Production of EVs is set to increase substantially with the arrival of new models.
At the same time, demand for new vehicles and EVs in particular could slow down due to an expected recession.
This could prove fatal for smaller companies, especially those that only sell EVs.
Despite almost every new electric vehicle generating enough enthusiasm to create long waiting lists, analysts say that their market shares are not sufficient to account for the influx of EVs that will arrive in 2023.
According to reports cited by Reuters, electric vehicles currently only make up 6% of the total automotive market in the United States.
Despite this, almost every automaker, established or new, is trying to enter the EV market in the next few years with many planning to do so as soon as next month.
This could cause a problem for smaller companies, especially those who don’t sell gasoline-powered vehicles, since the EV adoption rate is unlikely to increase fast enough over the coming months to make space for all of these new models.
Indeed, AutoForecast Solutions (AFS) predicts that EVs could only account for 26% of the US market by 2029 despite California having passed a bill that should give 100% of the market to EVs only six years later.
With up to 74 electric models expected to be offered in North America by 2025, such as small market share will make it difficult for each company to sell enough cars to be profitable, especially since fewer than 20% of these models are expected to reach 50,000 sales per year, according to AFS.
In addition, many economists warn of a looming recession that could hit the US and Canada next year. This would obviously impact the sale of new vehicles and since EVs are usually more expensive than comparable models powered by fossil fuels, their market share could stagnate or even recede.
Many of the smaller companies are likely to go bankrupt in 2023 or the following years because they will either have trouble finding enough capital to launch new models or because they will not be able to sell enough vehicles to generate a profit.