Ed Garsten on Why Hybrids Continue to Outpace EV Adoption

Ed Garsten, Senior Contributor at Forbes, joins Inside Automotive to discuss the future of EV adoption, affordability challenges, and the evolving competitive landscape facing the automotive industry.

While rising fuel prices have renewed interest in electric vehicles, Garsten explains why many consumers continue to favor hybrids over fully electric models. He explores the lifestyle changes associated with EV ownership, the growing opportunity in the used EV market, and the affordability pressures influencing vehicle purchase decisions. The conversation also examines the strength of fixed operations, shifting consumer priorities, and the potential impact of Chinese automakers on the U.S. market.

Key discussion points:

• Why consumers remain hesitant to fully embrace battery-electric vehicles
• The role of charging infrastructure, education, and ownership experience in EV adoption
• Growing demand for used EVs and opportunities for dealers
• How affordability pressures are changing vehicle ownership and purchasing behavior
• Why fixed operations continue to benefit from longer ownership cycles
• The competitive threat and opportunities presented by Chinese automakers

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Transcript

Welcome And Market Snapshot

Jim Fitzpatrick 0:07

Welcome to Inside Automotive with Jim Fitzpatrick. EV momentum is shifting, hybrids are surging, and Chinese automakers continue making headlines across the industry. Joining us now is Ed Garsten, who's a senior contributor at Forbes.com, longtime journalist who has spent years covering the industry's biggest trends, automakers, and market disruptions with experience spanning organizations including CNN, Detroit News, Automotive News, Chrysler, and the Associated Press. So we have with us True Royalty. So as it relates to automotive journalism. So thank you, Ed Garston, so much for joining us on the show today. My pleasure. I appreciate the uh the opportunity, Jim Straight, to talk to you. So you're just the guy to ask about all these different issues that face auto dealers today. I know that you've covered the industry for so long, uh, much longer than I have,

EV Interest Rises Then Retreats

Jim Fitzpatrick 0:56

by the way. So let's uh let's talk a little bit about EV sales. Uh fell 27% uh year over year in Q1, according to Kelly Blue Book. Um, although uh the dealers that I talk to are, you know, there's a lot of people coming in because of gas prices that are saying, eh, maybe I maybe I should take another look at at this whole EV idea, even though there's not a uh $7,500 tax benefit uh uh associated with it. So from your perspective, talk to us about that.

Ed Garsten 1:24

You know, i it's it's a funny thing about that, Jim. We uh every time gas prices fluctuate, you see this surge of interest in whether it's EVs or or hybrids or just some way for consumers to uh to save money on gas or eliminate paying for gas altogether. But then in the end, a lot of them back off. They they're just not ready to pull the trigger because they realize that with uh especially battery electric vehicles, your lifestyle has to change. You can't just pull up to the the the filling station and take five minutes and fill the tank and be on your way. And now, especially in the summer, people are going on road trips. You've got to plan uh a lot more uh intricately to find where you can recharge a battery if you if you're going further than the range. So it's it's one of those things where people are interested in it, they they want to find out about it, and then in the end they they back off and go, you know what, uh I'm gonna go for the hybrid. Yeah. Uh if I'm gonna do something, because I could still go to the gas station. I don't have to change anything about my life, uh, and I'm gonna still save uh money on gas. So that's that that's been the issue, and it's been an ongoing issue, really, uh, that that's EVs have been fighting ever since automakers began producing more and more of them and putting them out there.

Charging Time Still Feels Painful

Jim Fitzpatrick 2:48

So do you see it then as a um infrastructure issue that if in fact there were a lot uh the the availability of recharge or charging stations, um then people wouldn't have as big a problem with the the range anxiety that they that they go through?

Ed Garsten 3:04

You know, you know, I think it's more than that. And that initially seemed to be you know one of the major obstacles why people weren't going for EVs. But the thing is, you still have to spend uh uh much more time waiting for your battery to recharge. Right. Uh you can't do it in five minutes. It's it's impossible. Uh so people think about that and they go, I don't I I still don't like that idea. Even if they had a a charging station on every corner like like gas stations, uh there's still a uh a commitment of time and it seems like an inconvenience. And the other thing is is that as we've seen, the charging infrastructure is not a hundred percent reliable. Yeah. That's right. That's right. People people are at the end of their charge, they think they're gonna juice up and they've been there for half an hour and and it's not there.

Jim Fitzpatrick 4:00

Yeah, yeah. So it so it so the the whole EV in uh situation's gotta change in order for consumers to really adapt to it and say, okay, quick quick charge, uh longer life on the battery, so I don't have to, you know, pull over and charge more. And then of course the charging stations have to be out there and working for consumers to really jump on this, right?

Ed Garsten 4:23

I think so. And uh, you know, I'll just say this that uh we've watched how the automakers have introduced EVs and first saying, well, we're gonna we're not gonna make uh ice vehicles anymore, internal combustion engine vehicles, we're gonna we're gonna put EVs on the market, and you're gonna have an EV, and this is it's gonna be everything. And I I I think, Jim, there was a real strategic error early on in that not realizing that you're asking people to make uh not only a financial commitment, but a lifestyle

How Dealers Can Make EVs Real

Ed Garsten 5:00

change. And uh, you know, I if I was ruling the world and and now uh the benefit of 2020 hindsight is to say I think that the OEMs and the dealer networks should have really gotten together early on and put these vehicles out there, held these uh ride and drives to convenient areas, and let people get in the seat, uh talk to uh experts who could advise them on exactly what it's like to own and and drive and operate an EV and what the ramifications are, and and get people used to the idea, not just not just throw them out in the marketplace and then just pray that people are gonna buy them.

Jim Fitzpatrick 5:45

Yeah. I will tell you from the from uh my perspective, from the retail side, is that, and I've said this before when the in the the incentives were on the vehicles, and that is that, you know, unless you win over the hearts and minds of the sales professionals that are selling these EVs to consumers, and what I mean by that is you get them behind the wheels and you get them buying those vehicles. Used to be back in the day you had a demo, those are no longer. But uh, but it seems to me as though you've got you've got salespeople that have to be knowledgeable and they themselves have to be sold on EVs. The easiest thing for them to do though is to kind of go back and sell to a consumer an ice engine, because that's what they've sold their whole career or you know, as long as they've been in the industry, there's probably more vehicles available and what have you. But uh my uh d do you see where that might be, you know. If you go uh what I what I'm saying is that if a consumer goes into a showroom and says, hey, we're thinking about an EV, okay? And that salesperson doesn't believe themselves in an EV or drive one to really experience the benefits of it, um, they're gonna end up being told, no, you don't want an EV. Let me put you in a nice vehicle, let me show you the benefit, and you're not gonna have charging, you're not gonna have the infrastructure, it's not ready yet, simply because that salesperson pretty much sold that consumer. And this is happening where I've spoken to people, you know, at at uh in just in my small circle where they'll say, you know, I went in and I asked all about an EV, but the salesperson was just, they showed me a you know a nice vehicle and said, Here's really what you want. You know, the EV industry just isn't there yet. And I'm thinking to myself, wow, that that's that's unfortunate, you know, that that the consumer is.

Ed Garsten 7:22

And uh that's why I think that uh and I know that some companies uh have done this, but I think yeah, you need to take salespeople and have uh whether it's uh retreats or whatever it is, ride and drives, yeah. Yeah, really get them immersed in it, uh driving, learning, appreciating, having also empathy for the customer uh and then be able to talk to them person to person to say, you know, I I've experienced it, and this is this is what's great about it. And these are the and yeah, you're gonna have to make adjustments in your life. But here's what I did. Here's what we could do. And I think that people relate to that a lot better if you can say, well, I know an actual human being went through this. They're not just reading specs off a sheet or trying to sell me something. Uh this person's gone through this and we can talk as people. So yeah, that's why I think that the whole the whole strategy was was off, just throwing them out in the marketplace uh and not really getting the sales uh staff to to love these things and be able to uh to relate that that enthusiasm to the customer. That's

Used EV Deals And Affordability Squeeze

Jim Fitzpatrick 8:32

right. And now there's a huge uh uh market for used EVs. Consumers, it seems, uh are gravitating to the used EV versus a new EV. Talk to us about that.

Ed Garsten 8:43

Yeah, you know, um i i it's funny. It's such a divergence that uh sales of new EVs have have slipped while uh used EVs, uh I'm just looking at some of the latest figures from from April. Uh they were up about uh three percent between uh uh March and April and 16, almost 17 percent year over year. Now uh why? Well, of course, obviously they're less expensive, but there are some great late model EVs coming off of leases that are available. So the inventory is very attractive. So people who are ready to uh pull the trigger and and don't want to spend the the premium on a brand new EV, there's some really fabulous deals out there, and and that's what's drawing people in.

Jim Fitzpatrick 9:31

Yeah. That's right. That's right. Speaking of deals, uh the affordability issue still is a very dark cloud over the industry with the cars that are you know fifty thousand dollars for the price of a new car, which is just outrageous that we you know that it grows so quickly. And uh but here we are. The average payment out there is almost $800 a copy, 20% or greater of the payments are over $1,000. You add on to that the increase uh cost in uh car insurance, which is almost doubled in the last five years. I don't know where these maybe I'm getting too old. I don't know where these young families are gonna go with this, right? It it's it's nuts. Something's gotta give.

Ed Garsten 10:10

Yeah, I mean, I don't know. I don't know how people are uh are buying new vehicles at all. Uh I would say that uh uh if if you're somebody like me, it's much cheaper to maintain your vehicle, take it into the dealership, get the service with the right parts, the original equipment parts. Yeah. Um it's much cheaper to maintain a vehicle than to buy a new one.

Jim Fitzpatrick 10:34

That's right. Good point. Very good point. And and I and I think based on what I'm uh hearing from dealers and service uh uh service managers and fixed ops directors and such, that they're doing just that. Service departments, as you know, are are uh you know just you know exploding at the seams there because business is is pretty brisk, in that the average length of a vehicle is now in excess of 12 years on the road because of the cost of these vehicles, right? And to to your point, they're holding on to them and they're saying, let's just put the put the eight hundred bucks, a thousand bucks, fifteen hundred dollars, and and keeping the car running and fixing it up and making sure it's safe and and hold on to it and live with a four or five hundred dollar car payment, then jumping into an eight hundred dollar car payment, right?

Ed Garsten 11:15

Oh, absol absolutely. And you know, we just did a story uh a couple of weeks ago uh where I spoke to people at Napa and uh Drive, who uh are aftermarket companies, obviously, and their whole goal now is to because people are hanging on to their vehicles longer, you got to keep these things running. Right. Because they're doing apprentice programs and doing outreach uh to recruit and train uh service technicians, not only on ice vehicles, but electric vehicles, hybrid vehicles, uh even eREVs, and um knowing that the need is gonna keep growing, and of course, fixed ops is a great revenue source for the dealerships, uh, and you may as well grow that because the the need for that is growing. So, yes, people are are latching on to that. Uh I know I was just at my dealership the other day to get uh to get some some maintenance, and I used to be sitting alone in the in the service lounge, and now uh it was hard to find a seat. So maybe that's an indication of that that that would be for sure.

Chinese Automakers And U.S. Competition

Jim Fitzpatrick 12:22

All right, so the next topic here, and and this is something kind of that gets back to affordability, uh range anxiety, because these individuals are building cars that uh have a longer battery life that also charge much quicker. I mean, this technology is out there. You probably know where I'm going with this, but that's the Chinese vehicles. The growing influence of Chinese vehicles and automakers, I should say, that the rest of the world is enjoying. It has put uh a major hurt on a lot of automakers out there in these other countries that we actually here in the, you know, the domestic brands here were exporting vehicles to or had even um uh factories in these other countries as well, and partnerships and what have you. I think based on the information that I've got in the last 20 years, um GM has sold over 50 million vehicles in China. I mean, it was a big part, and lo and behold, uh Buick was a huge brand there. Uh not so much here in the United States, but huge in China. Obviously, that has dropped substantially. But getting back to the core issue here, and that is do we or don't we allow a limited number of Chinese vehicles into the U.S.? Um, what what you've been around the car business, you reported on it. What you know, Senator Bernie Marino wants to hermetically seal off the U.S. to uh prevent the Chinese cars from coming over. Um and he's got a lot of good reasons for that. You know, I happen to think we should allow a limited number to come in, to be sold through franchise dealers with an agreement to partner with a uh domestic manufacturer over time to build a factory here. Um what is your take on the Chinese uh influence?

Ed Garsten 14:05

Sure. Um I I agree with you, Jim. I think we should allow a uh a certain amount of Chinese vehicles um and yes, vital that they build them here, uh not only to preserve our jobs, but we have uh obviously union considerations as well. Um but you know, I think the American consumer deserves uh not only to have a choice uh but to have uh availability of uh what they perceive as the best quality and the the broadest uh number and broadest uh uh spectrum of body styles. Right. Um and I think that that that the consumers in entitled to that, and if the Chinese are building what uh American, North American consumers want and and can afford, I think uh that we should do that in a in a limited way. Now it it it's kind of funny, but uh the market in China is basically imploded. Uh they have got uh gross amount of uh of over capacity, manufacturing capacity, and they they've reduced uh from what I've read, they've reduced their uh production uh or going to uh this year by uh almost 200,000 units. Yeah. Yeah. So uh their market, their own uh domestic market uh uh is is lightening up, so they need a place to uh to sell their vehicles. Now we've seen that uh as you mentioned uh the U.S. automakers exporting vehicles that they make in China. We see Ford is uh is going crazy exporting vehicles that they make in China. So yeah, you know, uh uh give give consumers a choice, but but uh limit it to obviously we want to protect uh our companies and our workers here as well. But I think we could uh reach uh some sort of equilibrium, why not?

Jim Fitzpatrick 16:05

Yeah, and it sounds like the president he literally said, I'm open to the idea. So I think we're gonna see Chinese vehicles here over the course of the next two to three years. And we spoke we've spoken to Michael Dunn, who's a foremost authority at all things Chinese vehicles, as probably you know. And uh and I well he he feels the same way. I said, so maybe like within five years, he goes, I would shorten that to like two to three years. Um and and and to your point, I think that uh the American consumers deserves deserve that. And I might add that the domestics, much the way we saw in the late 70s and the 80s, all of a sudden take note that the Japanese vehicles are coming in better on gas, better quality, the styling was pretty cool. And they said, Well, wait a minute. We we're you know, we we really have gotta maybe we took our market share for granted, which they did, and now they've got this outside competition coming in. Lo and behold, who gets better? Ford, Chrysler, GM, all producing incredible cars today. Um so I think the competition is good, don't you? Don't don't you think that they will take note and say, well, wait a minute, how are they doing a five-minute charge? And how are they having a battery that lasts 450 miles and the styling is incredible and the technology in these Chinese vehicles is unbelievable. So says Jim Farley, who's currently driving one. Right.

Ed Garsten 17:27

Yeah, as a matter of fact, uh at the uh they have this big conference every year called Move. Uh when I attended that in the uh in the fall, uh a gentleman from Ford uh gave a really great presentation on how he basically embedded himself uh in China to basically learn their tricks. Yeah. Uh so that he can uh that's gonna be, you know, uh Ford's uh almost almost their greatest export from China is uh is the intellectual knowledge and how to apply that uh to the products that they make here. So I'm sure Ford's not the only one doing that. Right. And uh but sure, no, they're but they're definitely going over there, learning, absorbing, and uh bringing that knowledge back here so they can emulate what the Chinese are doing.

Jim Fitzpatrick 18:16

That's right. And if it's done in a limited way, you say, okay, you know, you want to set up a network of dealers uh to to sell these vehicles. Um 200,000 vehicles in a mar in a in a market that will absorb 16 plus million vehicles a year on the SAR is not that big a threat, you know, even if you went to 500,000 vehicles. I mean, there's a lot of uh manufacturers out there that do that here in the States. But uh but I think we can learn from it. I think that the consumers, to your point, deserve it. What

Cybersecurity Fears In Connected Cars

Jim Fitzpatrick 18:46

what about the issue, and this keeps coming up, that it's a national security threat if we have Chinese vehicles in uh uh on U.S. soil. What what's your take on that?

Ed Garsten 18:59

Well, you know, I I'm trying to I'm trying to temper my my my language in a way, but you know, there's a lot of paranoia out there. I I'll just say that. Yeah. Um but not totally unjustified because of the nature of how vehicles uh are built today. Sure. Basically we can do computers on wheels, yeah. Systems can be uh uh compromised, uh intelligence can be gotten. Uh so uh the the whole cybersecurity issue uh is is definitely real. Um and anything that uses uh uh computer, electronic control units, central computing units now with AI, uh things can be compromised. Yeah. But uh knowing that there is a whole separate industry that's dedicated to provide and create defenses against this stuff. So I think that it's it's worth thinking about. It's it's definitely uh you can't be naive about it. That's right. Uh but knowing that uh the industry is aware of it and and building the uh electronic and intellectual defenses uh that are necessary to uh to protect that information.

Jim Fitzpatrick 20:21

Yeah, yeah, for sure. I I agree. A little bit of paranoia, but then there's also some legitimacy to that concern. I I often say that my my iPhone, and every iPhone is built in China. This has my entire life on here, from photographs to videos to documents to you name it, it's all on this little China-built machine. And uh and so many computer companies as well, Dell and so many others that are built there as well. But uh but anyway, let me ask you this as we close out the session with you, Ed, and I appreciate all the time that you've given

A Reality Check On Consumer Stress

Jim Fitzpatrick 20:51

us. Um, you've been around the industry, as I said, and a lot of people look to you to say, you know, what what do you think about the industry that we're in today? What what concerns do you think or or I should say, what are maybe some of the things that keep you up at night about the industry as a whole, not brand specific or anything else, but just about the industry. You know, we're we're in some crazy times right now, right? And uh and and I know that uh there's a lot of dealers watching. Love to get your take on that. If if at all, you have anything.

Ed Garsten 21:20

I I'll tell you what what keeps me up, and um uh uh it's not nice to say, but I think that at least publicly, the companies uh look through life through rose-colored glasses too much. They're not realizing what reality is, what reality is uh among the population. That people are economically uh stressed. They're also stressed uh politically, they're stressed uh economically they they're losing how many people are losing their jobs? They just don't have they have no income. Right. Perhaps uh whether it's severance or or unemployment, you can't live off that in an extended way. Uh I think that the auto companies need to be much more uh sensitive to that. And yes, I know they need uh uh high profit vehicles, the SUVs, the big pickup trucks. Um I think they're slowly catching on. I always at Ford when Jim Farley gave a presentation uh during the uh earnings call about how they're looking now at at turning back time and going back to sedans. That people are requiring sedans, they need more affordable, more functional uh vehicles that uh they don't I mean they still need to make the big vehicle, there's still a high demand for those, and and that's great because it keeps the company solvent. But I think that uh looking at how EVs were presented, um you know, I'll just tell you this. I don't know how much time we have, but this one little anecdote. A couple of years ago we were at this thing with Mary Barr, uh, and I asked her, I said, when will GM admit that uh going all EV was a gamble and how will you know if it's paid off? And her answer to me was, well, you know, all I know is if you sit in an EV, you're gonna want to buy one. And that was the answer, huh? That was the answer. Okay. And uh unfortunately it's one of these holiday uh auto press association things where you couldn't really get too confrontational because I really wanted to call, you know, BS on that. But um to tell a room full of hardened auto reporters that that's that's your answer. Wow. Pretty pretty simple. To some degree, it's almost insulting, you know, really. Yes, all I could hope is that isn't really what she's thinking, and she was just, you know, doing PR. But uh but that's what that's what bothers me is that I think there's a uh uh uh suspension of reality of what the conditions are in the marketplace and how much stress that consumers are under right now.

Jim Fitzpatrick 24:00

That's right. That's right. I I I agree. I agree. I think that uh it's it's underlying a lot of this. We haven't seen it, you know, rise up to a great level. You know, we're still selling cars. It looks like we're still gonna sell 16 million vehicles, and I don't mean to be negative Nancy, but I've spoken to a lot of dealers around the country and and they've share the same concerns that that you and I are sharing right now about okay, but where is this going? You know, we're we're almost going weekend by weekend to go. How many units did we sell? How many uh what's going on? You know, and of course the unrest in the Middle East right now and Iran and and uh gas prices up and uh which drove uh mortgage rates up. And yeah, there's a lot of lot of concern out there right now. So yeah, but many dealers will say, I know, but we've had this before and we're gonna pivot, and consumers are still there, and the stock market is doing great, and but uh you know, it's uh it's just something uh to your point be concerned to keep your eye

Closing Thoughts And Thanks

Jim Fitzpatrick 24:56

on. So Ed Garsten, thank you so much for joining us here at CBT News. This is a personal treat of mine. I've been a big fan of your contributions to the uh automotive uh journalism industry out there, if I said that right. But uh so thank you so much for joining us. Love to, I've got about 20 more questions that time wouldn't allow me to ask. So I'd love to do a follow-up with you to bring it back on the show if you're if you're willing. Anytime I'm semi-retired. Time's all I got. There you go. What a nice way to semi retire, right? So well, thanks so much, really appreciate it. Thank you. Thanks for watching Inside Automotive with Jim Fitzpatrick.