Sales of electric cars are growing sharply, despite the shortage

Americans are buying electric cars at a record pace, without rising prices or long waits for deliveries, another sign that the twilight of the internal combustion engine is on the horizon.

Battery-powered vehicles accounted for 5.6 percent of new vehicle sales between April and June, still a small part of the market but more than double the share from a year ago, according to Cox Automotive, an industry consulting firm. Overall, new car sales were down 20 percent.

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

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

At the same time, the popularity of electric cars has caught the industry by surprise, revealing loopholes that could slow the transition to battery power, which is considered essential to staving off climate change.

One of the lessons for Ford and other automakers is that the transition to electric vehicles will require them to fundamentally overhaul their manufacturing and supply chains. To make the transition, they have begun, for example, to underwrite advanced battery manufacturers and deal 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 said they plan to invest more than $500 billion worldwide by 2026 to modernize their factory networks and supply chains, according to consulting firm AlixPartners. But it will take several years for production capacity to meet demand.

The lack of public chargers is another obstacle, especially for apartment dwellers who don’t have garages or private driveways where they can plug in. Many companies are competing to build the networks, and the Biden administration is providing funding, but they’re playing catch-up.

“The market is ahead of the charging network,” said Kathy Zoe, 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 out of reach for many buyers, even when fuel savings are factored in. The average price of an electric car 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 after years of decline due to raw material shortages.

“To get to 15 percent of the market, or 25 percent or 50 percent, we have to target a broader segment of the market,” said John Bozella, president of the Automotive Innovation Alliance, an industry group. . “For me, it’s a challenge.”

While EV sales in the United States are growing rapidly, Europe and China lag far behind. Battery-powered cars 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 are also lower-priced models to choose from.

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 vehicles on the road in the United States. But the Biden administration’s efforts to promote electric vehicles nationwide, for example by offering tax credits of up to $12,500 to electric car buyers, have faced strong opposition in Congress.

Sales in the United States will increase as battery-powered cars become more commonplace, said Felipe Smolka, who tracks the electric vehicle market for consulting firm EY. People are reluctant to buy fossil fuel-powered cars, he said, fearing they may become obsolete and lose resale value. Automakers have largely stopped investing in internal combustion engine technology.

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

Not all automakers are sharing the electric car boom equally. There’s a growing divide among traditional automakers between those that have started selling cars that can compete with Tesla’s popular models and those that can’t.

Major automakers such as Toyota, Honda and Stellantis, Jeep, Chrysler and Ram are largely absent from the electric car market in the United States, although they have announced plans for battery-powered models. Toyota started selling the bZ4X battery-powered sports car this year, but recalled some of those vehicles in June due to the risk of wheels falling off.

Getting to market early is no guarantee of success. The Nissan Leaf was one of the first electric cars to go into mass production, but US sales of the model totaled just 3,300 in the second quarter, down 30 percent from a year earlier. The Nissan Leaf is being replaced by the Ariya, an electric SUV that will go on sale this fall.

General Motors, once considered the EV leader among traditional automakers, was derailed last year by its electric Bolt challenge. There was a danger that the batteries would catch fire. GM sold less than 500 Bolts in the first quarter of 2022. Sales rose to 7,300 in the second quarter, but that was still down 20 percent from the second quarter of 2021.

For companies with electric vehicle lines, 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 electric vehicle brands in the United States this year behind 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 factory in Shanghai.

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.

Still, Tesla faces increased competition in China, which has the world’s largest car market. Chinese automaker BYD, which also makes batteries, sold 70,000 clean electric vehicles worldwide in June alone. In Europe, Tesla is ahead of Volkswagen, Stellantis and Hyundai/Kia in the first five months of 2022, according to Schmidt Automotive Research in Berlin. (Tesla’s Model 3 and Model Y remain the most popular electric cars in Europe.)

Tesla’s market leadership is set to change 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 fall to 11 percent by 2025, 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.

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