Since the early 2000s, the popularity of electric vehicles (EVs) has been rising. The adoption of the electrification of cars has created a market filled with EV manufacturers and car options (Matulka). This is due in part to gas prices having risen in recent years, climbing 49% during 2022 in the United States (Bureau of Transportation Statistics) and 75% in Europe during the same period (International Monetary Fund), which has led to UK and French governments actively promoting EV adoption (Robinson). In the U.S., companies such as Ford and Chevrolet are now focusing on the electric market, investing in EV technologies before the industry becomes saturated. Also, government subsidies and tax incentives encourage the purchase of EVs. This demand for electric cars has created a new market, where a primarily young demographic seeks to purchase the newest and most technologically-advanced vehicles on the market (Spencer et al). 

However, despite the economic potential for the industry electric cars present, certain obstacles hinder the global adoption of these vehicles. Some brands (primarily Tesla) have already cornered the market in having manufactured these vehicles for a longer period of time, and other manufacturers are struggling to make a profit from EV sales due to Tesla’s dominance (Lienert et al). Furthermore, limitations of the world’s current power grid with the unavailability of charging stations (Charette), along with the unwillingness to give up a gasoline-fueled lifestyle by the market demographic creates a barrier for the adoption of EVs on a global scale (Engel et al)

Although the impact of EVs on the automobile industry is a net creation of economic potential, the industry may face certain challenges on the path towards a more sustainable and electrified automotive future.

Economically Viable Perspective:

First, electric cars are an economic net-positive for the automotive industry because of government subsidies. According to “Designing Government Subsidy Schemes to Promote the Electric Vehicle Industry: A System Dynamics Model Perspective” by Li et al, professors from South China University of Technology in sustainable energy, the EV industry has been one of the most privileged industries in regards to gaining governmental financial support. In 2019, the United Kingdom gave 2 billion pounds in development funding to advance EV technology. Regarding the US, “The Effects of Public Subsidies on Emerging Industry: An Agent-Based Model of the Electric Vehicle Industry,” by Sun et al, Faculty of Management and Economics at Dalian University of Technology, shows the US gave $1.5 billion to advance the development of EV components in 2014. These subsidies act as a safety net which allows the automotive industry to feel confident taking the risk of investing money and manpower into innovating in the technology. This spending money on innovation, in turn, stimulates the industry by creating more jobs. Across the world, based on the article “E-mobility: A Common Goal,” by the Center for Strategic and International Studies, a popular U.S. Think Tank, India plans to provide about $1 billion in subsidies to increase the incentives in adopting EVs and another $130 million in creating charging infrastructure. This gives consumers the confidence to purchase EVs, knowing that they can acquire them for a discounted price and will have an abundance of convenient charging locations, which allows the electric automotive industry to sustain itself with the proper infrastructure.

Additionally, government-induced tax incentives and special programs allow consumers to purchase EVs at more affordable prices, promoting greater sales of electric cars. According to the article, “Amping Up EV Incentives: Making the Transition to Electrification Faster and More Equitable” by Dave Cooke, a senior vehicles analyst in the Clean Transportation Program, citizens in states such as California are able to get up to $7500 dollars off qualifying EVs alone while business are able to get up to $10,000 dollars in credit if they also establish EV infrastructure, such as solar panels. Also, programs such as the Clean Vehicle Assistance Program (CVAMP) gave grants to lower-middle income individuals and people who lived in low air-quality areas. These programs encourage consumers to purchase electric vehicles, which also stimulates economic growth in the automotive industry through sales.

Furthermore, the demand for electric cars also contributes to the economic potential towards the automotive industry of industrialized nations. The International Energy Agency, an intergovernmental organization that provides analysis on global renewable energy, believes that 2023 sales of electric cars will increase by 35% after its record in 2022 (IEA). Furthermore, based on their report, “Global EV Outlook 2023,” China has been the forerunner of electric car sales. However, other countries also contribute, leading to 14% of all new cars sold in the world to be fully electric.