Electric cars were the stars of the Detroit Auto Show this year and they have been garnering a lot of attention from the media generally amid increasingly urgent talk about climate change and how the world is failing in the fight against it. Every self-respecting automaker has at least one EV in the pipeline. The biggest ones have several. And all of these new EVs are scheduled to hit the market in the next few years. A pileup may be coming.

The pileup could be “of epic proportions” as AlixPartners warned in a study cited in a recent analysis of the EV topic by CNBC’s Paul Eisenstein. By the end of this year alone, Eisenstein says, analysts expect almost a dozen new EVs to make their appearance in showrooms across the United States. Some of these will be direct competitors of Tesla, which currently boasts an impressive 83 percent of the U.S. battery electric car market.

The “threat for Tesla” angle in EV reporting is a popular one and indeed a 83-percent market share is an unsustainable one in any industry. But with Tesla’s brand loyalty, concerns about the company’s future sales may be premature. What is not premature is a worry about that pileup AlixPartners warned about.

The world’s biggest carmakers are pouring billions into electric vehicles motivated by government incentives and strategies envisaging the phasing out of ICE vehicles in some markets. From the pro-EV perspective, the time is just right to launch as many electric cars as one can design and manufacture. All the big carmakers have developed EV manufacturing platforms and are preparing to put them to good use. Millions of EVs are coming to the market. There is just one problem with that: actual sales statistics. Related: Oil Rallies As Saudis Cut Exports To The U.S.

China is the world’s largest EV market, for example, with the total number of electric cars on Chinese roads last year reaching 2.61 million, which was up by 70 percent or more than a million cars from a year earlier. And yet, these 2.61 million EVs, according to Eisenstein, constitute just 4 percent of the total Chinese car market. Beijing has ordered local carmakers to boost their EV sales to 10 percent of their total sales this year and 12 percent in 2020, which means more competition for international rivals.

The United States, where sales of electric cars jumped by 81 percent last year, has just 1 million EVs on its roads. EV sales last year totaled around 360,000. This, however, compares with total car sales of over 17.2 million cars for the year. Putting the new EV sales figure in context shines a different light on the EV industry and this light becomes brighter when you factor in the federal tax incentives for EV manufacturers, which range between US$2,500 and US$7,500 per vehicle but are phased pout gradually once this manufacturer hits sales of 200,000 EVs.

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So, despite the enthusiasm about electric cars they still continue to be a tiny portion of total car sales in the world’s biggest car market. Can this enthusiasm somehow drive increased EV adoption? Not on its own. In a Forbes article discussing trends in EVs in the U.S. this year, Energy Innovation policy analyst Amanda Myers noted a lot of people don’t want to switch to EVs because they are prohibitively expensive. Yet with battery costs falling—and they have been falling steadily and considerably over the past decade—electric cars are bound to become more affordable, spurring more purchases. Longer ranges—another key concern for buyers—will help boost adoption, too.

The question for all these manufacturers that are spending billions on EV R&D and production is whether this boost in adoption will be large enough to justify their investments.

The AlixPartners study estimated that “by 2023 a whopping $255 billion in R&D and capital expenditures (will be) spent globally on electric vehicles, and that some 207 electric models are set to hit the market by 2022.” It went on to warn that “many of them destined to be unprofitable due to currently-high systems costs, low volumes and intense competition.” One could only hope carmakers have factored in these risks in their EV strategies.

By Irina Slav for Oilprice.com

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