We’re continually being told that electric cars are the future. Sales have soared already and the entire automotive industry is in the process of making the seismic shift from internal combustion engines to electric power.
We’re now way beyond the early adopter stage and many people have already made the switch. But, as car makers do their best to cope with a number of challenges - chief among them a global shortage of semiconductors which is severely slowing production - could the seemingly unstoppable march of the electric vehicle be in danger of being stopped in its tracks, for the time being at least?
The dreaded 'R' word (recession) has yet to become official but with energy prices soaring, the war in Ukraine escalating and a deepening cost of living crisis, is it the case that the adoption of electric vehicles will be a lot slower than expected?
The pandemic hit car makers hard but now they have another big problem with the shortage of chips, or semiconductors. How serious is it?
Charles Tennant (CT): “The automotive sector has had a tumultuous couple of years now, from Covid sapping customer demand, to a supply chain crunch from a global shortage of semiconductor chips.
“This has caused a vehicle famine of both new and used vehicles, where prices have been ballooning and waiting lists going up to 12 months for certain models, in a demand outstripping supply scenario.”
What is the global picture as far as electric vehicle take-up is concerned?
CT:“Pure electric – battery electric or EV – cars have seen a sales surge over the past year with worldwide sales doubling last year to 4.2 million (6% market share) where the American firm Tesla held the crown as the top-selling electric car brand closely followed by Volkswagen (including their Audi, Porsche, and Skoda brands).
“China still accounts for half of all EV sales with Europe in second place, where one in five sales are electric, and in the UK EVs had an 18% market share in February.”
Where are we at right now in terms of EV adoption?
CT: “In Europe and the UK EV sales have been driven by government green policies and financial incentives, where the tipping point for mass adoption was seen as being just around the corner as EV prices gain parity with petrol and diesel cars, and the charging infrastructure improves.
“However, new EVs are currently 35% more expensive than petrol or diesel cars, which puts around £10,000 on the price tag meaning that they are still mainly for wealthy families (and company car users), where 55% of buyers earn more than £50,000 per year.”
So, what could see a serious slowdown in EV sales?
CT: “Now with a cost-of-living crisis in the UK, driven by soaring inflation and gas and oil price hikes, cash strapped customers may have to wait even longer for that mass market affordable electric car.
“This is because battery prices which have been steadily lowering over the past few years to around $100 per kWh are about to soar again – and that matters as the battery accounts for around 30% of an EV cost.
“The battery price increase is due to surging prices of one of the key metals in the lithium-ion battery at the heart of an EV, which has increased five-fold to around $100,000 per tonne.
“With a typical EV battery consuming 27.5kg of nickel that equates to a cost increase from $500 to an incredible $2,500 per vehicle.
"And as Russia’s invasion of Ukraine leads to higher commodity prices for other raw materials used in batteries, such as lithium and graphite, it is easy to make the link with falling EV sales.”
Why does what’s happening in Ukraine have an impact on EV sales?
CT: “Sanctions on Russia – which provides 10% of the global nickel supply as well as being a substantial aluminium supplier used in batteries – will only exasperate the problem further.
“Higher energy density batteries needed to increase range between charging tend to use more nickel so a move to other battery chemistries such as lithium-iron phosphate (less reliant on nickel) maybe part of the solution as well as an eventual shift to solid state batteries.
“But that is all some considerable time away and not helpful right now.”
So, a slowdown is inevitable then?
CT: “Are electric vehicle sales about to stall? Well new buyers searching for electric cars on the UK’s Auto Trader’s marketplace fell from 26% last September to 16% in February as buyers seem to be switching back to petrol or hybrid cars.
“But even if you can afford one then customers who now want to switch to electric literally have nowhere to go other than on a long waiting list.
“One thing is for sure that If EVs do not somehow become more affordable then mass adoption remains a pipe dream.”