The automotive industry's rush to vehicle electrification has lost its charge. Sales are rising, but not as fast. And the federal government's enthusiasm has petered out with the arrival of a new administration. What can give the EV transition a jolt? Raman Ram, EY Americas Aerospace, Defense & Mobility Leader, sheds light on the current state of EVs and how the market can regain momentum.
Q: Although the EV market is currently sluggish, demand for hybrids is robust and would seem to present a bridge between the transition from the internal-combustion engine to electrification. How can automakers leverage this potential?
Raman Ram: The EY Mobility Consumer Index (MCI) shows that while EV buying intent is growing, the pace has slowed due to concerns about charging infrastructure, driving range and battery replacement costs. The U.S. pause of the clean-energy program that expands charging stations heightens consumer concerns, boosting hybrid-vehicle growth. In 2024, gas hybrids saw the fastest growth at 19%, outpacing battery electric vehicles (7%) and the overall industry (2.2%). With BEV growth slowing, sustained high fuel prices and environmental concerns, hybrid sales are likely to grow faster. Japanese automakers already offer a wider range of hybrids, sometimes surpassing their ICE portfolios, while most U.S. automakers are quickly expanding their hybrid options.
Q: The EV is, basically, technology – software and the like. What best practices can the auto industry employ from tech retailing to improve the appeal of EVs?
Ram: Our MCI study identifies five consumer personas ranging from EV "skeptics" to "enthusiasts." In between are "reluctants, "persuadables" and "considerers." Level of interest and concerns about EV ownership vary across these personas. The EV industry primarily targets "enthusiasts" and "considerers." To transition into the mainstream, the industry must engage the other segments. This will require adopting practices from the tech industry:
· Embrace software-first strategy, using over-the-air updates for continual improvement and intuitive user-experience design.
· Adopt platform thinking by integrating third-party apps, standardizing charging infrastructure and creating in-car marketplaces for services.
· Use modular designs in manufacturing and optimize global supply chains to prevent bottlenecks and ensure reliable supply.
· Harness EV data to enable decisions driven by artificial intelligence (AI), predictive maintenance and personalized services, while encouraging fast innovation for new products.
· Build a stronger online presence through social media and community engagement, while promoting collaborations and open-source development
Q: Finance and insurance (F&I) is an important revenue stream for the industry. How can products and services be improved to boost EV adoption?
Ram: F&I is shifting toward a fully digital, AI-powered and customer-centric model driven by technology, consumer preferences and regulatory changes. Dealerships, lenders and insurers must adopt these innovations to make the buying experience faster, more transparent and personalized. In addition, these F&I enhancements could further accelerate EV adoption by removing friction in the buying process and improve the customer experience:
· AI-driven F&I processes and platforms that let consumers select financing, warranties and insurance without going to a dealership, speed up credit approvals, reduce biases, and help lenders automate underwriting and offer personalized interest rates.
· Embedded finance and subscription models to enable in-car payment systems and flexible financing options for insurance and maintenance. Additionally, usage-based embedded insurance tailored to driving habits, mileage and risk, along with e-contracts for secure and speedy transactions.
· Predictive analytics that enable lenders to target specific EV customer segments with personalized vehicle offers and financing, warranties and service contracts based on driving habits and credit history.
"Automakers should focus on enhancing their hybrid offerings, emphasizing dependability, performance and technology."
Q: Early adopters have presumably purchased their EVs. How can the industry attract the mass market?
Ram: To attract the mass market customer segments mentioned earlier, the EV industry must leverage the growing demand for hybrid vehicles as a transitional bridge from internal-combustion engines to electrification. Automakers should focus on enhancing their hybrid offerings, emphasizing dependability, performance and technology. By adopting a software-first approach, prioritizing user-experience design and creating an ecosystem for app integration, the industry can make hybrids and EVs more appealing to a broader audience.
Q: EVs must overcome consumer anxieties. How can the industry begin the process of persuasion, given the uncertainty in the market?
Ram: The EV industry must focus on building trust and confidence to address consumer anxieties surrounding range, charging infrastructure and battery-related costs. Implementing data-driven decision-making and leveraging AI for predictive maintenance and battery management can enhance vehicle performance and safety and lower the cost. Engaging consumers through online platforms and social media will help build brand advocacy and foster community connections. By embracing rapid innovation and open collaboration, the industry can demonstrate its commitment to addressing consumer concerns as technology advances. Furthermore, the earlier-mentioned services can add value beyond traditional ownership models.
Q: The challenge from Chinese automakers has been much discussed. What lessons can the domestic auto industry learn from the experiences of that market?
Ram: Chinese manufacturers are disrupting the global market with affordable, high-tech EVs. While tariffs and regulations may delay their U.S. entry, they won't be a long-term barrier. Without swift action, the U.S. auto industry risks repeating history, letting Japanese and South Korean automakers take market share. To prevent this, U.S. automakers must act decisively.
· Cut costs and improve efficiency: Aggressively optimize production processes and secure domestic battery supply chains.
· Invest in affordable EVs: Break the development and product cost curve to develop affordable EVs that can compete head-to-head with low-cost Chinese models.
· Enhance software and AI capabilities: Prioritize over-the-air updates, AI-driven driving features and innovative digital services.
· Advocate for stronger government policies: U.S. automakers must not only engage with lawmakers but also take a stand against unfair competition.
In short, the domestic auto industry must act with urgency to innovate, adapt and reclaim leadership in the global automotive market.
ABOUT THE PANELIST
Raman Ram | EY Americas Aerospace, Defense & Mobility Leader
In his role as EY Americas Aerospace, Defense & Mobility Leader, Raman's focus is on addressing strategic and operational challenges to enable automotive, aerospace and defense, and transportation clients to create long-term value. He has led efforts to transform companies' products, services and asset portfolios; accelerate growth; and improve profitability. Raman has experience helping clients increase total shareholder return through cost improvement, digital transformation, supply chain, procurement and working-capital optimization, share gain, new business models and monetizing new sources of value.
To learn more, visit: ey.com/en_us/industries/automotive.
This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, legal or other professional advice. Please refer to your advisors for specific advice.
