Despite electric vehicle sales making up a little more than 4 percent of global auto sales, they totaled just 1.9 percent of retail sales in the United States in 2020. Some analysts expect the U.S. sales number to grow to 2.5 percent in 2021 because of more diversity and availability. Edmunds analysts expect 30 electric vehicles from 21 brands to be available for sale this year vs. the 17 electric vehicles from 12 brands that were available in 2020. Automotive manufacturers are putting their profits into more electric vehicle models, with General Motors promising to go all electric by 2035. Yet, there are many impediments to electric vehicle adoption by consumers, including cost, lack of electric charging infrastructure, availability of parts (e.g., batteries and semiconductor chips) and range, to name a few. A study by the National Bureau of Economic Research found electric vehicles in California drove 5,300 miles in a year—less than half the miles of gasoline-powered cars, probably due to some of these cost and convenience issues.
General Motors made over $6 billion last year—one of its highest profit totals ever as the pandemic drove personal vehicle travel over mass transit. Recently, GM said it hoped to end production of petroleum-powered cars and trucks by 2035 for an all-electric model lineup in about 15 years. It has set interim targets of introducing 30 new electric cars and trucks in the next four years, and selling a million of them a year in the United States and a million more in China by 2025. China is GM’s largest market, and has been for years, although most of the vehicles sold there are made in plants in China. GM plans to spend $27 billion on electric and autonomous cars by 2025, and over $7 billion this year. The most profitable vehicles that GM makes are pick-ups and SUVs and those profits will be put toward electric vehicle development.
GM earned $6.4 billion in 2020, down from $6.7 billion a year earlier, as sales of pickup trucks and S.U.V.s in the second half of the year offset the low sales in the spring due to the pandemic. Revenue declined 11 percent, to $122 billion.
GM’s electric Chevy Bolt has been on the market for several years, but sales have been low. Last year GM sold fewer than 21,000 Bolts in the United States—0.8 percent of GM’s 2.5 million U.S. sales for the year. GM will introduce an updated version of its Chevrolet Bolt compact hatchback and a roomier version called the Bolt E.U.V., or electric utility vehicle, in the coming weeks. An electric Hummer pickup and an electric Cadillac S.U.V. are to follow later this year and in 2022.
GM is not the only automaker spending heavily on electric cars. Ford Motor Company doubled its electric vehicle development budget to $22 billion over the next five years, and Volkswagen earmarked more than $80 billion over the same period. Ford recently began selling its Mustang Mach-E, an electric S.U.V. styled to resemble the company’s sports car. Volkswagen plans to begin delivering an electric S.U.V., the ID.4, to customers next month. Ford has plans to bring the all-electric Ford F-150 to market in mid-2022, which is a top priority for the company.
Daimler, which makes Mercedes-Benz cars, indicated it would have an electric or hybrid version of each of its models by 2022, and Volkswagen has promised an electric version for each of its models by 2030. Nissan plans to have all its “new vehicle offerings” in key markets be electrified by the early 2030s, as part of its efforts to achieve carbon neutrality by 2050.
Last fall, California’s Governor Gavin Newson inked an executive order stating all new passenger cars and trucks sold in the state would have to be emission-free by 2035. Just three months ago, Chinese policymakers ordered that most vehicles sold in China also must be electric by 2035. Several countries in Europe also have similar edicts.
Issues to Electric Vehicle Production
Price parity with gasoline-powered vehicles remains years away. That obstacle is highly related to the availability and cost of battery packs. Making the battery pack can cost as little as $1,500 for the simplest Chinese-brand electric micro subcompacts, but they are not suitable for highway driving because of their slowness and modest range. The cost of battery packs is as much as $12,000 for a high-performance car, like a Tesla. Gasoline engines in each category of car size and performance typically cost less than half as much.
Supply chains will need to be established to support key components such as batteries and power systems. The availability of battery packs and raw materials like lithium and cobalt is dominated by China. Of the 142-lithium ion battery mega factories that are under construction, 107 are in China. Only nine are in the United States.
In 2011, GM agreed to transfer battery technology and other electric car technology to a joint venture in China with the country’s largest state-owned automaker, Shanghai Automotive Industry Corporation. At the time, the Chinese government was putting heavy pressure on foreign automakers to transfer electric car technology to joint ventures in China. Such technology transfers — which foreign companies sometimes complain they are forced to make to gain access to the big Chinese market — had become a major issue between Washington and Beijing. The transfers were cited by officials under President Trump as one reason for launching a trade war against China.
Also, a dire shortage of computer chips has disrupted production at auto plants around the world and is expected to last well into this year. GM is extending what was supposed to be a weeklong shutdown at three North American factories into the middle of March because of the shortage. According to GM, the paucity of chips would lower its operating profit this year by $1.5 billion to $2 billion. Computer chips are needed for touch screens, engine controls and transmissions. New cars can have dozens of semiconductors. Ford has also closed factories. On February 11, 2021, President Biden announced he was directing a 100 day study to determine how to strengthen U.S. semiconductor production.
Significant electric vehicle growth will be dependent on infrastructure such as recharging stations. A recent report from Deloitte found U.S. consumers’ biggest concern regarding all-electric vehicles is range and a lack of charging infrastructure, which is most likely why electric vehicles are driven half as many miles as gasoline vehicles. President Biden is pushing for a new economic recovery package to include funding to build 500,000 electric vehicle charging stations, and to create a system of rebates and incentives for purchasing electric vehicles to make these vehicles more palatable to U.S. consumers. The President recognizes that their adoption will not be based solely on the market and consumer choices.
Americans, who treasure the range, cost, and fueling infrastructure of gasoline and diesel vehicles will, however, continue to buy them. Those new cars will have a long road life and improved fuel efficiency, mandated by Corporate Average Fuel Economy Standards, which means new gasoline-powered vehicles will require less fuel than in the past.
Even if GM and other automakers are able to move to an all-electric fleet by 2035 or 2040, combustion engine cars and trucks are likely to be on the roads for at least several decades to come in the absence of a huge government program designed to encourage people to replace them more quickly. There are more than 250 million vehicles on U.S. roads; the vast majority burn gasoline or diesel, and are on average about 11 years old.
President Biden clearly does not believe in the free market and consumer choice with his executive orders and push to transition Americans to electric vehicles that cost more, do not have the range and fueling infrastructure, and are more dependent on China’s batteries and raw materials than gasoline or diesel vehicles, where America has achieved its independence from foreign oil. U.S. automakers are following Biden’s lead with GM indicating that it will only produce electric vehicles by 2035. GM and other auto producers are pouring their profits into producing electric vehicles. Americans, however, will continue to buy gasoline vehicles due to their cost, range and ease of refueling, and those vehicles will be on the roads for decades despite Biden’s plans. Convenience and choice along with utility have always driven America’s car buyers.