As the world strives to move away from fossil fuels, electric vehicles have emerged as a solution to reducing carbon emissions from transportation. But one major challenge to electric vehicle adoption is that they are too expensive for the average consumer. With the cost of living rising exponentially in the past few months, and automakers increasing the costs of their EVs, you would think that EV adoption would slow down even further as people saved their dollars.
However, data shows that consumers are turning to electric vehicles in record numbers despite prevailing economic conditions, rising EV prices and long waiting times owing to limited supply. Industry consulting firm Cox Automotive says that battery electric vehicles (BEVs) accounted for 5.6% of vehicle sales from April to June. Although this is still a small percentage of total vehicle sales, it is twice the amount of EVs sold last year.
Cox Automotive also reveals that overall car sales decreased by 20% despite the increase in EV sales. The demand for electric vehicles was so great that automakers such as Ford Motor, Tesla and Volkswagen could have sold more cars if they could have been able to manufacture them. However, the global chip shortage coupled with increasing prices for lithium and other battery metals put a damper on EV supply.
Tesla was also forced to shut down its production facility in China, leading to a dip in supply. Ford also lost billions of dollars in revenue as the semiconductor shortage forced it to halt truck production. Despite all these mitigating factors, demand for electric vehicles has soared. Ford chief financial officer John Lawler says the firm has seen a 149% increase in EV sales. Ford delivered 15,300 electric vehicles from April to June.
The electric vehicle industry still has plenty of challenges to overcome despite the phenomenal demand for EVs. Since building electric vehicles presents an entirely different set of challenges, legacy automakers such as Ford and GM will have to remake their supply and factory networks. This includes investing in the battery technology that powers electric cars and building factories designed to manufacture electric cars.
Ford, for starters, has plans to build a $5.6 billion complex in Tennessee to manufacture EVs. In total, carmakers and their suppliers plan on investing more than $500 billion over the next few years to upgrade their supply chains and factory networks, says consultancy firm Alix Partners.
Increasing EV adoption will also require the development of a widespread and reliable charging network, especially to attract drivers who don’t have personal garages or private driveways. As that happens, the sales of electric vehicle makers such as NIO Inc. (NYSE: NIO) could shoot through the roof.
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