Americans are buying electric vehicles at a record pace, undeterred by rising prices and long delivery waits, indicating once again that the twilight of the internal combustion engine is on the horizon.
Posted at 6:45 p.m.
Battery-powered vehicles accounted for 5.6% of new car sales from April to June, still a small share of the U.S. market, but twice as much as a year ago, according to Cox Automotive, an industry consultancy firm. Overall, new car sales were down 20%.
Companies like Tesla, Ford Motor and Volkswagen could have delivered more electric cars if they had been able to build them faster. Automakers have faced shortages of semiconductors, which are 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 far exceeds what we can supply. »
Essential Batteries
At the same time, the popularity of electric vehicles has caught the industry off guard and exposed deficiencies that could slow the transition to battery power, seen as key to containing climate change.
One lesson for Ford and other automakers is that the shift to electric vehicles requires them to fundamentally overhaul their factories and supply networks. To ensure the transition, they have started to take out warranties for manufacturers of advanced batteries, for example, and deal directly with mining companies to obtain scarce raw materials. Ford is planning a $5.6 billion complex near Memphis, Tennessee, to build electric vehicles.
According to consultancy AlixPartners, car manufacturers and suppliers have announced plans to invest more than US$500 billion globally by 2026 to modernize their factory networks and supply chains. But it will take years for production capacity to meet demand.
The lack of public chargers is another barrier, especially for those who live in apartments that don’t have a garage or private driveway 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.
The price
Electric cars are still significantly more expensive than their gas-powered counterparts and are out of reach for many buyers, even when fuel savings are factored in. The average price of an electric vehicle in the United States is around US$66,000, compared to US$46,000 for all new cars. One of the reasons is the cost of batteries, the price of which has increased due to the shortage of raw materials after falling for years.
To reach 15% of the market, or 25% or 50%, we are going to have to address a much larger segment of the market. For me, this is where the challenge lies.
John Bozzella, President of the Alliance for Automotive Innovation, an industry group
While sales of electric vehicles are growing rapidly in the United States, Europe and China remain far ahead. Battery-powered vehicles account for 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 the electric cars on the road in the United States. But efforts by the Biden administration to promote electric vehicles nationwide, offering electric car buyers tax credits of up to $12,500, for example, have been met with strong opposition in Congress.
Not all automakers are benefiting equally from the electric vehicle boom. Among mainstream automakers, the gap is widening 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, 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 sport utility vehicle, the bZ4X, this year, but recalled some of those cars in June due to a risk of the wheels coming off.
Some failures
Being early to market is no guarantee of success. The Nissan Leaf was one of the first mass-produced electric vehicles, but sales of the model in the United States only reached 3,300 units in the second quarter, down 30% from a year earlier. Nissan is replacing the Leaf with the Ariya, an electric SUV that will go on sale in the fall.
General Motors (GM), once considered the leader in electric vehicles among traditional automakers, was sidelined last year by a 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’s still down 20% from the second quarter of 2021.
For companies with a range of electric vehicles, the ongoing technological transformation is an opportunity to improve their profile. Ford and 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, compared to 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.
Bank of America analysts said in a recent report that Tesla’s market dominance will weaken as traditional automakers introduce dozens of electric models. They predicted that Tesla’s share of global electric car sales would drop to 11% by 2025, down from 70% last year.
“Tesla’s dominance in this still-nascent market segment may be coming to an end,” Bank of America analysts said.