The Electric Vehicle Slowdown: A Lesson in Technology Diffusion and Saddle Patterns

C-Suite - Reinventing The Wheel

This was supposed to be the age of the electric vehicle (EV). A time when EVs were to finally fulfill their promise of power, simplicity, and cleanliness - and take over American roads. Yet, something strange happened on our way to the revolution. After several years of robust growth, EV sales have suddenly stalled, catching automakers, suppliers, utilities, and regulators by surprise. 

The slowdown has left many industry observers scratching their heads. After all, regulatory support for EVs has never been stronger – e.g., California’s initiative to ban the sale of new internal combustion engine (ICE) vehicles by 2035. And, in response, automakers, such as GM and Volvo, have invested billions in EV development and production while publicly committing to phasing out ICE vehicles entirely by the mid-1930s. Yet, despite these commitments and the enormous sums of money already poured into the effort, the EV market has hit a speed bump.

And so, in boardrooms across America, C-Suite executives are quietly re-evaluating their strategies as they grapple with the same set of questions: is this merely a temporary pause or does it signal a more permanent shift? Will the market eventually recover, either completely or perhaps evolving into a diverse mosaic of fuel-powertrain combinations? Or could the EV boom falter and possibly fail altogether – yet again?

Understanding the Slowdown

While the current slowdown in EV sales may seem alarming, it shouldn’t have come as a shock. To understand why, it is important to see it within the broader context of technology diffusion. Traditional models depict the new product introduction process as a smooth, predictable curve where adoption accelerates as the product moves through successive customer segments – from Innovators (2.5%) and Early Adopters (13.5%) to the Early Majority (34%), Late Majority (34%), and, finally, the Laggards (16%).¹

However, real-world adoption doesn’t necessarily follow this idealized curve. In fact, in a significant number of cases – up to 50% of high-tech products – the adoption curve doesn’t rise smoothly at all. Instead, it experiences a dip after the initial surge before taking off again. Sales can drop by as much as 25% during this “saddle” which can last for several years before the market recovers and growth resumes.^2,3

So, what causes a saddle? The answer lies in at least three interlocking forces, each of which is relevant to the current EV market.

Three Hidden Forces

1. The Adoption Chasm - The adoption chasm refers to the gap between Early Adopters and the Early Majority. Early Adopters are the risk-takers, the ones who are eager to embrace new technologies and willing to deal with the quirks and challenges of early-stage products, driven by a desire for cutting-edge innovation and factors such as environmental concerns. In contrast, the Early Majority is more cautious, often waiting for a product to prove its reliability and value before making a purchase. This chasm is where the EV market finds itself today. While Early Adopters have driven the initial wave of EV adoption, the Early Majority remains hesitant due to concerns about factors such as vehicle price, range anxiety, and the availability and reliability of charging infrastructure. The result is a temporary pause in the growth of the EV market as the Early Adopter segment is saturated before the Early Majority segment is ready to take over the baton.

2. Leapfrogging and Technological Expectations – The second force is the expectation of future technological advancements. Potential buyers may delay their purchases if they believe that significant improvements—such as longer battery life, faster charging times, or lower prices—are on the horizon. This "wait and see" approach can lead to a temporary dip in sales as consumers hold out for the next wave of innovation. Given the rapid pace of development in the EV industry, with frequent announcements of new models and enhanced features, it is likely that many consumers are indeed waiting for the next breakthrough before committing to an EV purchase.

3. The Business Cycle – Finally, the broader economic environment can also play a critical role in the adoption of new technologies. Economic downturns, rising interest rates, and inflationary pressures can significantly dampen consumer spending, especially on high-cost items like cars. Over the last few years, the U.S. economy has been grappling with uncertainty, including high inflation and rising interest rates, which could be contributing to the slowdown in EV sales. Consumers may be postponing new car purchases, particularly in the higher-priced EV segment, especially if they believe interest rates will soon decline.⁵  

Crossing the Chasm

So, what should automotive industry executives do to avoid getting stuck in the saddle and ensure their organizations are ready when the market picks up again?

1. Think in Scenarios - Instead of trying to predict the future with a single set of numbers, companies should explore multiple scenarios - plausible alternative outcomes that require materially different strategic, financial, and operational decisions. What if technological breakthroughs come sooner or later than expected? What if the regulatory environment changes following an election? By thinking in terms of scenarios, companies can be better prepared for whatever the future holds.

2. Understand the Saddle – Industry leaders must recognize that the diffusion of new technologies is not always a smooth process. Understanding the potential for a saddle pattern, including its likely impact on sales and market dynamics, can help companies better anticipate and respond to market fluctuations.

3. Differentiate between High-Commitment and No-Regret Initiatives – Some decisions only make sense in certain scenarios, while others are smart moves no matter what happens. Companies need to be clear about which is which. High-commitment moves, like building a new EV factory, may need to be put on hold if the market remains sluggish. But No-Regret moves, such as improving customer service, are smart investments in any scenario.

4. Address Consumer Concerns - To help the Early Majority cross the chasm, companies need to tackle their concerns head-on. This could involve increasing investments in charging infrastructure, improving battery technology to alleviate range anxiety, or offering more affordable EV options to attract price-sensitive buyers. The goal is to make EVs an easy, obvious choice for the cautious consumer.

5. Prepare for the Next Surge - Finally, companies should be ready for the market to pick up again. Saddles don’t have to last forever. If and when the economy improves and lingering technological concerns are addressed, demand will surge again. Companies that have stayed the course will be the ones to benefit.

In short, the story of the EV slowdown isn’t just about cars; it’s about the unseen forces that shape the adoption of any new technology. It’s a reminder that progress is rarely a straight line and that understanding the bumps in the road is as important as celebrating the peaks. By recognizing the patterns at play and preparing for the future, industry leaders can navigate the saddle and come out stronger on the other side.

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¹ “Rough road ahead for US EV makers despite upbeat quarterly sales,” Reuters (Jul 2024)

² “Diffusion of Innovations,” Everett M. Rogers, The Free Press (2003)

³ “Getting a Grip on the Saddle: Chasms or Cycles,” Chandrasekaran and Tellis, Journal of Marketing (2011)

⁴ “Riding the Saddle,” Goldenburg, Libai, and Muller, Journal of Marketing (2002)

⁵ “Interest Rates and the Fed: What to Expect Through the Rest of 2024,” Wall Street Journal (Aug 2024)