18 Apr Business Insider : The EV revolution has never felt farther away
Media Source : Business Insider
Alexa St. John
13 APR 2023
The industry won’t turn back on its electric-vehicle ambitions now, but the shift isn’t happening at full-speed.
GM; Rivian; Ford; Marianne Ayala/Insider
- EVs are hitting the American mainstream thanks to billions of dollars of investments and incentives.
- But now comes the hard part: winning over customers and beating Tesla at its own game.
- The US is “significantly far behind” in its EV transition, experts say.
Douglas Lauw of Spring, Texas, currently drives a Tesla. Eager to continue driving electric, when he decided to make another car purchase, he sought out the next generation of electric vehicles and put down a reservation for a Rivian R1T truck.
That was four years ago, and he’s still without a new car.
His saga, verified by Insider, is just one example of how Detroit and Silicon Valley’s well-funded push into electric vehicles is facing more speed bumps than ever — despite dozens of new models on the market, lucrative tax incentives, and massive investments in the nation’s charging network.
Instead, a reality check is setting in.
In the United States, automakers face major headwinds as they look to establish an all-new EV supply chain, catch Tesla, and win over skeptical buyers — all on top of an increasingly negative economic backdrop.
“Everybody is ramping up for higher production at their plants,” Sam Fiorani, forecasting VP at AutoForecast Solutions, told Insider. “But the fear of a potential recession, and the continued growth of Tesla in volume, keeps putting the squeeze on everybody.”
The extent of China’s role in the EV supply chain, including with lithium, is coming to light. Norberto Seebach
Breaking up with China is the hard part
At least $137 billion has been invested in new EV factories across the US over the past five years. But not all of it has been enough to meet the stringent requirements for cars to be eligible for tax credits under the Inflation Reduction Act, which aims to boost EV adoption and bring this new manufacturing home.
“The risk is that you’re not competitive if you don’t comply,” Caspar Rawles, the chief data officer at Benchmark Mineral Intelligence, said. “It still remains particularly challenging and daunting.”
Now, the industry’s deep dependence on China in its supply chain — including at least 70% of EV battery production — and just how hard it is to break those ties, is coming to light.
“The epicenter of where minerals reside, where processing resides, where EV production resides, all are outside of the US,” Douglas Kent, EVP of corporate and strategic alliances at the Association for Supply Chain Management, said.
Try as it might, the law won’t magically reduce the necessary years of construction, manufacturing, and, eventually, recycling to get enough lithium to the US.
“This is a shift that doesn’t move that easily,” Kent added.
Tesla was long past the worst of its production snafus by the time other automakers got serious about EVs. Christian Marquardt – Pool/Getty Images
There’s still the elephant in the room: Tesla
While the market leader has been losing some ground (down to 65.4% in 2022 from 79.4% in 2020) as new competitors hit the market, Tesla still has major advantages. By the time other automakers got serious about EVs, Tesla was long past its biggest manufacturing snafus and profitability challenges.
Like Tesla in its infancy, other manufacturers are now experiencing production shutdowns (like with the Ford Lightning), many of their first EVs are being recalled, and they’re losing a lot of money (Ford will lose $3 billion on them this year).
But unlike Tesla, today’s players are simultaneously fighting each other for the same supply, racing to gain market share amid increasingly viable competition and navigating a newfound price war instigated by Elon Musk himself.
Lauw, meanwhile, tried to buy something other than Tesla. But, “If I see a Cybertruck is available, I’m just going to jump the ship,” he said. “You can only wait so long.”
Other automakers’ success depends on if they “can offer something different and whether they can scale quickly enough to close the gap on Tesla,” Martin French, managing director at consultancy Berylls, said.
“To close that gap and also remain profitable,” French said, “in the next couple of years, I can’t see it.”
EV cost and public charging are still two huge concerns for buyers. Tim Levin/Insider
There’s no success without finding buyers
Two big consumer concerns have been addressed — the types of EVs being built and availability — as more EV models and inventory hit showrooms. But adoption has a long way to go.
“You still have a consumer attitude that’s not favorable to the electric vehicle,” said Bill Russo, CEO of advisory firm Automobility.
Few EVs get incentives right now, and basic supply-and-demand and economies of scale mean making them isn’t very cheap — forcing automakers to focus on higher-margin, luxury EVs for largely affluent buyers. The cars went for an average price of $58,940 in March — and that’s barely budging, despite automaker efforts to churn out more $25,000 EVs.
Meanwhile, as adoption does creep up, it’s becoming clear just how bad public charging is and how much automakers have kicked the infrastructure can down the road — resulting in unreliability and little money made from the venture. Like with pricing, there are solutions, like educating drivers to be comfortable with home charging and reasonable, 300-mile-range batteries.
The US EV industry is facing major headwinds. Rivian
The big picture
The industry can’t turn back now, but the shift isn’t happening at full speed.
“The claims that the American market would be transformed by the end of the decade were built on conjecture, hype, and wishful thinking as much as on real plans,” Patrick Anderson, CEO of Anderson Economic Group, said.
For now, there’s a lot of juggling — of supply chains, competition, and consumer demand.
“That’s where I think the US is in a quandary: They’ve got to solve all those problems at the same time,” Russo said. “I wouldn’t say hopelessly, but we’re significantly far behind.”
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