Despite the upward movement in stocks like Rivian, Lucid, and Tesla, the EV industry continues to face significant hurdles.

One of the primary challenges is the industry’s shift from early adopters to the mainstream market, which poses difficulties. Early adopters tend to be wealthier, while the mass market is more cautious and selective with their purchases.

A key indicator of this shift is data from Cox Automotive, showing that the proportion of U.S. EV transactions involving leases has been climbing rapidly. Lease agreements now account for 32% of EV sales this year, compared to just 9% in 2022. Interestingly, the leasing rate for Rivian vehicles sits at 15.2%, lower than companies like Tesla, BMW, and Audi.

This uptick in leasing suggests that mainstream consumers are hesitant to make large financial commitments when purchasing new EVs. It also signals that leasing options have become more affordable for the average buyer. In fact, a recent Bloomberg report highlighted that some dealers are offering leases for as little as $20 per month on certain Nissan Leaf models.

Another issue for Rivian and Lucid is the growing popularity of hybrid vehicles in the U.S., where companies like Toyota and Ford have gained a competitive edge in this segment.

Perhaps the biggest threat to these U.S.-based EV makers is the increasing dominance of Chinese EV manufacturers, which has prompted the Biden administration to propose a 100% tariff on vehicles imported from China. While these tariffs remain largely symbolic, as Chinese companies are not yet selling EVs in the U.S., their rapid growth raises the possibility of future competition in the American market.

Depreciation Concerns

Depreciation is another factor deterring consumers from buying new EVs. For example, a new Lucid vehicle depreciates by approximately 65.6% after five years, close to the luxury car segment’s average depreciation rate of 65.8%.