Minnesota EV sales rose last year, widespread adoption still far off

Electric vehicle sales are up in Minnesota, but the widespread surge of environmentally friendly rides needed to shrink carbon emissions nationwide still has yet to arrive.

EV sales jumped to 5.4% of new vehicles purchased in 2023 from about 3.5% in 2022, according to data from the Minnesota Automobile Dealers Association. But the state’s sales are still below what Kelley Blue Book reported as a national rate of 7.6%.

Scott Lambert, president of the auto dealers group, said buyers are attracted to cleaner burning vehicles, just not always the fully electric ones.

“There’s been some growth to be sure,” he said. “What continues to take off is hybrids.”

EVs are nevertheless top of mind for local auto dealers headed into the Twin Cities Auto Show at the Minneapolis Convention Center, which runs from Saturday until April 7.

Gov. Tim Walz’s short-running and politically controversial “Clean Cars” regulations are kicking into gear this year, which require auto manufacturers to provide more EVs for sale in the state in an effort to provide more options to Minnesota consumers and hopefully jumpstart greater adoption. President Joe Biden’s administration also announced last week air pollution rules that, while less stringent than some environmentalists had wanted, will still push dealers to sell more EVs.

But that pressure on dealers also comes with a cost. Lambert said factories are demanding dealers prepare for the EV age by requiring big investments in infrastructure like fast chargers, upgrades to service facilities and more.

Lambert has long been skeptical Minnesota can sell enough EVs to meet what he says are unrealistic expectations of state and federal officials for eventually universal adoption.

Still, he said people are becoming more comfortable with the technology.

Jukka Kukkonen, an EV consultant who teaches at the University of St. Thomas, said the quieter overall auto market has depressed electric vehicle sales. People gravitate toward car options that are more simple and well understood when faced with economic hurdles like higher interest rates, he said.

He also said confusion about changing charging plug technology and complicated federal tax credits doesn’t help.

But Kukkonen said there are bright spots. Minnesota is outpacing other Midwest states besides Illinois in EV sales, there are more local options than ever and he said said it’s a great time to buy a new or used EV. Low nationwide demand has led to a glut of inventory, causing prices to drop, and in some cases, become competitive with new gas-powered cars.

The gap between the price of an average EV and gas car shrunk to roughly $5,000 in January, down from as much as $17,000 during the same period in 2022, according to data from Cox Automotive.

“People have been asking for lower EV prices for a long time,” Kukkonen said. “Well, here they are.”

Aside from federal tax credits for EVs, Minnesota has a rebate for new and used electric cars the Department of Commerce plans to start issuing in April. The agency’s website says there is roughly $2.35 million left for rebates in Xcel Energy’s service territory out of an initial $9.5 million and about $508,000 left outside of Xcel territory from a pot of $4.5 million.

For dealers, regulations are a pressure, but Lambert said auto factories’ demands for “huge investments” to prepare for an influx of EVs up the stress.

Upgrades could include constructing ultra-fast Level 3 chargers, renovating service facilities to deal with the heavier cars by purchasing bigger hoists and forklifts and more. He said a typical dealership will spend more than $1 million, which worries some who fear they won’t enjoy a return on that investment if EV sales remain only a slice of auto sales.

Pat Francis, who owns Country Chevrolet in Annandale, said his small dealership sells about 50 cars of all types each month. But he will have to spend around $160,000 to meet the expectations of General Motors for electric vehicles.

Francis said he’s had a positive experience selling EVs. He sold all 62 new Chevy Bolts — one of the cheapest EVs — the dealership received. His mother owns one, and his brother Jimmy Francis leases one.

Jimmy Francis, the mayor of South St. Paul, said he became interested in an EV when the city earned grant money for charging infrastructure several years ago, and he has leased two Bolts in part because he said the resale value on EVs is poor.

He said the car is great for his wife’s commute to Saint Paul and other short trips even when cold weather saps mileage range, but he said the family also has a gas car for his job as an insurance benefits advisor and longer travel such as to a cabin in Wisconsin.

Still, Pat Francis said he’s losing money on EVs right now with the expenses from infrastructure, tools, electricity and training.

“I’m already on my second forklift,” he said.

The Public Utilities Commission on Thursday approved but modified a $44.5 million Xcel plan aimed at boosting electric vehicles and their infrastructure, but with some changes. The utility regulators were complimentary of a major proposal for rebates to help reduce the cost of home wiring often necessary for fast vehicle chargers, but they did ask Xcel to delay the rebates to include them in a separate state energy efficiency program.

The proposal is a much smaller one than Xcel originally asked for, however. The company withdrew a $330 million plan after it received a smaller rate hike than it wanted and after gas station owners and state officials criticized an idea to build and operate 730 high-speed charging stations.

There are more than 50,000 electric and plug-in hybrid electric vehicles on the road in Minnesota, according to recent data compiled by Atlas Public Policy. That’s less than 0.7% of light-duty vehicles.

But the market share of cleaner-burning vehicles is growing. Sales of hybrids were up to 7.3% of the new car market in 2023 compared to 6.1% in 2022. Plug-in hybrids are up to 1.5% from 1%.

What Minnesotans are mostly buying: Tesla EVs and Toyota hybrids.

The most popular vehicle sold in 2023 with an alternative powertrain — which includes fully electric and hybrid cars — is the Tesla Model Y, according to Experian Automotive data from the auto dealers. That’s no surprise, considering Tesla cars are by far the most common EVs on the road.

However, Toyota hybrids as a whole outsold Tesla cars last year, with the Rav4 and Highlander as the most popular options from the Japanese automaker. Toyotas as a class sold more but the single highest selling hybrid was the CRV.

Kukkonen urged people to try out the vehicles and learn more about them. They’ll have an opportunity at the auto show, which has an electric vehicle section Xcel Energy sponsors with the latest EVs on display, plus information and experts who can answer questions about the cars. People can test drive them around Minneapolis streets, too.