3 reasons for optimism in 2026

00:00 Speaker A

So I felt like this year was really important for the electric vehicle industry, and not in a good way. Do you think we’ve really seen a fundamental shift not only in policy support but also in consumer demand for electric vehicles?

00:30 Speaker B

Definitely. Thank you for accepting me. There is no doubt that the near-term demand environment will be challenging. Companies generally expect EV adoption to equal about 5 to 7% of new vehicle sales, at least in the very near term. But our message for the next few years is: Don’t sleep on the US EV market. In the near term it will probably be quite difficult and there won’t be much visibility in the next few months. There are some tailwinds that we think are still there that provide a more optimistic environment for the next few years. I think we’re still optimistic that EV adoption can increase over the next few years. And to your point, a lot of this, as it has been in the past, will really be driven by new product as well as consumer demand.

01:21 Speaker A

OK, you have a few reasons to be optimistic. Let’s skip them. What are you seeing indicators of consumer demand, you’re seeing that there’s still an appetite for EVs because we’ve seen hybrids really take off in a different way, in an accelerated way, but that hasn’t necessarily happened for EVs and we’ve seen automakers pull back on their plans.

01:54 Speaker B

Definitely. There are three reasons to be more optimistic about the next few years. First, let’s not forget that the US is a very concentrated car market. There are an average of two vehicles per household; This figure is higher than any other country. And so the burden of EV adoption is to get more consumers to wake up and conclude that they can have the best of both worlds. If one of your vehicles is a combustion or hybrid and the other is an electric vehicle. If you start to see more consumers making these decisions, and in some parts of the US, we’re seeing that you can model a very solid, you know, decade or more for US EV sales and still be left with a society that has an EV at home and then a combustion or hybrid at home as well. This is a very overlooked tailwind that we may be experiencing structurally as a country over the next few to several years. The second reason is when you look at the loyalty of EVs, meaning what current EV owners do when they come back into the market, they’re still buying EVs at a higher price than we see in other rate systems, including hybrids. And the fact that EV-to-EV loyalty is so high is a sign that we’re not actually seeing consumer remorse or people actually coming back from previous EV purchases. It’s pretty sticky when you buy an EV. And the third reason is really the product. Although we see automakers pulling back in the near term, we’ll likely see even more restructuring action. There’s still a lot of investment in next-generation products, and we can’t forget that electric vehicles are still innovating quite quickly, with each generation being better and cheaper than the last. Think of upcoming vehicles like the Rivian R2, of course the Tesla Cybercab, even Ford are investing in midsize trucks that will launch in 2027 with a starting price around $30,000, and GM is also investing in next-generation batteries and products. And a final point within this is autonomy. You know, we’re pretty optimistic about consumer autonomy in the next few years, and autonomy tends to correlate well with electric vehicles. And if autonomy kicks in at the consumer level in the next few years and there is indeed some recovery, you’ll potentially see a tailwind in EV adoption after that.