Price drop boosts appeal of used EVs
The “EV slowdown” is mainly driven by the wide price gap between new and used EVs, with more buyers incentivized to choose used cars over newer models.
“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 consumers in the U.S. are essentially not buying new EVs,” says Narayan.
“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 consumers in the U.S. are essentially not buying new EVs.”
Tom Narayan, Lead Equity Analyst for Global Autos, RBC Capital Markets
RBC Elements vehicle purchase data revealed discrepancies in pricing as a significant driver in buyer behavior. New battery electric vehicles (BEVs) are priced in excess of $50,000 while used BEVs are priced ~$30,000. The gap between new and used internal combustion engine cars (ICEs) is also much narrower: $40,000 versus $30,000. This makes used EVs far more attractive to cost-conscious buyers, while new EVs struggle to compete on price with either used EVs or new ICE alternatives.
U.S. tariff impacts could expand the spread further, forcing car makers to raise prices on newly manufactured EVs. “At some point they’ll have no choice ,” Narayan says.
Revised market forecasts
RBC has significantly revised its 2030 forecast for full EV adoption in the U.S., cutting the expected penetration rate from 35% to just 17%. The key constraint: public charging infrastructure. While Level 2 chargers are relatively widespread, there’s a notable lack of fast (Level 3) chargers, limiting convenience and undermining broader adoption.
Despite these headwinds, U.S. legacy automakers are relatively well positioned. They can pivot production back toward ICE vehicles and rely on ICE cash flows to absorb EV-related losses. Pure-play EV manufacturers, by contrast, face greater pressure. Without diversified product lines or sufficient scale, they bear the full brunt of softening demand.
Europe is also seeing tempered expectations. EV penetration forecasts have been lowered from 50% to 40%, driven by similar infrastructure limitations. But unlike in the U.S., European OEMs are more constrained. Regulatory mandates require a certain share of EV sales, reducing their ability to shift strategy in response to market conditions. This may create a strategic advantage for U.S. legacy automakers, who have more flexibility and financial resilience.
China, meanwhile, continues to lead the EV race with a major cost advantage in battery production and market penetration rates two to three times higher than in the U.S. While that lead may be difficult to close, improving technology and supply chain localization could help narrow the gap over time.
Long-term outlook
While the sharp ramp in U.S. EV adoption originally forecasted for 2030 has now been pushed out by five years, the long-term trajectory remains intact. The delay reflects temporary headwinds, including the rollback of IRA tax credits and slower-than-expected emissions regulations. Despite these challenges, Narayan remains confident in the direction of the market.
A key factor supporting this view is the growing effort by governments, particularly in the U.S. and Europe, to localize battery manufacturing. According to Narayan, this push will be essential in improving cost structures over time.
“We see a big impetus by governments to localize battery manufacturing, and we think that will help bring down costs,” he notes. “Longer-term battery chemistries like LFP, LMR, and solid state are all coming, and those innovations will dramatically help drive EV adoption. Because the number one driver is cost. It’s not anything else.”
“We see a big impetus by governments to localize battery manufacturing, and we think that will help bring down costs.”
Tom Narayan, Lead Equity Analyst for Global Autos, RBC Capital Markets
Narayan also believes the consumer appeal of EVs remains strong, even as the economics evolve.
“People like EVs. You don’t have to go to gas stations, there’s better acceleration. Eventually, we’ll see EVs costing less to make than ICEs. It’s just a waiting game,” he concludes.
