The EV landscape is set for a turnaround in 2024

Seana Smith and Madison Mills
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The EV landscape is shifting as interest rates continue to remain high, concerns over charging infrastructure remain, and interest in hybrid models has picked up. With heavy investments from top automakers like Tesla (TSLA) and Ford (F), coupled with the potential of interest rate cuts, could 2024 be a turnaround year for EVs in the US?

RBC Capital Markets Lead Equity Analyst of Global Autos Tom Narayan joins Yahoo Finance to discuss the EV landscape, the demand for new vehicles, and who are the biggest winners and laggards in this auto category.

"What you had happening for years now is the same EV type, the small crossover or sedan. Why? Because the biggest drag on range is aerodynamics. It's tough to make an SUV EV for a reason. Just big and boxy and heavy," Narayan stipulates one of the biggest challenges to electric vehicles and their design. "And so, you're finally going to get those cars come in — that's where most of the demand is in the US... SUVs, larger vehicles. So now you're going to see those, GM (GM) is going to put out their Blazer. There's a bunch of others that are coming online. That should help increase the demand for EVs."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

SEANA SMITH: We want to bring in Tom Narayan. He's RBC Capital Markets lead equity analyst of global autos. Tom, it's great to have you here in studio. If we just zoom out a bit and talk about the EV landscape right now, because this narrative has really formed over the last several months. Talk about the fact that EV demand has hit a wall.

Yet, in reality, sales are up dramatically. Up 50% in 2023. What's your assessment of today's EV landscape?

TOM NARAYAN: Yeah. I think Mary pointed out just exactly what's happening. We're in this lull period. You had a lot of demand that picked up. The early adopters buying their $60,000, $70,000 Teslas. A lot of money from the pandemic that came in, low interest rates.

So I think it was just a pull forward of demand. And some of the things she pointed out are very true. Charging infrastructure, something that needs to be developed. I think a lot of that is psychological, though. A lot of the early adopters charged their cars at home.

Now, we're reaching the mass market who are worried about how do I charge this thing. And so here's where I think there needs to be some development. And the second thing she pointed out is very true, pricing. These are really expensive. And we're not in this cash rich period that we used to be. Interest rates are high.

So these things need to adjust. And we'll get there with EVs. It's definitely happening. It's just we're in this lull period. It's unclear how long it lasts.

MADISON MILLS: It makes me think about BYD, when you talk about the split between lowering the cost of the vehicle, and then needing to, obviously, worry about your income. That dynamic didn't really work out for them. And their full-year forecast coming out this morning.

So which of those two matter more to EV players right now, the deliveries or the income?

TOM NARAYAN: Unfortunately, if you're a pure play EV maker, like, Rivian, or Fisker, or Lucid, they don't have these huge balance sheets like a GM or a VW have. So for them, they need to sell these products. So a lull winds up being really problematic from a cash flow perspective. And that's why the large caps, the legacy players like a GM, like a Volkswagen, like these guys, are actually better positioned to weather the storm.

SEANA SMITH: When you're talking about weathering the storm here-- and you laid out the fact that pricing was too high. There's also some concerns just about the accessibility of chargers and how people are going to charge these vehicles, when we talk about mass adoption.

When you take a look at the next generation of EV vehicles that we are expecting, say, over the next 12 to 18 months, do they address any of those issues?

TOM NARAYAN: Yes. That's a great point. And what you had happening for years now is the same EV type. This small crossover or a sedan. Why? Because the biggest drag on range is aerodynamics. So it's tough to make an SUV EV for a reason. Just big and boxy and heavy.

And so you're finally going to get those cars coming. That's where most of the demand in the US is, the SUVs, larger vehicles. So now, you're going to see those-- GM is going to put out their Blazer. There's a bunch of others that are coming online. That should help increase the demand for EVs.

Range is just a function also of just public charging. That just takes time to develop. It is being developed. We may be a six to a year-- six months to a year out before it gets really robust.

So, again, I think we're just in this lull period. And we need more models that cater to the demand what Americans want to drive.

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