Electric car sales are rising sharply despite the shortage

Electric car sales are rising sharply despite the shortage

Americans are buying electric vehicles at a record pace, undeterred by soaring prices and long waits for delivery, another indication that the dawn of the internal combustion engine is on the horizon.

Battery-powered vehicles accounted for 5.6 percent of new car sales from April to June, still a small part of the market but twice as much as a year ago, according to Cox Automotive, an industry consultancy. Overall, new car sales fell by 20 percent.

Companies like Tesla, Ford Motor and Volkswagen could have delivered more electric cars if they could build them faster. Automakers struggled with shortages of semiconductors, which are even more important for electric cars than for gasoline vehicles, while prices for lithium and other commodities needed for batteries soared.

“The transformation is real,” said John Lawler, chief financial officer of Ford, which sold 15,300 electric cars from April through June, a 140 percent increase from a year earlier. “The demand for electric vehicles far exceeds what we can supply.”

At the same time, the popularity of electric vehicles has surprised the industry, revealing flaws that could slow the transition to battery power, which is seen as essential to mitigating climate change.

One of the lessons for Ford and other automakers is that the transition to electric vehicles requires them to fundamentally transform their factory and utility networks. To make the transition, for example, they have started acquiring advanced battery manufacturers and are working directly with mining companies to secure scarce raw materials. Ford is planning a $5.6 billion complex near Memphis to build electric vehicles.

According to AlixPartners, a consulting firm, automakers and suppliers have announced plans to invest more than $500 billion globally by 2026 to modernize their factory networks and supply chains. However, it will take several years for production capacity to meet demand.

The lack of public chargers is another obstacle, particularly for apartment dwellers who lack garages or private driveways to plug into. 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, managing director of EVgo, which operates more than 850 fast-charging stations across the United States.

Electric cars remain far more expensive than their petrol counterparts and are out of reach for many buyers, even when fuel savings are factored in. The median price for an electric vehicle in the United States is about $66,000, compared to $46,000 for all new vehicles. One reason is the cost of batteries, which have risen in price after years of decline due to scarcity of raw materials.

“To get 15 percent of the market, or 25 percent, or 50 percent, we need to target a much broader segment of the market,” said John Bozzella, president of the Alliance for Automotive Innovation, an industry group. “That’s the challenge for me.”

While EV sales are growing rapidly in the United States, Europe and China remain far ahead. Battery-powered vehicles account for more than 10 percent of new car sales in Europe and around 20 percent in China. Government quotas and subsidies play a big role, but there is also a larger selection 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 the electric cars on United States roads. But the Biden administration’s efforts to promote electric vehicles nationwide, for example by offering up to $12,500 in tax credits to electric car buyers, have met with fierce opposition in Congress.

Sales in the United States will gain momentum as battery-powered cars become more common, said Felipe Smolka, a partner at consultancy EY who follows the electric vehicle market. People will be reluctant to buy fossil fuel cars, 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 has already reached a point of no return,” said Mr. Smolka.

Not all car manufacturers are participating equally in the electric car boom. Among traditional automakers, there’s a widening divide between those who have started selling vehicles that can compete with Tesla’s popular models and those who haven’t.

Big automakers like Toyota, Honda and Stellantis, the maker of Jeep, Chrysler and Ram vehicles, are largely absent from the pure electric vehicle market in the United States, although they have announced plans for battery-powered models. Toyota began selling a battery-powered SUV, the bZ4X, this year, but recalled some of those cars in June over concerns that the wheels could come off.

Early market introduction is no guarantee of success. The Nissan Leaf was one of the first electric vehicles to be mass-produced, but U.S. sales of the model totaled 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 go on sale this fall.

General Motors, once regarded as the leading electric car maker among traditional automakers, was derailed by a recall of its electric Bolt last year. 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 rebounded to 7,300, but that was still a 20 percent drop from the second quarter of 2021.

For companies with an electric vehicle range, technological change is an opportunity to sharpen their profile. Ford and South Korean automakers Hyundai and Kia, which are corporate siblings, were the most popular EV brands in the United States this year, behind Tesla.

Tesla remains the company to beat, but it’s showing 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 closures and supply chain issues affecting its Shanghai plant.

Tesla sales rose 26 percent year over year in the second quarter, and the company said it built more cars in June than at any time in its history, a sign that supply problems are easing.

Still, Tesla faces increasing competition in China, which has the largest auto market in the world. BYD, a Chinese automaker that also makes batteries, sold 70,000 pure electric vehicles worldwide in June alone. In Europe, according to Schmidt Automotive Research in Berlin, Tesla was behind Volkswagen, Stellantis and Hyundai/Kia in sales of electric vehicles in the first five months of 2022. (Tesla’s Model 3 and Model Y remained the most popular electric cars in Europe.)

Tesla’s market dominance will wane as traditional automakers introduce dozens of electric models, Bank of America analysts 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 fledgling segment of the market could be nearing an end,” Bank of America analysts said.

Leave a Comment

Your email address will not be published.