Cars, costs, and cognitive dissonance

By the year 2021, a historic transition to electric powertrains appeared well underway. An impressive consensus of regulators, manufacturers, and futurists anticipated more than half of US new vehicle sales would be battery electric vehicles (BEVs) by 2030—and that the market had already passed a “tipping point.” Encouraging this transition, the US government enacted new subsidies in both 2021 and 2022. It also adopted regulations in 2023 and 2024 that effectively required electric vehicles to exceed 30% of the market in 2027 and 50% in 2030. Despite this, BEV penetration remained under 8% in the first half of 2024, and the mismatch between actual consumer demand and production became impossible to ignore. Many manufacturers reported huge losses on their EV models and retracted previous pledges to build an all-electric fleet. We identify three causes of this gross forecast error. First, regulators and manufacturers downplayed real-world costs. Second, they relied more on technological enthusiasm than on demonstrated consumer behavior. Third, they were affected by cognitive dissonance, which caused them to neglect fundamental factors in favor of their own preferences. We recommend lessons from this episode that can be applied to future innovations, including reliance on actual consumer behavior and avoidance of cognitive dissonance.