Electric vehicle sales soar despite shortages

Americans are buying electric vehicles at a record pace despite rising prices and long waits for delivery, another sign that the end of the internal combustion engine is just around the corner.

Vehicles powered by batteries count 5.6 percent new car sales from April to June, still a small market share but double what it was a year ago, according to industry consulting firm Cox Automotive. Overall, new car sales were down 20 percent.

Companies like Tesla, Ford Motor and Volkswagen could deliver more electric vehicles if they could make them faster. Automakers have been battling a shortage of semiconductors, which are needed for electric vehicles even more than for gasoline-powered cars, while prices for lithium and other raw materials needed for batteries have skyrocketed.

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

At the same time, the popularity of electric vehicles has taken the industry by surprise and exposed deficiencies that could slow the transition to battery power, which is seen as important for curbing climate change.

One lesson for Ford and other automakers is that the transition to electric vehicles requires them to overhaul their factories and supply chains. To make the transition, they started underwriting manufacturers modern batteries, for example, and work directly with mining companies to obtain scarce raw materials. Ford plans $5.6 billion complex near Memphis for the production of electric vehicles.

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

The lack of public chargers is another hurdle, especially for apartment building residents who don’t have garages or private driveways where they can plug in. Many companies compete to build networks, and Biden administration provides funding, but they are playing catch-up.

“The market is outpacing the charging network,” said Cathy Zoe, chief executive of EVgo, which operates more than 850 fast-charging stations in the US.

Electric vehicles remain far more expensive than their gasoline counterparts and out of reach for many buyers, even with fuel economy. The average price of an electric car in the US is about $66,000 compared to $46,000 for all new cars. One reason is the cost of batteries, which has risen in price due to a shortage of raw materials after declining for years.

“To take 15 percent of the market, or 25 percent, or 50 percent, we have to reach out to a much broader segment of the market,” said John Bozzella, president of the Alliance for Automotive Innovation industry group. “That’s for me where the challenge is.”

While sales of electric vehicles in the US are growing rapidly, Europe and China remain far ahead. Battery-powered vehicles account for over 10 percent of new cars sold in Europe and about 20 percent in China. State quotas and subsidies play a big role, but there are also a wider range of low-cost models.

Public policy also plays a big role in the United States. California requires manufacturers to sell a certain number of zero-emission vehicles, and local residents drive nearly 40 percent of electric vehicles on United States roads. But the Biden administration’s efforts to promote electric vehicles across the country, offering tax breaks for buyers of electric vehicles up to $12,500, for example, faced strong opposition in Congress.

Sales in the United States will pick up as battery-powered cars become more common, said Felipe Smolka, who monitors the electric vehicle market at consulting firm EY. People will be reluctant to buy fossil fuel vehicles for fear they will become obsolete and lose their resale value, he said. Automakers have virtually stopped investing in internal combustion engine technology.

“The energy behind this transition is already at the point of no return,” Mr. Smolka said.

Not all automakers are equally participating in the electric car boom. Among traditional automakers, there is a widening gap between those who have started selling cars that can compete with popular Tesla models and those who have not.

Major automakers such as Toyota, Honda and Stellantis, maker of Jeep, Chrysler and Ram vehicles, are largely absent from the net electric vehicle market in the United States, although they have announced plans for battery-powered models. Toyota started selling the battery-powered bZ4X sport utility vehicle this year, but remembered some of these cars in June due to the risk that the wheels could come off.

Early market entry is no guarantee of success. The Nissan Leaf was one of the first mass-produced electric vehicles, but in the second quarter, sales of this model in the US were only 3,300 units, 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, once considered the leader in electric vehicles among traditional automakers, was led astray last year by revoke your electric bolt. There was a risk of battery fire. GM sold less than 500 bolts in the first quarter of 2022. In the second quarter, sales rose to 7,300, but that’s still a 20 percent decline compared to the second quarter of 2021.

For electric vehicle companies, the ongoing technological transformation is an opportunity to increase their value. Ford and South Korean automakers Hyundai and Kia, corporate siblings, were the most popular electric vehicle brands in the US this year behind Tesla.

Tesla remains the best company, but it shows signs of vulnerability. Company over 254,000 vehicles delivered in the second quarter, up from 310,000 in the first quarter due to shutdowns and supply chain issues that affected its Shanghai plant.

Tesla’s second-quarter sales were up 26 percent year-over-year, and the company said it produced more vehicles in June than at any time in its history, a sign that supply issues are easing.

However, Tesla faces increasing competition in China, home to the world’s largest auto market. BYD, a Chinese automaker that also makes batteries, sold 70,000 electric vehicles worldwide in June alone. In Europe, Tesla lagged behind Volkswagen, Stellantis and Hyundai/Kia in electric vehicle sales during 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 vehicles in Europe.)

Analysts at Bank of America said in a recent report that Tesla’s grip on the market will fall as traditional automakers introduce dozens of electric models. They predicted that Tesla’s share of global electric vehicle sales will drop to 11 percent by 2025, down from 70 percent last year.

“Tesla’s dominance in this still-nascent market segment may be coming to an end,” Bank of America analysts said.