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Electric car sales rise sharply despite shortage

Americans are buying electric vehicles at record speeds, rising prices and waiting longer 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 car sales from April to June, according to industry consulting firm Cox Automotive, which is still a small share of the market, but double that of a year ago. Overall, new car sales declined by 20 per cent.

Companies like Tesla, Ford Motor and Volkswagen could deliver more electric cars if they were able to make them faster. Carmakers were grappling with shortages of semiconductors, which are even more essential for electric cars than gasoline vehicles, while prices for lithium and other raw materials needed for batteries soared.

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

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

One lesson for Ford and other carmakers is that switching to electric vehicles requires them to radically remake their factory and supply networks. To make the transition, he has begun underwriting manufacturers of advanced batteries, for example, and is working directly with mining companies to secure scarce raw materials. Ford is planning a $5.6 billion campus near Memphis to build electric vehicles.

Carmakers and suppliers have announced plans to invest more than $500 billion worldwide by 2026 to upgrade their factory networks and supply chains, according to AlixPartners, a consultancy. But it will take many years for the manufacturing capacity to meet the demand.

The lack of a public charger is another deterrent, especially for apartment dwellers who lack a garage or private driveway where they can plug in. Several companies are competing to build the network, and the Biden administration is providing the funding, but they are playing catch-up.

“The market is ahead of the charging network,” said Cathy Zoey, chief executive 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 savings are taken into account. The average price of an electric vehicle in the United States is approximately $66,000, compared to $46,000 for all new cars. , One reason is the cost of batteries, which after years of dwindling has led to a rise in prices due to a shortage of raw materials.

“To reach 15 percent, or 25 percent, or 50 percent of the market, we 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 where the challenge lies for me.”

While sales of electric vehicles are growing rapidly in the United States, Europe and China are 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 selection of low-cost models.

Government policy also plays a large role in the United States. California requires manufacturers to sell a certain number of zero-emissions vehicles, and residents there drive about 40 percent of electric cars on the road in the United States. But the Biden administration has run into strong opposition in Congress, for example, by offering a tax credit of up to $12,500 to electric car buyers to promote electric vehicles nationwide.

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

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

Not all carmakers are sharing the same in the electric vehicle boom. Among traditional automakers, there’s a growing gap between those that have begun selling vehicles that can compete with Tesla’s popular models and those that aren’t.

Major carmakers such as Toyota, Honda and Stelantis, makers 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 the bZ4X, a battery-powered sport utility vehicle, this year, but recalled some of those cars in June because of the risk that the wheels could take off.

Getting to the market early is not a guarantee of success. The Nissan Leaf was one of the first electric vehicles to be mass-produced, but US sales of the model were only 3,300 during the second quarter, a 30 percent drop from a year earlier. Nissan is replacing the Leaf with the Aria, an electric SUV that will go on sale in the fall.

General Motors, once regarded as the EV leader among traditional carmakers, derailed last year by recalling its electric Bolt. The battery was prone to fire. GM sold fewer than 500 Bolts in the first quarter of 2022. In the second quarter, sales reached 7,300, but this was still a 20 percent drop from the second quarter of 2021.

For companies with electric vehicle lineups, the ongoing technological change is an opportunity to raise their profile. Ford and South Korean carmakers Hyundai and Kia, which are corporate siblings, have been the most popular EV 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, down from 310,000 in the first quarter, as shutdowns and supply chain problems affected its factory in Shanghai.

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

Still, Tesla faces intense competition in China, which has the world’s largest car market. BYD, a Chinese automaker that also makes batteries, sold 70,000 pure electric vehicles worldwide in June alone. In Europe, Tesla overtook Volkswagen, Stellantis and Hyundai/Kia in sales of electric vehicles during 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.)

Analysts at Bank of America said in a recent report that with traditional automakers offering dozens of electric models, Tesla’s lead in the market would slip. He predicted that Tesla’s share of worldwide electric car sales would drop to 11 percent by 2025, up from 70 percent last year.

“Tesla’s dominance in this still-nascent market segment could end,” Bank of America analysts said.

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