Americans are buying electric vehicles at a record pace, undeterred by rising prices and long wait times for delivery, further indication that the twilight of the internal combustion engine is approaching.
Battery-powered vehicles accounted for 5.6 percent of new car sales from April to June, still a small share of the market but twice as much as a year ago, according to Cox Automotive, a consultancy for the automotive industry. sector. Overall, new car sales fell 20 percent.
Companies like Tesla, Ford Motor and Volkswagen could have supplied more electric cars if they could have built them faster. Automakers faced shortages of semiconductors, which are even more important for electric cars than for petrol vehicles, while prices for lithium and other raw materials needed for batteries rose.
“The transformation is real,” said John Lawler, the chief financial officer of Ford, which sold 15,300 electric cars from April to June, a 140 percent increase from a year earlier. “The demand for electric vehicles is far greater than we can supply.”
At the same time, the popularity of electric vehicles has taken the industry by surprise and revealed shortcomings that could delay the transition to battery power, which is considered essential to contain climate change.
One of the lessons for Ford and other automakers is that the switch to electric vehicles requires them to fundamentally reshape their factory and supply networks. To make the switch, for example, they’ve started insuring advanced battery makers and working directly with mining companies to secure scarce resources. Ford plans a $5.6 billion complex near Memphis to build electric vehicles.
According to consulting firm AlixPartners, automakers and suppliers have announced plans to invest more than $500 billion globally through 2026 to upgrade their factory networks and supply chains. But it will take several years before the production capacity can meet the demand.
Lack of public chargers is another hindrance, especially for apartment dwellers who don’t have garages or private driveways to plug in. Numerous companies are competing to build networks and the Biden administration is providing funding, but they are catching up.
“The market is ahead of the charging network,” said Cathy Zoi, the CEO of EVgo, which operates more than 850 fast charging stations in the United States.
Electric cars remain much more expensive than their petrol counterparts and are out of reach for many buyers, even when fuel economy is taken into account. The average price for an electric vehicle in the United States is about $66,000, compared to $46,000 for all new cars. One of the reasons is the cost of batteries, which have risen in price after years of decline due to scarcity of raw materials.
“To reach 15 percent of the market, or 25 percent or 50 percent, we’re going to have to appeal to a much broader segment of the market,” said John Bozzella, the president of the Alliance for Automotive Innovation, an industry group. “That’s the challenge for me.”
While electric vehicle sales in the United States are growing rapidly, Europe and China remain well ahead. Battery-powered vehicles account for more than 10 percent of new cars sold in Europe and about 20 percent in China. Government quotas and subsidies play a major role, but there is also a wider choice of cheaper models.
Government policy also plays a major role in the United States. California requires manufacturers to sell a certain number of zero-emission vehicles, and residents there drive nearly 40 percent of electric cars on the road in the United States. But attempts by the Biden administration to promote electric vehicles across the country, for example by offering tax credits for electric car buyers worth $12,500, met strong opposition in Congress.
Sales in the United States will increase as battery-powered cars become more commonplace, said Felipe Smolka, who monitors the electric vehicle market for consultancy firm EY. People will become reluctant to buy cars that run on fossil fuels, he said, for fear they could become obsolete and lose their resale value. Automakers have largely stopped investing in internal combustion engine technology.
“The energy behind this transition is already at a point where there is no turning back,” said Mr Smolka.
Not all car manufacturers share equally in the rise of electric vehicles. Among traditional automakers, there is a growing gap between those who have started selling vehicles that can compete with Tesla’s popular models and those who haven’t.
Major automakers such as Toyota, Honda and Stellantis, the maker of Jeep, Chrysler and Ram vehicles, have been largely absent from the pure electric vehicle market in the United States, although they have announced plans for battery-powered models. Toyota started selling a battery-powered SUV called the bZ4X this year, but recalled some of those cars in June due to the risk that the wheels could come off.
Getting to the market early is no guarantee of success. The Nissan Leaf was one of the first electric vehicles to be mass-produced, but sales of the model in the US were just 3,300 in the second quarter, down 30 percent from a year earlier. Nissan is replacing the Leaf with the Ariya, an electric SUV that will hit the market in the fall.
General Motors, once considered an EV leader among traditional automakers, was knocked off the track last year by a recall of its electric Bolt. There was a risk that the batteries could catch fire. GM sold fewer than 500 bolts in the first quarter of 2022. In the second quarter, sales bounced back to 7,300, but that was still a 20 percent drop from the second quarter of 2021.
For companies with an electric vehicle lineup, the ongoing technological transformation is an opportunity to raise their profile. Brother and sisters of the corporate world, Ford and South Korean automakers Hyundai and Kia were the second most popular EV brands in the United States this year after Tesla.
Tesla remains the company to beat, but shows signs of vulnerability. The company delivered more than 254,000 vehicles in the second quarter, up from 310,000 in the first quarter due to shutdowns and supply chain issues that hit the Shanghai plant.
Tesla’s second-quarter sales were 26 percent higher than a year earlier, and the company said it built more cars in June than at any time in its history, a sign that delivery problems are easing.
Still, Tesla faces increasing competition in China, which has the largest car market in the world. BYD, a Chinese automaker that also produces batteries, sold 70,000 pure electric vehicles worldwide in June alone. According to Schmidt Automotive Research in Berlin, Tesla in Europe followed Volkswagen, Stellantis and Hyundai/Kia in electric vehicle sales in the first five months of 2022. (Tesla’s Model 3 and Model Y continued to be the most popular electric cars in Europe.)
Tesla’s domination of the market will decline as traditional automakers introduce dozens of electric models, analysts at Bank of America said in a recent report. They predicted that Tesla’s share of global electric car sales would fall to 11 percent by 2025, from 70 percent last year.
“Tesla’s dominance in this emerging market segment may be coming to an end,” analysts at Bank of America said.
