Undoubtedly, 2022 was an excellent year for the EV industry. In the U.S., 5.7% of all vehicles sold during the year were electric. That’s notable, because 5% has historically been a tipping point for mass adoption across other countries. This trend strongly suggests sustained future growth, and eliminates fears that the EV revolution will be a flash in the pan. They’re here to stay, meaning everyone will watch top EV industry trends in 2023.
Those trends will affect participants from manufacturers to consumers to regulators and more. Let’s dive in, as these widespread catalysts take investors in the electrification realm on a wild ride.
Changing Tax Credits
One of the most important trends in the EV sector this year is the changing tax credits. Federal income tax credit rules for EVs are changing significantly in 2023. The Inflation Reduction Act (IRA) is an important legislation related to this conversation.
The IRA effectively reshaped the eligibility landscape for EVs. Some manufacturers had been ineligible for the credit, as it required 200,000 EV sales per the previous regulations. The IRA removed that clause, making those manufacturers eligible again. At the same time, the IRA now requires EVs to be made in North America, invalidating previously-qualified EVs.
The Department of Energy is undertaking a massive push to convert light-duty vehicles to electric vehicles. The impetus was a study finding that it would be the most significant opportunity to achieve a net-zero economy by 2050.
Further, tax credits will only apply to specific vehicle classes at certain price points. Large EVS must be priced below $80,000, and small EVs below $55,000.
Lower prices are a clear focal point across the EV sector in 2023. Elon Musk has slashed prices on the most popular Tesla (NASDAQ:TSLA) vehicles several times this year. So far, rival legacy auto manufacturers Ford (NYSE:F) and General Motors (NYSE:GM) have remained firmly committed to keeping prices unchanged.
Musk’s intent is clear. Tesla aims to produce 2 million vehicles in 2023, double the number it had a year ago. Margins will decrease, but the logic is that the volume increase will more than makeup for that decline. Tesla’s rivals warn that its fleet of vehicles may already be stale and need a refresh. In focusing on volume, they warn Tesla will fall farther behind.
While the outcome of Tesla’s strategy remains to be seen, lower prices are likely to be a norm for 2023. The government’s incentivizing of lower-priced vehicles in combination with credits could spare demand in lower-priced cars. Meanwhile, volume has become a paramount metric, and other manufacturers may lower prices and follow Tesla’s lead to spike sales.
A Focus on Infrastructure
I think 2023 will see a continued focus on infrastructure. If mass EV adoption is here, it will require a massive push to make charging infrastructure more available.
The Biden Administration’s bipartisan Infrastructure Act is a big part of that conversation. It sets out goals for 500,000 EV chargers along U.S. highways by 2030. In addition, it aims to spur auto manufacturers to have 50% of all new car sales comprised of EVs by 2030.
The law earmarks $7.5 billion for charging, $10 billion for clean transportation, and $7 billion for batteries. There are currently 130,000 EV chargers on U.S. roads. If 500,000 charging stations are to be built by 2030, it’s clear that a lot of activity will have to occur in the interim.
Overall, look for a significant push toward all things infrastructure build-out related. Those chargers will need to be more available, reliable, and user-friendly. Government investment means that firms engaged in any such activities have apparent advantages for the medium-term.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.