Stephen C. Lynch, CFA, CPA, Director and John T. Mickelinc, CFA, Associate
Downstream Energy & Convenience Retail Investment Banking Group

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Introduction
Almost every day it feels like there is a new headline regarding the latest evolution of the electric vehicle (“EV”) market, and when one is constantly bombarded with so much information, it is hard to take a step back and objectively assess the state of the current light passenger vehicle fleet. It may appear like EVs are everywhere yet seemingly nowhere at all – that is, depending on which part of the United States one may be living.

What exactly is happening? How can this be reconciled with what we see, hear, and read in the news?

In this three-part series, we will review the latest data to better understand the current state of EVs in the United States and glean several insights as to how this might change – and potentially how quickly – in the future.

What is the Overall EV Market Share in the United States?

Unfortunately, we are not aware of any data sources that provide a reliable cross-section analysis of the underlying propulsion technology used to power the light passenger vehicle fleet at any particular moment in time. However, there are numerous data sources related to the sale of new vehicles that can help shed some light on the current market penetration of EVs. These figures, while indicative of current consumer behavior, are not representative of the overall composition of the vehicle fleet unless viewed over long periods of time and should only be seen as leading indicators when viewed individually or during shorter periods of time.

Based on new vehicle registrations tracked by IHS Markit [1] and as seen in Figure 1, the overall market share of EVs within the United States during 2021 was 4.6%. On a percentage basis, the overall market share of EVs has been and remains relatively low, but EV market share increased substantially in 2021 compared to prior years. By looking at Figure 1, it is easy to see that the current trajectory of EV market share is not only upward-facing but has also recently gained momentum.

What is the Driving Force Behind the Recent Increase in EV Market Share?

While EV market share increased significantly between 2020 and 2021, the recent up-tick in EV market penetration first began in 2018. Numerous factors have contributed to this increase, but growth in the overall EV market can largely be linked to one simple overarching factor – the rise in popularity of Tesla vehicles.

In terms of car manufacturers, Tesla is a relatively new company. Its first production car, the Tesla Roadster, was first delivered in 2008 but was expensive and appealed to a very niche buyer. It was not until the Tesla Model S, which was introduced in 2012, that Tesla began to gain widespread recognition and become more mainstream. Although one of the goals of the Model S was to bring down the overall cost of Tesla’s products, this vehicle was still too prohibitively expensive to appeal to the masses, but it was still considered an overall success.

Continuing its push into the broader mass consumer market, Tesla announced the Tesla Model 3 in 2016 and marketed it as being even more affordable than previous models. Limited production of the Model 3 occurred during 2017, but it was not until mid to late 2018 before Tesla began delivering the much-anticipated Model 3 to customers in meaningful quantities. This model struck a chord with consumers as it became the bestselling EV in history in early 2020 and was the 17th bestselling car in the United States during 2021, according to Car & Driver magazine [2].

Since 2018, Tesla has also introduced another popular model, the Model Y, but Tesla still only sells four base vehicle models. From a consumer option perspective, the four Tesla models represent only a small fraction of the EV models available today, yet during 2020, Tesla represented approximately 80% of the BEV market and almost 63% of the total EV market. Drilling down further, Tesla’s performance has been driven by the Model 3 and Model Y, which collectively accounted for 83% of Tesla’s 2020 vehicle deliveries.

Based on recent market share and vehicle delivery numbers, one can see that Tesla dominates the current EV market and that the Tesla Model 3 and the Tesla Model Y are largely responsible for the recent increases in EV market share.

This momentum resulted even as the federal tax incentive of $7,500 per vehicle initially phased out and subsequently expired during 2019 for Tesla [i], not to mention the broad challenges created by the global COVID-19 pandemic during that time. However, based on deliveries made during 2021, Tesla seemed almost immune to the global semiconductor shortages and other supply chain issues compared to other automobile manufacturers. Perhaps this is a contributing factor as to why the overall EV market share increased from 2.4% in 2020 to 4.6% in 2021 – consumers were potentially hard-pressed to find other new vehicles.

[i] As currently drafted, the federal EV tax credit phases out over a 12 month period once an auto manufacturer sells 200,000 qualifying EVs in the United States. This threshold is calculated based on the manufacturer’s total qualifying EV unit sales and is not determined at the individual vehicle model level.

How Does EV Market Share Vary Across the United States?

Even though the overall nationwide EV market share still remains low, there are significant deviations in EV market penetration across the United States. During 2021, California led the nation with an EV market share of 13.3% and was followed closely by the District of Columbia (11.2%), Washington (8.4%), Oregon (8.4%), Hawaii (7.9%), and Colorado (6.9%).

To put this in perspective, approximately one out of every seven light passenger vehicles sold in California during 2021 was an EV. However, on the opposite end of the spectrum, only one out of every 130 cars sold in North Dakota was an EV during this same time period. In other words, the EV market share in California, the leading state for EVs, was more than 17 times higher than the state with the lowest EV market share during 2021.

The regional differences in EV market share are the result of a complex set of factors that won’t be explored in significant detail within this paper. However, Figure 5 does provide a list of select factors that create differences in EV penetration rates between geographic markets. Parts II and III of this series will cover several of these factors in greater detail.

Conclusion
The overall EV market share has been increasing over the last several years, but this is largely attributable to several models that may have had the ‘it’ factor or were simply more available to consumers during the backdrop of COVID-19 related supply chain issues.

We also saw that a person’s geographic location has a large bearing on whether he or she believes EVs are more commonplace on his or her roadways or are seemingly non-existent. As an illustration of this, almost 75% of all EVs sold since 2014 were originally registered in only ten states while almost half of all EVs sold in the United States were registered in California alone. On the other hand, there have been just over 650 EVs sold in North Dakota since 2014, which equates to one EV for every 106 square miles. Even though these statistics ignore population density, it paints a very stark picture as to the unequal penetration of EVs across the United States.

While we have reviewed the historical and current EV market share across the United States in this first installment of our three-part series, the next two issues will explore several forward-looking factors to help readers anticipate how EV market share may change in the future within their local markets.

About Matrix Capital Markets Group, Inc.
Founded in 1988, Matrix Capital Markets Group, Inc. is an independent, advisory focused, privately-held investment bank headquartered in Richmond, VA, with an additional office in Baltimore, MD. Matrix provides merger & acquisition and financial advisory services for privately-held, private-equity owned, not-for-profit and publicly traded companies. Matrix’s advisory services include company sales, recapitalizations, capital raises of debt & equity, corporate carve outs, special situations, management buyouts, corporate valuations and fairness opinions. Matrix serves clients in a wide range of industries, including automotive aftermarket, building products, business services, consumer products, convenience retail, downstream energy, healthcare and industrial products.

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SOURCES

1. IHS Markit (as compiled by the Alliance of Auto Manufacturers). Electric Vehicle Sales Dashboard. https://www.autosinnovate.org/resources/electric-vehicle-sales-dashboard

2. Car and Driver. Top 25 Bestselling Cars, Trucks, and SUVs of 2021. https://www.caranddriver.com/news/g36005989/best-selling-cars-2021

3. Transportation Research Center at Argonne National Laboratory (Published by Alternative Fuels Data Center / DOE). U.S. HEV Sales by Model. https://afdc.energy.gov/data/10301

4. Automotive News/Experian (as published by CNet). 2020 EV Registrations. https://www.cnet.com/roadshow/news/tesla-cars-ev-registrations-us/

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