President Joe Biden sought to make major strides on slashing vehicle emissions in the US with an executive order encouraging the shift to electric on Thursday. But that action might not actually move the needle much, analysts say.
In his order, Biden set a target of 2030 for making half of all new vehicles sold in the US zero-emission, including battery electric, fuel cell, and plug-in hybrid vehicles.
Although EVs make up just 2% of new US car sales today, Ford, General Motors, and Chrysler-parent company Stellantis claimed to be bullish about meeting Biden's target, saying in a joint statement that they aim to hit EV sales of between 40% and 50% by the end of the decade.
But analysts are skeptical, and say the White House order will prove to be mostly hot air — unless policy makers and car companies can figure out how to make selling electric cars a profitable venture.
That's because right now, electric vehicles cost more to make than gas-powered vehicles. Some experts say EVs could become cheaper to make than gas cars as soon as 2027, but switching away from gas requires an entirely new supply chain, costly battery packs made of precious metals like cobalt, lithium, and nickel, along with accompanying infrastructure — all of which will take time to scale.
"It's easy for them to say that, but are they going to guarantee profits for the OEMs?" Bill Diehl, an independent consultant and former CEO of business advisory firm BBK, said of the 2030 announcement. "There's going to have to be a significant change in the cost structure to make EVs move forward."
Several automakers have made ambitious commitments in recent months to shift their product lines away from gas engines, with plans to introduce dozens of electric car models in the coming years. GM said earlier this year that it wouldn't sell any gas-powered vehicles after 2035. Ford plans to invest more than $30 billion in electric vehicles by 2025, and has started to electrify some of its biggest nameplates, including its best-selling F-150 pickup. Stellantis said last month it will invest $35.5 billion in EVs in the same timeframe.
These plans are still ramping up, and most automakers still haven't turned a profit on their EVs. Some say that Biden's target — which carries no regulatory weight — might bolster their plans. But the real power lies with the people.
"From a business standpoint, is this possible? Yes, probably so," said Jessica Caldwell, executive director of insights at car-buying platform Edmunds. "But obviously the x-factor are consumers who haven't really taken to EVs."
Only recently has Tesla made money off electric vehicles. The company, which has accounted for about 74% of electric vehicle sales in the US over the past three years, turned its first full-year profit in 2020. Its profitability has, in part, been driven by zero-emission vehicle credits, which are likely to disappear as other automakers go electric.
Until that happens, a lot stands in the way of profiting off EVs — and analysts say the voluntary target out of White House likely won't be what it takes, either.
"I question whether the hype is backed up by substance," Diehl said. "If they're not making money and nobody's figured out how to make money yet, how does that become viable?"
