A recent report from consulting firm McKinsey & Company took a hard look at the electric vehicle (EV) market and found that there are some considerable—but not insurmountable—roadblocks to its success.

The problem is summed up in one notable statistic from the report: in the US, 30 percent of the vehicle buyers McKinsey surveyed reported that they considered purchasing an EV, but only 3 percent actually did so. Numbers were similar for Germany (45 percent considered buying an EV, but only 4 percent did so), while in Norway approximately 22 percent of potential buyers ultimately bought an EV, “due in part to government subsidies,” the report states. The survey was conducted online and involved 3,500 respondents from the US, Germany, and Norway. McKinsey also surveyed approximately 3,500 potential car buyers in China.

The challenge to transform at least part of the global fleet of cars and trucks to electric vehicles is an important one for regulators and automakers to consider as the world becomes increasingly aware of the dangers of climate change. In 2014, transportation made up 26 percent of US greenhouse gas emissions, while electricity made up 30 percent. But as more and more utilities incorporate renewable energy into their portfolio, transportation starts sticking out like a sore thumb. In California, for example, only 20 percent of the state's greenhouse gas emissions come from utilities, but 40 percent comes from transportation. So around the world, governments are pressuring automakers to raise their fleet fuel efficiency numbers to combat the urgency of climate change. Automakers can offset sales of less-efficient SUVs with sales of EVs, but it's a task that’s been made harder in the US as cheap gas has driven demand for SUVs rather than cars with better fuel economy.

That's especially the case, McKinsey argues, given that approximately 50 percent of potential car buyers are unaware of how EVs and related technologies work.

Newfangled technology

McKinsey suggests that there’s “substantial latent demand” for EVs, which automakers aren’t meeting, in the potential buyers that don't know anything about how EVs work. “An automaker could relatively quickly increase the number of potential buyers by running a focused marketing/consumer education campaign,” the company writes.

Government campaigns are big drivers of EV consideration, too. The consulting firm noted that Chinese interest in Battery Electric Vehicles (BEVs) and Plug-In Hybrid Electric Vehicles (PHEV) tripled over the last five years due to government promotion.

McKinsey also notes that potential EV buyers have a lot of misconceptions about the cars. They think they’ll break down more easily than cars with internal combustion engines, despite the fact that EVs generally have fewer moving parts. McKinsey says data busts that myth: “Based on a comparison of five EVs across five automakers and their comparable size ICE counterparts from the same brands, EVs typically had 20-40 percent lower five-year maintenance costs."

Potential buyers also think EVs will be slower and less fun to drive than ICE cars, although improved acceleration and torque are some of the benefits of electric cars. (That perception is slowly changing though, perhaps with Tesla’s efforts to make the Model S and Model X uniquely fast for EVs: “acceleration and driving performance are now among the top benefits that many potential buyers now cite when considering EVs,” McKinsey writes. “The benefit of instant torque from e-motors was not a part of the consumer conversation for early EV models.”)

Customers also think they’ll experience much more range anxiety than they actually report after getting an EV, although McKinsey says a lack of charging stations is a matter of concern. The firm estimated that there are 2 million public and private charging stations in the world right now, and that could balloon to over 12 million in 2020 if automakers follow through with planned EV corridors. The firm writes that China went from 8,000 stations in 2011 to approximately 110,000 stations in 2015.

To convert buyers who would consider an electric car to actual buyers, McKinsey says automakers need to start offering more affordable EV options, even if they’re short-range vehicles for urban commuters. But the price of the battery pack is the biggest stumbling block. Over the last six years, battery pack prices fell 80 percent to about $227/kWh, but they need to fall to about $100/kWh to compete with cheaper internal combustion engine cars, something McKinsey predicts won't happen until 2030. “Yet if battery costs continue to trend downwards, a clear path exists towards EV and ICE [internal combustion engine] model price parity in selected segments in the next decade,” the company wrote in its report.

Moving forward, McKinsey says, EV manufacturers need to focus less on the price-insensitive early-adopters, and target consumers who want small car-based SUVs and crossovers, as well as cheaper EVs with shorter range for city-dwellers. Household income for the second wave of potential EV buyers in the US is about $50,000 to $150,000 less than that of early adopters, McKinsey notes, so offering something for those people will be key to moving EVs along. “These near-term EV buyers may be satisfied with less costly, purpose-built EVs with smaller battery packs and shorter ranges,” the firm writes. “They live predominantly in urban settings and travel 25 to 35 miles on average per day, which is well within the range of current EV models and 20 to 30 percent less than consumers in our survey who live in the suburbs.”

Ultimately, the firm suggests automakers reframe the idea of the cost of a car to help buyers decide between EVs and ICEs. “Automakers will need to experiment with and deploy new business models,” McKinsey writes. “The first step, a common denominator of these new business models, is to center the economics of EV ownership on total cost of ownership (TCO) and not on purchase price or traditional lease rates.”