The EV market isn't in peril. It's just changing.

Electric vehicles have hit a hurdle, but not a roadblock. Ratnakorn Piyasirisorost/ Getty Image

• It’s not all bad news for electric vehicles these days, but it may seem like it. 
• Automakers aren’t likely to walk away from multibillion-dollar investments.
• There are shoppers who want EVs, they just can’t afford them.

The electric-vehicle market is going through its biggest change yet, and it’s not pretty.

The rate of EV sales has been slowing for about a year, major automakers have pulled back on their previously lofty EV goals, and even the electric-car giant Tesla is faltering.

High-end vehicles that companies have spent years developing are hitting the market after their target buyers have already gone electric. Meanwhile, a newer crop of EV-curious shoppers can’t find a car in their price range and are opting for hybrids instead.

In the once thriving EV startup market, valuations of previous Wall Street darlings such as Rivian have crashed back to earth while others, such as Fisker, are at risk of going belly-up.

This thinning of the herd in the EV market gives skeptics of a battery-powered-car revolution plenty to point to these days. But to count out EVs altogether ignores the greater context behind this rough moment for the electric-car market.

Demand for EVs hasn’t dried up completely

Demand for expensive EVs has softened significantly, but an opening exists in the affordable market.

A new generation of electric-car shoppers are looking for different options than their early-adopter counterparts. These shoppers, who are less interested in Tesla, are more frugal and practical and more likely to be considering replacing their gas-powered car with an EV rather than adding an EV to their fleet.

These shoppers are discovering that there’s not much made for them in the way of EVs right now, which has led to an uptick in demand for hybrid vehicles instead.

The result is a slowing in the rapid rate of growth the EV segment has seen in the last few years — not a reversal. Overall, sales of EVs are still on the rise; it’s just slower going. EVs accounted for 8.9% of retail sales in April, according to JD Power, up from a first-quarter average of 8.3%.

Legacy car companies aren’t going to give up on EVs

It’s just not that simple. Essentially every major automotive company at this point has built its future around selling more EVs. This has required billions of dollars in investment that executives aren’t going to just walk away from overnight.

On top of that, car companies still have to meet increasingly stringent emission standards in the US and globally over the next several years, and EVs are crucial to meeting those standards.

What we’re seeing instead is a sobering up of sorts after several years of hype. Companies, egged on by investors, have spent the past several years promising that a battery-powered future was right around the corner. As these ambitions have met with reality, however, plans have changed.

Hybrid sales are good for EV sales

While hybrid sales can take away from EVs in the short term, industry experts have said hybrids are a good bridge technology for future EV adopters.

But that didn’t stop Tesla CEO Elon Musk from blaming hybrids for some of his company’s poor first-quarter results last month.

It’s true that as EV growth has slowed, interest in hybrids is on the rise. These cars, which come in plug-in varieties or with hybrid engines that don’t need to be hooked up to a charger, are more appealing to the current green-car shopper.

The real divide here isn’t between hybrids and EVs but between legacy car companies and EV-only startups. Companies such as Ford and GM can keep a shopper in the brand if they opt for a hybrid over an EV, while Tesla or Rivian loses a hybrid buyer altogether.

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