Home| Technology| About| Customer Support| Login
Gallery inside!
Markets

Electric Vehicles Are Taking Off. Car Makers Need to Get Ready.

Although EVs only account for around 6% of overall vehicle sales in the US, that figure has tripled in the last two years. This is while sales of other types of vehicles have declined, according to research firm Motor Intelligence.

September 18, 2022
15 minutes
minute read

As auto makers race to turn out electric vehicles, they have generated long wait lists. Now they must try not to disappoint customers like Louie Figueroa.

Mr. Figueroa was one of the first people to put down a deposit on the new Ford F-150 Lightning electric pickup truck. He was eager to use it for his construction job, but there is a long backlog and it isn't clear when he'll be able to actually order one. "I'm starting to wonder if I can afford to keep waiting for this," said Mr. Figueroa, who lives near San Bernardino, Calif.

A few years ago, auto executives were worried that there wouldn't be enough buyers for electric cars. Now, they're worried that they can't build them fast enough. They're intensifying their efforts to bring factories online and accelerate timelines, investing billions of dollars in the process.

Although EVs only account for around 6% of overall vehicle sales in the US, that figure has tripled in the last two years. This is while sales of other types of vehicles have declined, according to research firm Motor Intelligence. Auto makers such as General Motors Co., Ford, and Rivian Automotive Inc. say they have waiting lists of longer than a year for their new electric models.

According to data from consumer site Edmunds.com, in July five of the six fastest-selling vehicles in the U.S. were electrics or plug-in hybrids. EVs sold in 19 days on average in July, compared with 47 days a year earlier, and went four days faster than internal-combustion vehicles.

According to Steven Center, operations chief for Kia Corp.'s U.S. business, electric vehicles (EVs) are in high demand. He was surprised by the strong demand for the company's recently released electric SUV, the EV6 SUV, which has a backlog of three to six months. Center stated that they are trying to electrify the lineup as quickly as possible.

The Inflation Reduction Act, signed into law recently, extends the $7,500 federal tax credit for electric vehicles (EVs) until 2032. This credit, which has been in place since 2009, helps to encourage consumer demand for EVs. The new law expands the availability of the subsidy to some buyers while also imposing income and price caps to qualify, as well as domestic-manufacturing requirements.

As the electric vehicle market continues to grow, auto manufacturers are under pressure to grab a larger share of the market. Tesla is currently the leader in the EV market, but executives from GM, Ford, and VW believe they can catch up. VW has been facing some delays in its EV rollout, which led to the ousting of Chief Executive Herbert Diess earlier this year.

Car companies are struggling to keep up with demand for electric vehicles (EVs), in part because they underestimated the market for EVs early on. Many car executives were hesitant to invest heavily in EVs, because they are less profitable than traditional internal-combustion vehicles. However, EV demand surged during the pandemic, catching many car companies off guard.

The automotive industry is seeing a significant influx of electric vehicles (EVs), including pickup trucks, sporty SUVs and off-roaders. These types of vehicles have resonated more with buyers than the small, utilitarian EVs that have been on the market for the past decade. Rising gasoline prices are also sparking interest in EVs.
It can take more than a year to boost factory production beyond original targets, often requiring new factory equipment and getting thousands of suppliers to line up more parts. This can be a lengthy and difficult process, but it is often necessary in order to increase production.

Auto makers have found themselves hampered by insufficient supplies of critical parts, especially computer chips. Electric cars use more computer chips than internal-combustion-engine vehicles, and the chip shortage has hobbled the auto industry. “There was an assumption that, ‘If EVs end up selling well, we can ramp up our production,’ ” said Mark Wakefield, managing director at consulting firm AlixPartners LLP. “That hasn’t been possible in the last two years.”

Batteries are a major obstacle for auto manufacturers trying to increase EV production. It can be very difficult to secure contracts for battery cells from the limited number of global cell manufacturers, said Darren Palmer, Ford’s head of EV programs. When Ford decided to double Lightning production last year, they had to put together a team to search for suppliers all over the world, he said.

GM has launched a new slate of electric models that it says will give it the broadest electric portfolio in the U.S. market. However, the launch of the first two of these vehicles—the GMC Hummer pickup truck and Cadillac Lyriq SUV—has been slower than comparable new vehicles from rivals. According to people familiar with the matter, GM has been making both the Hummer and Lyriq at rates of less than a dozen a day, despite waiting lists that stretch into the tens of thousands.

Output at the Detroit factory where the Hummer is made has been constrained by battery supplies, a GM spokesman said. The batteries needed to increase vehicle production should flow with the recent opening of an Ohio battery factory GM built with partner LG Energy Solution, he said.

GM's finance chief Paul Jacobson told analysts in August that the company is having trouble ramping up production to meet demand.

As auto makers shift toward battery-powered cars, Tesla's valuation has skyrocketed. Tesla is now worth more than twice as much as Toyota, VW, GM, and Ford combined. According to research firm Motor Intelligence, Tesla accounted for around 70% of all U.S. EV sales in the first half of this year.

As global emissions standards become stricter, manufacturers are responding by investing in green technologies. This shift is also being driven by the growing influence of environmentally conscious investors.

Some executives from traditional car companies have admitted that they were too cautious in their early plans for electric vehicles. Ford's CEO, Jim Palmer, said that the company determined manufacturing targets for electric trucks around three years ago. However, he acknowledged that at the time, there was a lot of uncertainty about consumer demand for these vehicles.

In 2020, Ford completed a small factory near its Dearborn, Mich., headquarters to produce about 40,000 Lightning pickups a year. However, due to high demand, the company doubled its production target last year, and then again in January of this year, with a goal of producing about 150,000 trucks per year by summer 2023.
"The cement had barely joined to some of the walls when we started expanding," Mr. Palmer said.

During his four-year tenure, VW's Mr. Diess had outlined big plans for the company's shift to electric vehicles, earmarking tens of billions of dollars for EV technology. Mr. Diess was impressed with Tesla's progress and hosted Tesla CEO Elon Musk last year to speak to VW managers via videoconference. However, VW experienced delays in releasing some new EV models, due in part to issues with new software. This caused some VW board members to question his ability to carry out the company's transition - which ultimately led to his departure, as reported by the Journal.

In recent months, GM CEO Mary Barra has been urging her team to speed up several EV programs that were originally scheduled for later dates. This includes the Cadillac Lyriq SUV, which was recently launched, and a plug-in version of the Chevrolet Silverado pickup truck. Barra stated in a June interview that she would like to see all of GM's vehicles released as soon as possible.

Startup electric vehicle (EV) makers such as Rivian and Lucid Group Inc. have had an especially tough time launching new models. Rivian cut its production forecast earlier this year, citing parts shortages. CEO RJ Scaringe told Wall Street analysts in August that the company’s lone factory, in Illinois, hadn’t been able to schedule full work shifts because of trouble getting components. Scaringe said that output would improve through the year. A Rivian spokeswoman said in March that the company had stood by its reduced forecast despite continued supply-chain challenges.

Lucid, with an electric sedan that some reviewers have compared favorably to Tesla’s Model S, has said it has at times been unable to secure parts that normally are in ample supply, such as carpet and glass. Lucid in August halved its estimate for 2022 production, to between 6,000 to 7,000 vehicles, the second time this year the company reduced its forecast. Lucid declined to comment.

Analysts say that one of the biggest challenges in the long term will be batteries. They predict that shortages of battery raw materials could curtail auto production plans as early as mid-decade. In this sense, the rest of the industry is chasing Tesla, which has spent more than a decade developing a battery supply chain and jointly operates a factory with partner Panasonic Holdings Corp.

Within the past year, a number of major automakers have signed deals to build new battery factories in the United States. Panasonic Holdings Corp. is reportedly considering building a $4 billion battery-cell plant in Oklahoma, after announcing plans for a similar facility in Kansas.

The Inflation Reduction Act includes provisions aimed at shifting more battery-cell production and processing of key minerals to the United States. However, car executives and analysts say that this is likely to increase competition for supplies, rather than reduce it.

The prices of raw materials used in batteries, such as nickel and lithium, have increased sharply over the past year, leading some car manufacturers to raise their prices. Some companies are now striking deals with mining firms to extract and process these and other raw materials, a significant change from the past when car makers had little involvement in the early stages of the supply chain.

Ford is investing in the construction of three battery plants, two in Kentucky and another in Tennessee. The company is also building an EV truck factory in Tennessee. In July, Ford outlined prospective deals with battery-material suppliers, from Australian mineral processors to a Louisiana graphite producer.

In July, Ford CEO Jim Farley warned that only half of the battery raw materials the auto industry needs to achieve its long-range EV sales targets are available today. He stressed the importance of securing supply quickly, telling analysts during a conference call that it is a critical and strategic priority.

GM has partnered with a Korean company to build a factory in Canada for battery raw materials, and signed a supply agreement to extract lithium from a California lake. This will help GM secure a reliable supply of lithium for its electric vehicle production.

The EV plan at GM is a key part of the investment strategy at Frontier Investment Management Co. in Dallas. The firm owns about 2.8 million GM shares and believes that the company's manufacturing expertise gives it a big advantage.

There are several obstacles preventing wider adoption of electric vehicles, according to Mr. Sowden. These include the higher cost of EVs compared to traditional vehicles, and the lack of charging stations in many areas. Ford has raised the price of its popular electric vehicles by up to 18%, while Rivian has dropped its least expensive model.

According to J.D. Power, the average price paid for an electric vehicle in the United States in July was about $66,000, up 28% from the same period a year earlier. By comparison, the average price paid for a non-electric vehicle rose by 12% over the same period, to around $45,000.

Earl Stewart, a Toyota dealer in Florida, said that there is a lot of customer interest in the recently introduced Toyota Bz4x electric SUV but that there is very limited availability. He said that for electric vehicles to be adopted on a large scale, there will need to be more models available, including affordable ones. He himself drives a Tesla Model S Plaid. He said that until the prices are brought down, only people like him who can afford to buy EVs and who want to be the first on the block to drive one will do so.

Tags:
Author
Adan Harris
Managing Editor
Eric Ng
Contributor
John Liu
Contributor
Editorial Board
Contributor
Bryan Curtis
Contributor
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

Subscribe to our newsletter!

As a leading independent research provider, TradeAlgo keeps you connected from anywhere.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Explore
Related posts.