EV Sales Growth Faces Resource Headwinds

Electric vehicle sales globally had a banner year in 2021, overcoming material shortages and supply chain constraints to triple market share from two years prior with sales volume of 6.6 million that accounted for nearly 9% of the global market, according to the International Energy Agency. At this pace, governments pledging to phase out the internal combustion engine are on course to meet their ambitious goals, including the United States, where the Biden administration in November 2021 set a target that 50% of new car sales in 2030 would be electrified.

U.S. EV sales in 2021 doubled from the previous year, with sales volume of more than 500,000 capturing a 4.5% share of total vehicle sales in the United States. In the fourth quarter 2021, EV sales accounted for 3.4% of light-duty vehicle sales, according to the Energy Information Administration, using data from Ward’s Intelligence. Combining EV sales with hybrids and plug-in hybrids, fourth quarter 2021 sales represented 11% of all light-duty vehicle sales in the United States, while ICE vehicles fueled by gasoline and diesel declined.

Discussions of an EV takeover has proliferated for years, yet sales growth was frustrated by the limited number of models, high vehicle prices, short driving ranges, and inadequate infrastructure for charging. That reality is changing, with manufacturers in 2021 offering 126 hybrid and EV models compared with 49 non-hybrid ICE vehicle models, explains EIA.

In a Jan. 28 letter to Transportation Secretary Pete Buttigieg, NATSO, which represents 4,000 travel plazas and truck stops nationwide, joined SIGMA in urging the Department of Transportation and the Federal Highway Administration to harness their members’ vast nationwide networks and experience to build out an alternative fuel network that includes EV charging stations. The associations, which represent more than 80% of U.S. retail fueling stations, were responding to FHWA’s request for comment in the development of a National Electric Vehicle Formula Program, and the Charging and Fueling Infrastructure Program enacted as part of the more than $1 trillion Infrastructure Investment and Jobs Act passed on Nov. 6, 2021.

“To have any chance of being successful, the refueling experience for alternative fuels should be as similar as possible to today’s refueling experience. We should work with consumer behaviors and habits rather than against them,” said the associations.

The Biden administration on Feb. 10 announced $5 billion of funds from the infrastructure bill would be deployed to states over a five-year period to build out a network of 500,000 EV charging stations across highway corridors in the United States. Two days earlier on Feb. 8, Australian-based Tritium DCFC, Ltd. announced plans to build an EV charging station factory in Lebanon, Tennessee, with annual production of more than 10,000 DC fast charger units per year over the next five years. Tritium, who cited the infrastructure bill in its announcement, said at peak capacity the manufacturing facility could produce roughly 30,000 units.

There are, however, multiple challenges in maintaining this momentum. On Jan. 25, the Commerce Department highlighted a “significant mismatch in supply and demand” in describing a shortage of semiconductors. These computer chips are essential for a growing number of products from automobiles to medical devices, and demand from some industries for semiconductors has intensified. These include smart phones, high-performance computers, 5G communication networks and, yes, EVs. IEA notes EVs require twice the number of chips as conventional vehicles.

Breakdown of RFI respondents

“The pandemic exacerbated these trends by dramatically increasing demand for products that require semiconductors of all types,” said the Commerce Department. “Simultaneously, supply was disrupted by a series of black swan events such as factory fires, winter storms, energy shortages, and COVID-19-related shutdowns.”

In addition to poor planning, a root cause of the semiconductor shortage is linked to a lack of wafer production capacity, which is seen constrained through 2024.

Illustrative representation of the global and complex nature of semiconductor supply chains

Commerce Department said median demand for chips was 17% higher in 2021 than 2019. From 2019 to 2021, median inventory of chips fell from 40 days to less than five days in 2021. The shortage has prompted auto manufacturers to shut factory lines. Inadequate availability of semiconductors is further frustrated by ongoing supply chain challenges.

Honda Motor Co., Toyota Motor Corp., and Nissan Motor Co. in early February noted the semiconductor shortage has limited sales, with the manufacturers dialing back sales forecasts because they can’t build enough vehicles. General Motors Co. and Ford Motor Co. were more optimistic the chip shortage would ease, but this follows GM losing its position as the top seller of vehicles in the United States, a standing it had since 1931, to Toyota last year.

U.S. new vehicle sales in 2021 were just over 15 million, according to the Associated Press, below the 17 million in annual sales before the pandemic. It was against this backdrop EV sales captured a nearly 9% global market share, with Europe and China the largest markets for EVs.

Tesla was the top EV automaker in 2021 with global sales off 936,000 followed by VW Group at 763,000 and China’s BYD Auto Co., Ltd. with 99.5% of its 598,000 EV sales in China. GM sold 517,000 EVs in 2021, but only 25,000 in the United States, with EV sales in China at 486,000. Stellantis N.V., formed in 2021 through the combination of Fiat Chrysler Automobiles and France’s PSA Group, rounded out the fifth top seller position on sales volume of 385,000, with 84% of those sales in Europe.

GM Chief Executive Mary Barra during a fourth quarter 2021 earnings call addressed criticism the company wasn’t moving quickly enough in getting EVs to market, telling analysts the automaker was targeting North American EV sales volume of 400,000 this year and in 2023. Toyota, also under scrutiny by investors, said it plans to invest $70 billion in electrification efforts with half of the investment for battery-powered EVs. The automaker is targeting battery-powered EV sales volume of 3.5 million in 2030.

Reasons for the cautious ramp-up of EVs by major automakers are manifold since the undertaking requires large investments and uncertainty over customer adoption, two critical factors in determining profitability. EV owners express an affinity for their vehicles. But will this hold true as sales scale up and your EV needs a repair? Consider a late January tweet from a Tesla owner in Los Angeles who was looking for an aftermarket 85 kW battery for her 2012 Model S after the “big battery” died and the replacement cost was $22,000.

While EVs were moving closer to cost parity with gasoline-powered vehicles, supply side challenges are again seen widening the gulf. There are far more minerals used in building an EV then a conventional vehicle, exposing EV manufacturing to higher costs as global mining slowed by the pandemic confronts rising demand spurred by the transition to cleaner energy. This includes demand pull for cooper for use in solar photovoltaic panels and wind generation in addition to EVs. Demand growth for cooper is seen outpacing supply through 2025.

Minerals used in electric cars compared to conventional cars

Lithium-ion battery prices are also seen moving higher after years of decline. Prices are about $130 per kilowatt-hour, with $100 per kWh seen making EVs cost competitive with ICE vehicles, a price point expected in 2024. However, supply constraints are seen pushing back that timeline, which could weigh on EV sales.

Against this backdrop, sport utility vehicle sales outpaced EV sales handily. Globally, SUV sales grew more than 10% between 2020 and 2021 and are estimated to account for more than 45% of global car sales, according to IEA. Both sales volume and market share are new record highs, with robust growth in SUV sales seen in the United States, India and across Europe, although slowing in China.

“The global fleet of SUVs has increased rapidly, from less than 50 million in 2010 to around 320 million in 2021 — equivalent to the total car fleet of Europe,” said IEA, with SUV sales in 2021 at 35 million.

“I took a long road trip in an enormous self-driving tech-stuffed Cadillac Escalade. I loved it! Omg it was wondrous! And it prompted a lot of internal crisis! How will we ever quit cars if every car becomes as comfortable as this one?” tweeted Farhad Manjoo, technology columnist for The New York Times.

“EV sales are growing rapidly. And yet the market also seems to agree with @fmanjoo’s reaction to driving one of the largest, heaviest and least fuel efficient cars out there,” tweeted Jason Bordoff, Co-Founding Dean of the Columbia Climate School and former senior official with the Obama administration.

All things considered, maybe those ambitious EV volume targets are, at least in the United States, too aggressive.