If you want to know how quickly electric vehicles could spread across the US, look at California. In the past five years, EVs have gone from accounting for 2 per cent of new car sales in the state to 22 per cent.
The pace of adoption in California increased sharply once EVs reached 5 per cent of new car sales, a threshold at which preferences start to change for mainstream car buyers, according to a Bloomberg Green analysis of EV adoption curves around the world.
California was one of the first major car markets to reach that tipping point, in 2018. So far, 23 countries have been added to the list.
If California were itself a country, it would now rank fourth in terms of overall EV sales – only China, the US and Germany sell more.
The pace of adoption in the state shows no signs of slowing, with second-quarter EV sales rising 70 per cent compared with the same period in 2022. The US as a whole is three years behind California, and currently tracing its path. If the trend continues, a quarter of new car sales could be electric by 2026.
For all good technology, there comes a point at which sticking with the old tech no longer makes sense. Think smartphones in the 21st century or colour TVs in the 1960s. Sales move at a crawl in the early days, then much faster once things go mainstream.
Figuring out when EVs will shift into mass-adoption mode is proving an existential challenge for the car industry. The transition requires hundreds of billions in capital investments, made years ahead of widespread demand.
Investing too soon risks squandering fortunes on undesired vehicles, while moving too slowly risks ceding the market to early movers such as Tesla.
In a milestone that should be setting off alarm bells for traditional vehicle manufacturers, Tesla recently overtook Toyota as the top-selling car brand in California.
The first global car maker to reach mass EV scale, Tesla controls 60 per cent of the US EV market. It spent this year dropping prices and adding new features while maintaining industry-leading margins.
Outside China, car companies have not yet produced a single EV that approaches the sales volumes of Tesla’s Model 3 or Model Y. Until that sort of scale is achieved, the transition will continue to be a costly grind.
At traditional US dealerships, meanwhile, inventories of unsold EVs have been rising.
But increasing competition should not be mistaken for diminishing demand. More than half of the US consumers think EVs are the future, according to a recent survey by Cox Automotive, and their expectations are rising around what that future should include.
Expensive, low-range EVs that might have been successful five years ago are no longer cutting it. Some customers are also holding out for new models from America’s most famous brands – Chevy’s Silverado and Blazer, for example – or for the newly refreshed Model 3 or Tesla’s highly anticipated Cybertruck.
Until 2020, EV sales in California were largely determined by how many units of a single vehicle, the Model 3, a single Tesla factory could produce.
The US EV market is not as fragile any more. About $200 billion is being spent on 100 US factories for EVs and the batteries that power them. It could be the biggest industrial build-up in the history of the country's car-making industry.
EV adoption is accelerating pretty much everywhere. Even in India, home to some of the cheapest cars in the world, battery-powered models are starting to make inroads.
Car makers that cannot figure out how to make money on electric options soon are likely to fall farther behind those that already have. But to see where things are headed next in the US, it is worth keeping an eye on the roads in California.