedes-Benz abandoned its goal to go completely electric by 2030 and Volkswagen plans to close its factories in Germany to reduce costs following sluggish EV sales.

50 PERCENT SPLIT

Some companies are beginning to consider other gasoline alternatives beyond EVs.

BMW revealed a plan to mass-produce hydrogen-reliant fuel cell vehicles in cooperation with Toyota Motor Corp.

The companies’ executives told reporters that the future of the EV market is unclear and, “Investing only in EVs is the same as standing only on one foot. We can stand, but it will not last very long.”

A Japanese automaker executive provided analysis on European auto giants’ shift from EVs, saying, “The rapid electrification of cars arose from prioritizing company logic when it appears consumers did not actually need EVs.”

Aside from this, one explanation for the market’s slowed growth is EVs’ high price tags compared to traditional gas-powered cars and hybrids.

Nomura Research Institute Ltd. conducted a survey of Japanese, Chinese, German and American consumers last year, who indicated this reason.

As many as 1,527—nearly 50 percent—of the 3,232 respondents answered that they do not want to buy EVs.

Of this demographic, over half in Japan, the United States and Germany said prices were the reason for their disinterest.

Additionally, almost 60 percent of this group in Japan called out the inconvenience of charging stations. Specifically, the limited availability of charging spots and the time required to charge EVs.

The ratio of people who chose this explanation was much higher in Japan than the other three countries where the survey was conducted.

Seiji Sugiura, a senior analyst at the information service company Tokai Tokyo Intelligence Laboratory Co., pointed out that EVs are still an “immature” commercial product compared to gas-powered cars.

He also said that one of the most prominent reasons for the minute growth of EV sales is that early adapters have already bought them.

POLITICS AND BUSINESS

So, was the growth of EV market temporary? The answer still seems to be no—the International Energy Agency predicted in April that half of new car sales globally will be EVs in 2035.

Government policy incentives in the United States, European nations and China concerning protecting the environment through decarbonization is the reason for this confidence.

Selling cars with gas engines and hybrids is expected to be prohibited, in principle, in EU countries and the state of California in the United States that same year.

The Chinese government also aims to expand EV adoption in rural areas while sales increase in major cities in its implementation of strong policy incentives.

Promoting EVs in the United States, European countries and China also appears politically motivated to create a competitive edge for each government’s automakers.

Chinese car brands have not produced efficient gas engines while European manufacturers have fallen behind Japan in creating hybrid models.

Amid all this are the beginnings of a transformation in cost-effectiveness.

Next-generation solid-state batteries are on the cusp of widespread implementation—fortuitous, as 30 percent of EV prices are due to their batteries.

Their larger storage capacity means using solid-state batteries should translate into EVs with longer cruising distances than their counterparts running on standard lithium-ion ones.

As their name suggests, solid-state batteries also do not contain liquids and are considered safer since there is no risk of leakage. They can be recharged more quickly than lithium-ion batteries. 

Chinese automakers may begin mass-producing EVs with solid-state batteries as early as 2026.

Executives at major Japanese car brands said that employees of Chinese automakers often visit to see how their developments are proceeding, and that they appear to be extremely invested.

THE ‘BEST’ CHOICE

Japanese automakers, already trailing Tesla Inc. in the United States and BYD Co. in China, are also lagging behind Chinese companies in the realm of batteries.

With a rebound and expansion forecast for the market, Japanese carmakers are looking for any opportunity to change their position.

“EVs are the best solution in the mid- and long-term for passenger cars that we are producing,” said Toshihiro Mibe, president of Honda Motor Co. 

Mibe announced the company’s plan to focus on EVs, continuing its previous commitment even though he acknowledges that the EV market is in the thick of what he believes is a temporary slowdown.

Honda aims to exclusively sell EVs and fuel cell vehicles as early as 2040 and is scheduled to launch a a new EV model Honda 0 series in the North American region in 2026.

The company has introduced a large-scale aluminum casting machinery for single-piece molding of battery cases to reduce the number of their components. It has also adopted new vehicle platforms specifically designed for EVs. Both are part of efforts to streamline production to curb costs that are presently hindering the accessibility and spread of EVs.

Honda intends to utilize various self-driving technologies and artificial intelligence to expand its services.

“We can’t compete with Chinese makers and Tesla if we continue to rely on our existing values,” Mibe said.

“In this sense, I’m sure that the direction of the Honda 0 series is not wrong,” he said.

Meanwhile, Toyota plans to increase annual sales of EVs and PHVs to 1.5 million units by 2026 although it pushes “multi-pathway approach” of achieving decarbonization through various technologies, including HVs and FCVs, instead of focusing on EVs.

A senior Toyota official said the company has come up with the plan to better meet future growth in demand for EVs.

Nissan Motor Co.—the first company to mass-produce EVs—is aiming to reduce production costs by 30 percent by fiscal 2030; achieving this would match the cost of manufacturing gas-powered vehicles.

Regarding batteries, a strong point among Chinese automakers, major Japanese entities have plans to build their own factories, which includes Toyota, Nissan, Subaru Corp. and equipment makers.

Total investment will be about 1 trillion yen ($6.45 billion).

To avoid a dependence on Chinese-sourced batteries, the Japanese government plans to subsidize a maximum of one-third of each company’s investments.

Sugiura believes whether the EV market will snap back and Japanese automakers will be able to compete hinges on product appeal of the cars themselves.

“Lower prices independent of subsidies along with usability and attractive designs will be the key to becoming competitive in the EV market," he said.