Joe Colletti 00:05
Welcome to Powering Sustainable Ideas, a podcast series from RBC Capital Markets, where we interview the leaders and companies powering the sustainable future. I'm your host for this episode, Joe Coletti. Today, I'm joined by Tom Narayan, Lead Equity Analyst for Global Autos at RBC Capital Markets, to discuss a new report he published with our proprietary in-house data science team, RBC Elements, on the electric vehicle slowdown, looking at the used pricing delta between internal combustion engine cars, or ICEs, and battery electric vehicles, BEVs. Tom, thanks for being with us today.
Tom Narayan 00:39
Thanks for having me.
Joe Colletti 00:40
Tom, let's dive right in. Your report suggests that used car prices in the U.S. are a key driver of the EV slowdown, versus other factors like culture wars and range anxiety. Can you elaborate on how the dynamics of the used BEV market directly impacts new BEV sales and is shaping consumer behavior?
Tom Narayan 00:58
Absolutely, and it's something that I think is being overlooked by the market. As you noted, there's a lot of attention on the culture wars and range anxiety, but what we think is really happening is used EV prices have come down so much that that's what's causing consumers in the U.S. to essentially not buy new EVs. They (lot of them) purchased full electric cars right after the pandemic here in the years of 2022, 2023 and now those lease terms are coming due. Instead of renewing purchases and buying new EVs, they're choosing instead to buy used EVs. Our data science team looked at transactions to see where pricing is, and noted something quite interesting, namely, that new full electric cars are priced in excess of $50,000 per car, but used EVs around $30,000, whereas for internal combustion engine cars, that pricing delta is far narrower. It's more like $40,000 for a new ICE versus the same 30,000 for a used ICE. So that spread is widened, and we think that's what's causing consumers to, instead of buying a new EV, buy used EVs.
Joe Colletti 02:24
So building on that, you significantly cut the 2030 BEV forecast for the U.S. and Europe, and tempered growth expectations in China. Beyond these used car prices in the U.S. and the public charging infrastructure in Europe, what other specific factors contributed to your revised projections in each of these regions?
Tom Narayan 02:45
Yeah, certainly we cut dramatically our U.S. EV forecast, or full electric forecast, for 2030. We were previously expecting like a 35% penetration level for full electric and we've cut that all the way down to 17%. In Europe, we cut our product projections from like 50% to about 40%. What was driving that is public charging, there's a lot of level two charging, but there's not a lot of super charging, level three. So that's why we cut those forecasts. And in China, while electric forecasts are, we didn't really change it all that much. We did temper it kind of longer term.
Joe Colletti 03:27
Can you talk a little bit about the challenges and opportunities that you see in these regions and how they may evolve, particularly in the next kind of few years?
Tom Narayan 08:32
Yes, certainly. In the US, the near-term challenge, most pressing, as we noted, is this used car price dynamic. We do think there is some range anxiety in Europe – that's primarily the issue. Charging isn't as strong and robust as probably it needs to be. So we see that potentially slowing, even though it's been pretty robust today. In China, it's been very strong, but like I said before, we see that potentially tempering longer term. So the main determinant for buying EV is cost and pricing. So, over time, we should see used pricing come back up higher. Maybe new full electric car pricing could come down. What could drive that is battery costs coming down. So, while near term we're a little bit more cautious, longer term, we think is battery chemistry improves, costs come down. We actually do see EV penetration picking up steam. It's just that, that progress has probably been delayed a little.
Joe Colletti 04:50
I want to ask you about the strategic advantages of legacy OEMs in the current market, OEMs being original equipment manufacturers that design and build a vehicle, but also manufacture original parts. Can you talk about their ICE exposure and manufacturing flexibility, but also the unique challenges that are faced by those pure-play EV companies in this evolving landscape.
Tom Narayan 10:15
Yeah this is predominantly the main question we get on, what are the conclusions on the EV slowdown. How can we play it as an investor? And we think that this actually advantages the internal combustion engine levered car makers, those legacy OEMs, you know, your OEMs that can shift production away from EVs and more towards ICEs. And for them, they've already talked about delaying some of those investments, and a lot of those are in the U.S. On the flip side of this is the pure-play EV companies. Those companies have less of an ability to pivot away. That's all they sell, is electric cars. So we think they will probably be more disadvantaged. So we think the ICE players in the U.S., making large SUVs, pickup trucks, they're probably the best situated. Those legacy car makers in Europe have less of an ability really to pivot, because in Europe, there's a requirement to sell EVs by regulatory requirements, and so we think that the work we've done really showcases the advantage that the legacy car makers in the U.S. have. They can still make EVs, but they're going to make more ICEs, and actually they can afford to take losses on the EVs because of all the cash they're making in the ICEs. Meanwhile, the pure-play EV companies, they're just going to continue to make losses, and because demand is slowing, they can't sell as many to increase scale economics which would normally absorb some of those losses.
Joe Colletti 07:01
Let's talk about tariffs for a moment. Can you explain how U.S. tariffs on BEVs are influencing the price gap between new and used electric vehicles, but also how this dynamic is acting as a headwind for new BEV sales?
Tom Narayan 17:13
So far, we haven't seen the car makers raise pricing, which is kind of making analysts like ourselves kind of scratching our heads, when is that going to happen? But the car makers we talk to tell us it will happen eventually. They have no choice. Otherwise, they lose too much money, and at that point, we think that will actually exacerbate this new versus used EV spread even further, because it takes a while for used prices to catch up to new. So eventually, the car makers will raise prices on the new EVs because of the tariffs, and then it'll take longer for the used to catch up. There's already a spread so, near term, we actually see tariffs expanding that spread, further exacerbating this dynamic.
Joe Colletti 08:03
We'll be talking about tariffs for a while, I imagine, and their impacts. So I want to give you a chance to talk a little bit more about the outlook, and particularly looking ahead to 2030. Can you maybe give us the full outlook on the future of the BEV market, as it stands to you right now, but also talk a little bit about the factors that could potentially accelerate or further slowdown EV adoption in some of the key global markets we've been talking about.
Speaker 2 08:27
Yeah, certainly. So we're actually bullish on EVs longer term. So whereas we thought that this would be a strong ramp into 2030, it's probably going to be more like a 2030 to 2035 event, it's like pushed out five years. So we're still bullish on it and the big driver longer term is battery chemistry and battery prices coming down. We've already seen evidence of this in China, where there's a huge battery cost advantage. And in China, the penetration levels are like two, three times the penetration of the U.S. We also see a big impetus by governments, notably Europe and the U.S., to try to localize battery manufacturing, and we think that will help bring down costs. And so longer-term battery chemistries, like LFP chemistry, LMR, solid state, all of these innovations are coming, and that will dramatically help drive EV adoption. Because the number one driver is cost, it's not anything else. Sure, charging infrastructure will be a factor, and that's improving. It's taking a while, but that will eventually get there. So I think, after 2030 you'll really see that ramp. EVs are definitely a more efficient vehicle. People do like them. You don't have to go to gas stations, there's better acceleration. And eventually we actually see EVs costing less to make than ICEs. There's this interesting break-even point that you reach, and then it actually becomes cheaper to make EVs. The problem is today, it's just far more expensive to make an EV than an ICE, so, and as we have things like the IRA, that credit that used to go to buying an EV, that goes away in September, emissions regulations going away in the U.S., that only delays the progress and adoption of EVs. So what we're looking at is more of a delay than an elimination of EVs.
Joe Colletti 10:34
I think we'll actually end it there. Tom, thanks so much for being with us today. Really appreciate the insight in the EV market, and we'll have you back again.
Tom Narayan 10:43
Got it
Joe Colletti 10:43
If you’re interested in reading Tom's full report, The EV slowdown, please contact your RBC representative.
Joe Colletti 10:55
Thanks for listening to Powering Sustainable Ideas, brought to you by RBC Capital Markets. Please remember to subscribe to get more great content and be alerted about future episodes. This episode was recorded on August 29, 2025. If you'd like to learn more, or continue the conversation, please visit rbccm.com/poweringsustainableideas, or contact your RBC representative. See you all next time.