The electric vehicle market isn't collapsing; it's simply in need of a charge.

The electric car market isn't collapsing; it simply requires rejuvenation.

Electric vehicles (EVs) are seeing a surge in demand and are predicted to reach record levels this year. However, the growth rate is slowing down temporarily. According to a report from the International Energy Agency, global sales of plug-in vehicles will increase by over 20% compared to the previous year, though this is less than the 35% increase between 2022 and 2023. The EV market is not collapsing, experts say, but entering a new phase.

The first wave of adopters, mainly well-off, tech-savvy customers who have driven Tesla's success, have been satisfied. Now the challenge is to attract mass-market consumers. "The consumers who could be potentially interested in buying one in the first place, they are more likely to have already bought an EV themselves," said Coco Zhang, an analyst at ING. "So the challenge comes to unlocking the second wave of consumer adoption in those advanced economies."

New consumers who just want a good car regardless of its power source are demanding more affordable EVs. Automakers need to strike a balance between meeting their demands and remaining profitable.

Tesla plays a significant role in the slowdown, particularly in the US, where it still represents around 50% of all electric vehicles sold, although this has dropped from over 60% a year ago. Tesla has also tried to stem losses by slashing prices.

Meanwhile, established automakers like Ford, which sold the most electric cars in the US last year behind Tesla, are facing challenges. Ford doubled sales of the popular Mustang Mach-E by cutting prices by 17%. However, this has caused the company to record significant losses. Ford will delay future electric vehicles as its engineers work on more affordable models that can be produced profitably at lower prices.

During the same period, rivals like General Motors are gaining ground. After struggling to ramp up production of its electric vehicles, GM seems to be picking up speed. The Cadillac Lyriq sold well in the first quarter, and production has resumed for the Blazer EV. The less expensive Equinox EV is soon to be introduced.

China, which has the largest EV market, could potentially meet the demand for affordable EVs. However, European and American automakers are concerned about the impact of Chinese-made EVs on their industries. Chinese EVs are expected to make up 25% of all electric vehicles sold in Europe this year, while brands like Polestar and Volvo, owned by China's Geely, are entering the US market.

The Inflation Reduction Act, offering tax breaks to EV buyers in the US, aims to promote domestic production of electric vehicles and aims to discourage vehicles and components made in China. Tax credits are reduced or eliminated based on where EVs and battery packs are produced.

In China, there is a fierce battle for customers as more than a dozen EV manufacturers have gone bankrupt or consolidated in the past year, and the trend is expected to continue. This phenomenon will also happen in the American market, albeit on a smaller scale.

"If you study technology disruptions and transitions, this is to be expected, this is the playbook," said Michael Lenox, a professor at the University of Virginia who researches the EV industry. "This is exactly what you expect to happen, a massive entry and a shakeout associated with it. Some of the legacy companies will fail, some of the entrepreneurial companies will succeed, though many of the startup companies will fail as well."

The future of sales and market demand for electric vehicles (EVs) could improve in the coming year for a few reasons, according to Corey Cantor, an expert in the field with Bloomberg New Energy Finance. First, governments in Europe have reduced some incentives this year, while emissions regulations will be slightly more stringent next year. A similar trend is developing in the American market.

Manufacturers might try to move some EV sales into next year to help lower their average fuel economy, which would help them meet the more demanding regulations, Cantor suggested.

Additionally, the widespread adoption of the Tesla charging standard will help remove some obstacles to owning an EV, such as limited charging infrastructure and the unnecessary complexity of charging EVs.

Perhaps most significantly, a host of new models will be released before the end of the year or during the next. Models like the new Chevrolet Bolt EV and an electric Dodge Charger could reinvigorate the industry.

"If you look at where automakers are planning their big EV pushes or new EV models,” stated Cantor, “a lot of it is in ’25."