Among the largest countries and regions pursuing an energy transition, the United States is clearly the laggard. We can reduce the comparison to a general measurement of speed. China: revolutionary pace of transition, with massive disruption in the transportation sector amidst an ongoing transformation of its power sector. Europe: the rate of change is not as rapid, but it’s powerfully cumulative, and has been running steadily for two decades. The United States: stasis, fully trapped in an additive transition across all sectors, as it spins its wheels. Not falling behind, not moving ahead.
A good place to start is the rather pathetic adoption rate of EV in the U.S. This has been the case since the very beginning, and adoption as it turns out was only marginally improved by federal and state tax credits—many of which have now expired. Worse, from already weak levels, EV sales are slumping hard this year, down roughly 20%, specifically because of the loss of the bigger, federal credit. The U.S. last year saw 1.53 million EV sold. This year, through the first 9 months of data, EV sales are on pace to come in around 1.2 million, the lowest sales activity for EV since 2022.
The chart is interactive on the web, but not in email, and you simply mouse over the bars.
There is however another factor starting to weigh on the U.S. auto sector: a full, outright decline in light duty vehicles (LDV) sales growth. This partly touches upon a counterintuitive factor in energy transition: to swap out old infrastructure, devices, and machines for the sake of the new actually requires at least a spoonful of growth. If an economy or a market is stagnant, with no forward motion, transition itself will lack any momentum.
Clearly, however, the U.S. auto market has problems that are bigger than piss-poor EV adoption. In the chart, you can spot pretty easily that after the pandemic, U.S. LDV sales never really recovered. Here’s the reason: inflation, and affordability. Average selling prices for new cars have skyrocketed, and have thus created a new regime that puts ownership further out of reach. At least as damaging to the consumer vehicle sector is that operating costs for car ownership have also spiraled upward. Vehicle insurance rates are up at least 30-40% in the past 4-5 years. And there’s no surprise as to why. Auto parts are a classic example of a good that relies heavily on global supply chains, which have of course been loaded down with new tariff costs. Labor costs for mechanics have risen strongly also, just as we’ve observed among service workers more widely.