Electric car sales soar despite shortages
Americans are buying electric vehicles at a record pace, undeterred by rising prices and long delivery waits, yet another indication that the twilight of the internal combustion engine is looming.
Vehicles powered by batteries accounted for 5.6% new car sales from April to June, still a small slice of the market but twice as much as a year ago, according to Cox Automotive, an industry consultancy. Overall, new car sales were down 20%.
Companies like Tesla, Ford Motor and Volkswagen could have delivered more electric cars if they could have built them faster. Automakers have faced shortages of semiconductors, even more critical to electric cars than gas-powered vehicles, while prices for lithium and other raw materials needed for batteries have soared.
“The transformation is real,” said John Lawler, chief financial officer of Ford, which sold 15,300 electric cars from April to June, a 140% increase over the previous year. “The demand for electric vehicles is far beyond what we can supply.”
At the same time, the popularity of electric vehicles has taken the industry by surprise and exposed loopholes that could slow the transition to battery power, seen as key to containing climate change.
One of the lessons for Ford and other automakers is that the shift to electric vehicles requires them to fundamentally redo their plant and supply networks. To make the transition, they’ve started underwriting advanced battery makers, for example, and dealing directly with mining companies to get rare raw materials. Ford is planning a $5.6 billion complex near Memphis to build electric vehicles.
Automakers and suppliers have announced plans to invest more than $500 billion globally through 2026 to modernize their factory networks and supply chains, according to AlixPartners, a consultancy. But it will take several years for manufacturing capacity to meet demand.
The lack of public chargers is another obstacle, especially for apartment dwellers who lack garages or private driveways where they can plug in. Many 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, chief executive of EVgo, which operates more than 850 fast-charging stations in the United States.
Electric cars remain significantly more expensive than their gas-powered counterparts and are out of reach for many buyers, even when fuel savings are taken into account. The average price of an electric vehicle in the United States is around $66,000, compared to $46,000 for all new cars. . One of the reasons is the cost of batteries, the price of which has risen due to the shortage of raw materials after falling for years.
“To get to 15% of the market, or 25% or 50%, we’re going to have to appeal to a much larger segment of the market,” said John Bozzella, president of the Alliance for Automotive Innovation, an industry group. . “For me, that’s where the challenge lies.”
While sales of electric vehicles in the United States are growing rapidly, Europe and China remain far ahead. Battery-powered vehicles represent more than 10% of new cars sold in Europe and around 20% in China. Quotas and government subsidies play an important role, but there is also a greater choice of models at lower prices.
Government policy also plays an important role in the United States. California requires automakers to sell a certain number of zero-emission vehicles, and its residents drive nearly 40% of electric cars on the road in the United States. But the Biden administration’s efforts to promote electric vehicles nationwide, offering electric car buyers tax credits of up to $12,500, for example, have been met with strong opposition from the government. Congress.
Sales in the United States will pick up steam as battery-powered cars become more common, said Felipe Smolka, a partner at consultancy EY who tracks the electric vehicle market. People will become reluctant to buy cars powered by fossil fuels, he said, for fear they will 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,” Smolka said.
Not all automakers are benefiting equally from the electric vehicle boom. Among mainstream automakers, there is a growing divide between those who have begun selling vehicles capable of competing with popular Tesla models and those who have not.
Major automakers like Toyota, Honda and Stellantis, the maker of Jeep, Chrysler and Ram vehicles, are largely absent from the U.S. pure electric vehicle market, although they have announced plans for battery-powered models. Toyota started selling a battery-powered sport utility vehicle, the bZ4X, this year, but reminded some of these cars in June due to the risk of the wheels coming off.
Being early to market is no guarantee of success. The Nissan Leaf was one of the first electric vehicles to go into mass production, but sales of the model in the U.S. totaled just 3,300 units in the second quarter, down 30% from the previous year. Nissan is replacing the Leaf with the Ariya, an electric SUV that will go on sale in the fall.
General Motors, once considered a leader in electric vehicles among traditional automakers, was knocked down last year by the recall of its electric Bolt. There was a risk that the batteries would catch fire. GM sold less than 500 Bolts in the first quarter of 2022. In the second quarter, sales rebounded to 7,300, but that was still a 20% drop from the second quarter of 2021.
For companies with a range of electric vehicles, the ongoing technological transformation is an opportunity to make themselves known. Ford and sibling South Korean automakers Hyundai and Kia were the most popular electric vehicle brands in the United States this year after Tesla.
Tesla remains the company to beat, but it is showing signs of vulnerability. The company delivered more than 254,000 vehicles in the second quarter, down from 310,000 in the first quarter due to shutdowns and supply chain issues that affected its Shanghai plant.
Tesla’s second-quarter sales rose 26% from a year earlier, and the company said it built more cars in June than at any time in its history, a sign supply issues are easing.
Still, Tesla faces growing competition in China, which has the world’s largest auto market. BYD, a Chinese automaker that also produces batteries, sold 70,000 pure electric vehicles globally in June alone. In Europe, Tesla trailed Volkswagen, Stellantis and Hyundai/Kia in electric vehicle sales in the first five months of 2022, according to Schmidt Automotive Research in Berlin. (Tesla’s Model 3 and Model Y remained the most popular electric cars in Europe.)
Tesla’s grasp of the market will diminish as traditional automakers introduce dozens of electric models, Bank of America analysts said in a recent report. They predicted that Tesla’s share of electric car sales worldwide would drop to 11% by 2025, from 70% last year.
“Tesla’s dominance in this still-nascent market segment may be coming to an end,” Bank of America analysts said.