People used to marvel at a Tesla quietly humming along with traffic, but with several years on the market, Model 3s aren’t too hard to find any more. Electric vehicles in general are popping up left and right. Since CivicScience’s last report on EVs at the start of 2022, ownership has increased from 9% (January 2022) to 11% today.
In latest news, federal lawmakers inscribed a specialized tax credit into the Inflation Reduction Act which was enacted on August 16, 2022. The tax credit gives money back to consumers who purchased / will purchase a qualifying electric vehicle or hybrid plug-in between 2010 and January 2023. The fine print certainly narrows eligibility but could give certain individuals up to $7,500 back in the bank.
The overall response to the EV clause has been soft, but CivicScience data show that around one-third of U.S. consumers interested in electric vehicles have been newly incentivized to purchase one (12% much more likely to buy; 24% somewhat more likely to buy). At this point in time, 60% of U.S. adults say they don’t own and are not interested in owning an electric vehicle, which means any changes in motivation to purchase an EV as a result of the tax credit is occurring within a small percentage of car-buying consumers.
Most EV-interested consumers (55%) say the credit would need to be at least $5,000 in order for them to consider purchasing an electric vehicle. Thirty-five percent were satisfied with a dollar amount under $5,000, and the remaining 10% would purchase (or already have purchased) an EV without a tax credit.
Cost happens to be the most significant deterrent to purchasing EVs. Fifty-seven percent of consumers said the primary reason they haven’t bought an electric car was simply because it costs too much. The second reason had to do with limited or no access to convenient charging (45%), which could also relate to money when considering the fact that at-home wall chargers can be a small fortune on their own.
So it comes as no surprise that the announcement of the tax credit had the greatest impact on people making under $50K per year, 42% of whom say they are now more likely to purchase an EV. Wealthier Americans are less incentivized by the credit – 29% say they are at least somewhat more likely to buy.
Fuel costs and environmental concerns are driving EV interest. When people interested in EVs were asked about motivating factors to buy, reducing the cost of gas is the primary accelerant to purchase an electric car. That’s followed quickly by environmental concern. Tax credits were important to 25% of participants, which ranks as the fourth most-selected motivating factor. Even before tax credits, consumers are motivated by something else (‘none of these’), suggesting the reasons for buying electric cars could be more varied than people think.
What else we’re seeing in the data:
- Today, hybrids; tomorrow, EVs. People who plan to buy a car within at least a year or two are the most likely to indicate that their next vehicle would be electric rather than hybrid or traditional gas. However, hybrid vehicles are more immediately desirable – 51% of individuals who say they will buy a car within the next 1 to 6 months say they will buy a hybrid, which is remarkable given economic sentiment data showing more than half of Americans believe now is a bad time to buy a new car.
- SUVs and crossovers are still in demand. Thirty-five percent of consumers who say the tax credit has made them more likely to purchase an EV also say they plan on getting an SUV or crossover for their next car. That leads over other car types for this group.
Nearly every major car brand is preparing for an electric future. Consumers have a lot to choose from now, and only more options in the years to come. The drive consumers feel to purchase an electric vehicle has just as much to do with the exorbitant price of gasoline as it does with environmental concerns. At the same time, the cost of the vehicles themselves is the most challenging barrier for most consumers who are interested in owning an electric car. The tax credit will reign in a few more EV buyers, but right now, hybrid vehicles are more attainable for most people.
Go deeper with the CivicScience 2022 Auto Industry Insights Report for timely insights into this fast-evolving industry, including market trends and disruptions, purchase intentions, shopping behaviors, brand affinities, and much more.