Electric car sales soar despite shortages

Americans are buying electric vehicles at a record pace, undeterred by rising prices and long waits for delivery, a further sign that the twilight 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 slice of the market but double the share from a year ago, according to Cox Automotive, an industry consultancy. Overall, new car sales fell by 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 important for electric cars than gasoline-powered vehicles, while prices for lithium and other raw materials needed for batteries have soared.

“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 last 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 shortcomings that could slow the transition to battery power, which is seen as essential to curbing climate change.

One of the lessons for Ford and other automakers is that the transition to electric vehicles requires them to essentially rebuild their factory and supply networks. To make the transition, they have begun underwriting advanced battery makers, for example, and are dealing directly with mining companies to secure scarce 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 by 2026 to upgrade 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 dwellers who don’t have 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’re playing catch-up.

“The market is ahead of the charging network,” said Cathy Zoi, CEO of EVgo, which operates more than 850 fast-charging stations in the United States.

Electric cars remain much more expensive than their gasoline 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 reason is the cost of batteries, which have risen in price due to raw material shortages after years of decline.

“To get to 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, president of the Alliance for Automotive Innovation, an industry group . . “That’s the challenge for me.”

While sales of electric vehicles in the United States are growing rapidly, Europe and China remain far 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 big role, but there is also a greater choice of lower-priced models.

Government policy also plays a large 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 the road in the United States. But the Biden administration’s efforts to promote electric vehicles nationwide, offering electric car buyers tax credits worth up to $12,500, for example, have faced strong backlash in Congress.

Sales in the United States will gain momentum as battery-powered cars become more common, said Felipe Smolka, a partner at consulting firm EY who tracks the electric vehicle market. People will become reluctant to buy cars that run on fossil fuels, he said, for fear that 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 of no return,” Mr Smolka said.

Not all automakers share equally in the electric vehicle boom. Among traditional automakers, there is a growing divide between those that have begun selling vehicles that can compete with Tesla’s popular models and those that have not.

Major automakers such as Toyota, Honda and Stellantis, the maker of Jeep, Chrysler and Ram vehicles, have been largely absent from the all-electric vehicle market in the United States, although they have announced plans for battery-powered models. Toyota began selling a battery-powered sports utility vehicle, the bZ4X, this year but recalled some of those cars in June because of the risk of the wheels coming off.

Being early to market is no guarantee of success. The Nissan Leaf was one of the first mass-produced electric vehicles, but U.S. sales of the model totaled just 3,300 during the second quarter, down 30 percent from a year earlier. Nissan is replacing the Leaf with the Ariya, an electric SUV due in the fall.

General Motors, once considered an electric vehicle leader among traditional automakers, was derailed last year by a recall of its electric Bolt. There was a risk of the batteries catching 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 a range of electric vehicles, the ongoing technological transformation is an opportunity to raise their profiles. Ford and South Korean automakers Hyundai and Kia, which are corporate siblings, were the most popular EV brands in the United States this year after 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 outages and supply chain issues affecting its Shanghai plant.

Tesla’s second-quarter sales rose 26 percent from a year earlier, and the company said it built more cars in June than ever in its history, a sign that supply problems are easing.

However, Tesla faces intensifying competition in China, which has the world’s largest auto market. BYD, a Chinese automaker that also makes batteries, sold 70,000 pure electric vehicles worldwide 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 market dominance will slip away 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% 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.

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