Why 2023 could be the year of the electric SUV

You Can Expect to See More EVs at Costco

About 20 new electric vehicle models are expected to launch in the U.S. in the next 12 months, roughly the same number as this year. Crucially, however, many of these are aimed at the sweet spot for the US market, which is to say good for carrying cargo and family, and not terribly expensive.

A few days ago, Nissan’s long-awaited Ariya finally hit dealerships with a starting price of $43,190. A few months later, Chevrolet said it would launch the Blazer EV at just under $45,000, followed by the smaller, cheaper Equinox EV in the fall. Kia’s EV9 is a true three-row model, and if it follows the example of its smaller sibling, the EV6, it could also fall into the affordable zone. On the startup front, Vietnamese manufacturer VinFast will debut its VF 8, a $40,700 small SUV (although the battery is included in a monthly subscription plan).

European drivers can expect many of the same options, plus some that are entirely Continental, like the Jeep Avenger, a stubby SUV that’s the brand’s first all-electric offering. A few sport wagons also join the mix, including the Opel Astra Electric and the Peugot e-308 SW. Thanks in part to their low profile, both cars boast impressive efficiency, post road-trip-worthy range figures, and have batteries far smaller than those found in most U.S. EVs.

The $100,000+ market isn’t slowing down

A number of more luxurious SUVs are coming in 2023, including a version of the GMC Hummer EV priced in the six-figure range; the first electric Lexus, dubbed the RZ; an “electrified” version of the Hyundai GV70; the crossover models, known simply as the 3 and 4; and the Mercedes EQE and EQS at the top of the luxury pyramid. There’s even talk of a big electric Volvo.

We’ll also start to see EVs in greater numbers, like the Rivian R1S and Cadillac’s new Lyric, which are technically available but still uncommon on most American roads. On the truck side, GM will eventually start to phase out its Silverado EV, which regularly wins more than half a million gasoline customers a year.

Manufacturing problems will hardly be alleviated

Those looking for an electric SUV will see their options double in 2023. But choosing a new whip and actually buying a new whip will continue to be very different things. Supplies will remain tight, prices will remain high, and traditional automakers will remain eager to sell gas-powered vehicles while they capture nearly the entire EV market.

Meanwhile, start-up automakers are still figuring out how to actually build cars at scale. Rivian, for example, has only produced about 25,000 vehicles this year, even though it has more than four times as many orders. Lucid Group aims to produce just 6,000 to 7,000 electric vehicles by 2022 after halving its production target in late summer.

S&P Global Mobility expects drivers around the world to snap up 10 million electric vehicles by 2023, almost 14% of the total market, but they won’t come cheap. Standard & Poor’s has warned that the electric car frenzy is driving up prices and that the sting will only be softened slightly by a raft of new incentives proposed in the Lower Inflation Act.

Making money on electric cars won’t get much easier

While the lawsuits in Detroit, Seoul, Stuttgart and Tokyo may finally get the computer chips they need, the unit economics of electric cars are still terrible. Lithium-ion battery prices will rise for the first time in 2022, with a 7% increase. Some of the biggest names in the industry, including Toyota President Akio Toyoda and Rivian CEO and co-founder RJ Scaringe, fear it will take years for the battery supply chain to catch up.

That’s why the best strategy for auto executives may be to stick to the simple bait-and-switch: Get drivers to hype up EVs at low base prices, while mostly phasing out pricier, better-equipped models. If you can’t make enough cars already, the logic is, make the most profitable cars.

But if the economy continues to falter and interest rates continue to climb, it may be unwise to count on uncertain demand. “The U.S. consumer is holding back, and the pre-pandemic recovery in auto demand appears to be a hard sell,” said S&P analyst Chris Hopson.

Ironically, no one really knows how many drivers want electric, but it’s safe to say a lot. Surveys often peg the EV-curious range between 25% and 50%, and that’s only going to increase as the offering proliferates. When it comes to green driving, as the saying goes, these are the best of times, and…well…it could be even better.

First published date: Jan 2, 2023, 11:07am CST