July 13, 2022, 9:24 am EDT
More Americans are considering buying an electric vehicle the next time they’re in the market for a new car. That’s great news for electric vehicle-only car companies such as Tesla and Rivian Automotive.
It’s also good news for traditional auto makers like General Motors (ticker: GM) and Ford Motor (F) too. The traditional players are spending billions trying to catch Tesla along with other EV startups.
The latest survey from the 120-year-old American Automobile Association, better known to drivers as AAA, showed that 25% of Americans are “likely to buy an electric vehicle (powered exclusively by electricity, i.e., not a hybrid) for their next auto purchase.” That number is 30% for millennials.
Saving on fuel costs is the No. 1 reason cited.
“The increase in gas prices over the last six months has pushed consumers to consider going electric, especially for younger generations,” said Greg Brannon, AAA’s director of automotive engineering and industry relations, in a news release. “They are looking for ways to save, and automakers continue to incorporate cool styling and the latest cutting-edge technology into electric vehicles, which appeal to this group.”
The survey is good for Tesla (TSLA) and its EV peers. Battery-electric vehicle penetration in the U.S. was roughly 3% in 2021. There is room for growth.
The U.S. lags behind the rest of the world adopting electric vehicles. More than one quarter of new vehicles sold in China in June were either battery-electric or plug-in hybrid models. European penetration of battery-electric vehicles hit about 11% of new car sales in May 2022.
The survey is also good news for Tesla’s traditional auto maker competitors.
Ford and GM are going all-in on EVs. A group of them that accounts for roughly 70% of global light vehicle sales have committed more than $400 billion in spending on EVs, according to Barron’s tracking.
The types and timing of goals varies by auto maker. Some auto makers include battery spending, others include spending on self-driving technology as well. Regardless of the details, it’s a huge sum. The money represents roughly 50% to 60% of all the capital those auto makers plan to spend over the coming few years.
The survey also revealed some issues U.S. drivers have with EV tech. Higher upfront purchase prices, public charging availability and range anxiety — the belief that EVs aren’t suitable for long trips due to that lack of charging — were cited as concerns by about 60% of survey respondents.
The auto industry is moving to address those concerns. Almost every traditional auto maker is partnering with EV-charging companies to improve charging infrastructure. Tesla, for its part, operates the largest network of fast chargers in the country.
Battery costs have also fallen about 80% to 90% over the past decade, helping make EVs more affordable, and also providing better range. (An auto maker can put more batteries in an EV if they are cheaper). A Chevy Bolt, for instance, now starts at $27,000 and gets about 260 miles of per-charge range.
The survey isn’t helping auto stocks. U.S. inflation in June came in higher than expected. Tesla shares fell 3.2% in premarket trading. S&P 500 and Dow Jones Industrial Average futures were off 1.5% and 0.9%, respectively.