Automakers will miss U.S. EV sales goals, car executives warn in survey

The majority of automaker executives in Kerrigan Advisors' 2024 Kerrigan OEM Survey said they believe their companies won't meet proposed electric vehicle sales goals and the transition to EVs from gasoline-powered vehicles will be slower than initially projected in the U.S.

Kerrigan's second annual survey included more than 110 U.S. automaker executives' responses from December 2023 through May. Questions focused on EV sales, dealer profitability and the franchise system.

Two-thirds of respondents expect their companies won't meet their proposed EV sales goals and 81 percent say the EV transition will take more time.

Erin Kerrigan, managing director of Kerrigan Advisors, a dealership sell-side advisory firm in Incline Village, Neveda, said the results were surprising, especially that 86 percent of auto manufacturer executives who said their company is making contingency plans for more internal combustion and hybrid vehicles if EVs do not penetrate the market as successfully as expected.

"For a dealer, it just means that the legacy ICE (internal combustion engine) business, and the threats to, for instance, fixed operations and the risk factors to that and shifting to EVs are probably a long way out," she said. "It's more steady-as-you-go for dealers with the bread-and-butter ICE business than was expected last year."

Kerrigan said the results showed high prices as the No. 1 reason executives thought EV sales were lagging, higher than the lack of charging infrastructure or consumer demand. That sentiment could change by next year, she said.

"It's likely if EV prices continue to decline, this [pricing] will be less of an impediment to EV sales," Kerrigan said, adding that "the legacy OEMs' pricing on EVs is really out of step relative to the market leader in EVs being Tesla."

Tesla has cut pricing on its EVs several times, including as first-quarter sales lagged and inventory piled up.

The survey also showed a drop in the percentage of automaker executives who foresee an increase in dealership facility requirements. That number was 18 percent in 2024, down from 32 percent in 2023.

"The vast majority of executives surveyed, 60 percent, now believe facility requirements will remain the same, while a higher percentage, 22 percent, see a decline in requirements, perhaps as EV charging infrastructure investments become a less critical OEM priority," according to Kerrigan Advisors.

Ford Motor, for example, in June nullified a Model e program that required dealers to comply with facility requirements to sell EVs.

In other findings, respondents said they see dealership profitability starting to normalize this year, with 54 percent anticipating a decline in the next 12 months, Kerrigan said. Forty-one percent of executives expected dealership profits to remain stable over the same time, compared with 24 percent in the previous survey.

"The majority of the respondents, 62 percent, said they expect the gross margins on new vehicles to normalize above 2019 levels, so that's also a really good indication of where we are going to be as an industry," Kerrigan said.

Seventy percent of executives surveyed said they believe the industry's days' supply of new-vehicle inventories in the next 12 months will reach an average of 60 to 90 days, which she said is consistent with current levels, but an "about-face""from the 38 percent of executives who said so last year.

Compared with the previous survey, there also are significantly more executives rejecting the notion of an agency model coming to the U.S. in the next five years.

"They recognize now as inventories pile up on dealers' lots, particularly EV inventories, that they don't want to have that role going forward," Kerrigan said. "They much prefer to have the dealers play that part that they have so successfully done for decades in our industry."

More automakers, 19 percent, said their companies would own the primary customer relationship and most customer data in the next five years. That was an increase of 16 percent year over year.

"That trend is a little surprising, although if you look at it, still the vast majority, 67 percent, believe that both the dealer and the OEM will own that relationship with the customer and the customer data," Kerrigan said.