Why electric vehicle demand is diminishing in 2024

Citing the failure to meet sales expectations and to deal with diminishing EV demand, electric vehicle (EV) manufacturers Rivian Automotive and Lucid Motor each announced their second rounds of layoffs this year. Tesla announced the elimination of over 600 roles in California this past May, after cutting positions since January of this year. CEO Elon Musk also announced in April that the company would let go more than 10% of its global workforce and cut prices of three Tesla models to combat slowing sales and increasing competition.

Why are consumers losing interest in EVs? Some data suggests that this is, in part, because EV value is depreciating. 

Mitchell’s “Plugged-In: EV Collision Insights Q1 2024” research shows that the price difference between EVs and internal combustion engine (ICE) vehicles is closing–the average transaction for a new EV was only about $2 thousand more than an ICE vehicle. 

According to Mitchell, this presents issues for consumers concerned with EV financial viability. Used EV prices have fallen 31.8% since last year, compared to a decrease of 3.6% in prices of used ICE vehicles. 

Loss frequency and costs have also gone up for EVs. Mitchell reports that EV total loss frequency this first quarter in the U.S. jumped to nearly 10% of the time, which is an increase of 8% from the final quarter of 2024 and 30% from Q3. Research does not indicate that EVs are declared total losses more often than ICE vehicles, however, and both present similar stats in this area: the report shares that 2021 ICE automobiles and newer were declared a total loss 9.51% of the time. 

Insurance costs are still a barrier for some consumers, as well.  In the U.S., EV average claims severity was around $6,066, versus $4,703 for ICE automobiles. Average mechanical labor hours are higher for EVs, as well, at about 3 hours compared to 1.66 for ICEs.

“In general, EVs are typically more expensive to insure than a similar ICE vehicle. Recent auto insurance shoppers are less satisfied with the insurer they purchased their auto insurance from if they drive an EV than someone driving a traditional ICE vehicle. This is mostly driven by the quote process, where EV drivers first encounter the higher insurance premiums for EVs. That’s coming from the 2024 Insurance Shopping Study,” said Stephen Crewdon, senior director of insurance business intelligence at J.D. Power, in an email to Digital Insurance. “As more consumers become aware of the increased insurance premiums for EVs, this could contribute to a decrease in interest in EVs. Consumers are especially sensitive to auto insurance premiums right now and do not want to add to already higher premiums.”

Infrastructure is another major concern. Though public charging ports were increased by 22% in the U.S. by the end of 2023, range anxiety can be a barrier for areas lacking public charging. 

J.D. Power’s 2024 U.S. Electric Vehicle Consideration Study finds that this was the greatest reason cited for EV disinterest. A reported 52% shoppers who are somewhat or very unlikely to consider an EV cite the lack of charging stations available as their top reason. Other factors included limited driving distance per charge, time required to charge and inability to charge from home or at work. Those with longer commutes were less likely to consider purchasing an EV.