How crazy prices and year-long wait times could doom the electric car experience
It wasn’t too long ago that you went to a car dealership to buy a new car and the salesman was twisting, shoving and pushing just to make a sale. “Sit inside.” “Good right?” “Leather seats. Touchscreen.” “What are you going to need to get in that car today?” Then, with a wink: “Let me talk to my manager to get you a good price.” Today, due to chip shortages, supply chain issues, rising inflation, staggering gas prices, climate change, war in Ukraine, and insatiable demand for consumers, the roles of seller and buyer of cars have been reversed. In dealerships today, the consumer is often the one begging to close a deal. The situation is bad enough for gasoline-powered cars and trucks. But when it comes to electric and hybrid vehicles, a massive shortage of inventory has turned the shopping experience into a war for scarce resources. This, in turn, produces prices that defy reality.
The wait time for a new Tesla Model Y, the company’s latest crossover, is estimated at nearly a year. The wait is about as long for most of Tesla’s other car models, including the S and X. Elon MuskSophisticated electric vehicles aren’t the only ones with incredible wait times. Volkswagen CEO Herbert Diess recently said that the electric varieties of his company’s cars, which include the Porsche Taycan, Volkswagen ID.4 and Audi E-Tron, are all “essentially sold out…in Europe and the United States” for the rest of the year. Orders for Ford’s Mustang Mach-E luxury SUV are also closed for the year.
Consumer demand for electric trucks, meanwhile, is so strong that some manufacturers have stopped taking new orders indefinitely. That’s the case with Ford’s electric pickup truck, called Lightning, which has a staggering three-year wait, according to Kelley Blue Book. Tesla’s Cybertruck, which is expected to go into production in 2023, also has so many pre-orders that Musk said earlier this year that his company would stop taking new reservations. “We have more orders for early Cybertrucks than we could fill for three years after production begins,” Musk said during the 2022 FinancialTimes Conference on the future of the car in May. There’s so much demand for Rivian, a sleek new electric truck backed by Jeff Bezos, second-hand models sell online for almost twice the price of new.
According to Cars.com, which tracks U.S. sales, demand is so high that dealer inventory of all new vehicles has fallen 70% in the past three years: Auto dealers had 3.4 million vehicles available for sale in April 2019; by April, that number had fallen to just over a million. Consumer research firm JD Power reported in April that the average number of days a new car stays at a dealership before buying it was just three weeks, down from 49 days a year earlier. In-demand cars rarely make it to a dealership, with eager buyers buying them through pre-orders. Many vehicles cost thousands of dollars above list price.
Much of this madness can be traced to supply chain issues. The shortage of chips, which we have been hearing about since the start of the pandemic, affects the supply of all cars. But electric vehicles require components that are in such demand that miners and producers of the necessary metals and chemicals simply cannot keep up. Electric car batteries, for example, are typically made of cobalt, nickel and lithium, the price of which has risen significantly, according to consultancy AlixPartners. “Due to multiple global factors, the electric vehicle market is currently experiencing unusual shocks,” says Josh D. Boone, executive director of Veloz, a non-profit organization that champions electric cars. “Automakers are working hard to ramp up production to pre-COVID levels, but are facing labor shortages and supply constraints. Chip shortages, wiring harness shortages, and shipping delays are all issues related to early pandemic-related shutdowns, ongoing supply chain complications, China’s zero COVID policy, and now war. in Ukraine.
Then there is inflation, which is both the cause and the effect of these ridiculously high prices. According to the latest Consumer Price Index, which measures inflation in the United States, the prices of all indexed goods have increased by 8.6% over the past 12 months. Guess what was at the center of this rise. Bingo! New and used cars. The index noted that the price of new cars rose 12.6% over the past year and used cars rose 16%. The world is so turned upside down that used cars are selling for more than people bought them. You may have heard stories of people who bought a car three years ago and were able to sell it back to the dealership for about the same price (or more) today.
Often, these savings resolve themselves in a short time. We’re already seeing some of the gasoline car prices come back to reality, but there’s no end in sight for consumers looking to buy electric or hybrid vehicles. The war in Ukraine drove up gasoline prices, highlighting the benefits of electric vehicles. Meanwhile, a slew of new electric trucks have caught the attention of Americans at heart who don’t want to drive silly little electric cars, but want everything BIGGER, BETTER, and BAD! Since, according to The New York Times, less than 1% of cars on the road today in America are electric, and with supply chain issues and inflationary spending expected to continue for the foreseeable future, demand will likely far outstrip supply for at least the next years.
There is, however, another scenario where the laws of supply and demand are broken by rising prices and stockouts. Yes, consumers are willing to pay a premium to save money on gas, but there is a price cap above which buying electricity just doesn’t make sense. So far this year, Tesla has raised the price of some of its cars by several thousand dollars, and Musk has signaled that more increases may be on the way. Arnaud Deboeuf, The chief manufacturing officer of Stellantis, an auto manufacturing company, told Bloomberg that the transition to electric cars is “doomed” unless prices start falling. “If electric vehicles don’t get cheaper, the market will collapse,” Deboeuf said. In other words, if making electric cars becomes so expensive that consumers decide they’re not worth the price, automakers might be forced to lower prices below what it costs to manufacture them, profit margins could collapse and the whole system could collapse. on the weight of itself.
Ultimately, the importance of electric vehicles goes well beyond gas prices and supply chains. Replacing gasoline-powered cars with electric cars is essential to combating climate change, especially in a world where the Supreme Court seems determined to tie the hands of the Environmental Protection Agency and other administrative departments. Today, Americans who buy electric cars are generally eligible for a federal tax credit of up to $7,500, and the Biden administration wants to increase it to $12,500. But given the crazy numbers circulating in dealerships these days, even the target number may need to rise much higher if we are to make a dent in the climate crisis.