Ford CEO Jim Farley calls it a “watershed moment.” GM’s Mary Barra says it’s an “inflection point.” Volkswagen Group CEO Herbert Diess says it’s a “crucial moment for our company.” And Akio Toyoda, president of Toyota, describes it as “a diversified and uncharted era.”
The auto industry is going electric. We know because they’ve been telling us, over and over, in earnings calls, virtual events, podcast interviews, and in many television commercials. (Hi, Malcolm Gladwell!) Gone will be the dirty internal combustion engines of yesteryear, replaced by zero-tailpipe emission electric vehicles. The future is here, and it probably has a light bar.
The spotlight is on the auto industry like never before. President Joe Biden, who is spearheading a plan to spend billions of dollars on EV charging infrastructure and new incentives for car buyers, has test driven not one but two electric pickup trucks this year. Car companies are under enormous pressure to help usher in this electric future. And they know it.
“The transition to EVs is both happening far later than many people had hoped for and far faster than most legacy OEMs expected two or three years ago”
“The transition to EVs is both happening far later than many people had hoped for and far faster than most legacy [automakers] expected two or three years ago,” said Sam Abuelsamid, principal analyst for electric mobility at Guidehouse Insights. He argues that car companies have been “downplaying” the prospect of mass adoption of electric vehicles for years, sitting back while Tesla soaked up market share. Now, EV sales are way up, Tesla is one of the most valuable companies in history, and the entire auto industry finally sees there’s profit in plug-in cars.
As expected, the transition has been stilted and plagued with problems. There’ve been battery fires, recalls, fraud allegations, a global chip shortage, and numerous missed deadlines. The number of new electric vehicles that went on sale this year is still laughably small compared to all the gas-guzzling, planet-warming, glacier-melting trucks and SUVs that still dominate the roads.
The rollout of new EVs remains fairly thin. There’s the Ford Mustang Mach-E, Volkswagen ID 4 … and that’s about it. The Porsche Taycan and Polestar 2 helped fill out the premium segment, while shorter-range EVs, like the BMW i3, Ford Focus Electric, and the VW e-Golf, got the ax. Audi released a $140,000 electric sports car that’s fantastic to drive but won’t move the sales needle that much.
Other rollouts have been a mixed bag. Rivian, which went public in one of the biggest IPOs of all time, saw its stock tumble on the news that production of its first electric truck and SUV would be slow going. The 2021 Chevy Bolt and Bolt EUV were both recalled after a number of worrisome battery fires, while the Mercedes-Benz EQS was recalled for an infotainment snafu. General Motors managed to start delivering the Hummer EV trucks to its first customers, just under the wire. The Tesla Cybertruck was delayed until 2022.
“Then the Mach-E came out, and that was about it.”
“It felt like we were setting ourselves up for a big EV year,” said Jessica Caldwell, director of insights at Edmunds. “Then the Mach-E came out, and that was about it.”
There have been other setbacks as well. Ford dropped its plans to make an electric SUV with Rivian and delayed the launch of its forthcoming electric Explorer SUV to December 2024 at the earliest. The company just stopped taking reservations for the F-150 Lightning as it prepares to launch production of its hotly anticipated electric truck. Experts say more delays could be on the horizon if the pandemic continues to disrupt supply chains and the automotive chip shortage doesn’t improve soon.
Tesla still commands around two-thirds of the EV market in the US, with the Model Y overtaking the Model 3 as the best-selling electric vehicle in the world. The company had some noticeable wins, like a 100,000-vehicle order from Hertz. But it also has stirred up controversy over its rollout of the controversial Full Self-Driving beta software to select customers. For those in the market for a non-Tesla electric vehicle, the options are still pretty slim, Caldwell said.
“It does feel like this EV market has really been like ‘hurry up and wait’ because there’s a lot of announcements and a lot of talk and yet not a lot in the way of delivery,” she added.
“It does feel like this EV market has really been like ‘hurry up and wait’”
This is partly because the act of transforming century-old industry is like making a three-point turn in a cruise ship. What’s easy for a startup or even a modest-sized automaker like Tesla is much harder for a 100,000-employee company like GM. These companies have been making internal combustion engines for such a long time, it’s hard to imagine them doing anything different.
Another reason it’s taking so long to see more EVs is that automakers are shifting away from decades-long practices of outsourcing production work and design to suppliers in favor of a more vertically integrated model of manufacturing, Greenhouse’s Abuelsamid said. In the past, designing and building engines and transmissions was considered a core competency for an automaker.
But now, ICE powertrains are at the end of the road, and there’s no more room for improvement, leading automakers and major suppliers to scale back their investments. EV motors and batteries are the new core competency, and automakers want to own the whole supply chain. Ford and GM are both planning massive battery-making facilities in the US. They’re also scrambling to lock down other key materials, like lithium and other rare earth minerals.
“That’s why we are suddenly seeing OEMs take back control of the key components of their next-generation vehicles,” Abuelsamid said.
One of the main lessons automakers took away from the financial collapse of 2008 and subsequent auto bailouts was the need to respond more quickly to shifts in customer demands. And right now, demand for EVs is rising, but skepticism is, too. It’s a weird moment in which customers recognize the environmental and financial benefits of going electric but are unsure they can afford an EV or that the necessary infrastructure exists to support their purchase.
demand for EVs is rising, but skepticism is, too
According to a new survey by the Consumer Technology Association, majorities of non-EV owners believe that EVs aren’t reliable (53 percent), are too expensive (64 percent), and that there aren’t enough charging stations to make owning an EV practical (85 percent). On the other hand, EV owners are overwhelmingly enthusiastic about the benefits and reliability of EVs.
Obviously, this gap will narrow as more people get behind the wheel and see the benefits of EV ownership firsthand, like fewer maintenance needs, more spacious cabins, instant torque, and other attractive features. But that will depend on the auto industry’s ability to make enough electric vehicles to meet this rising demand.
To date, every major automaker has unveiled a grand strategy to shift to electric-only or at least electric-majority sales. Volvo and Mercedes are doing it by 2030, GM by 2040, and Volkswagen by 2050. Naturally, all of these pledges are just words floating in the ether, and the likelihood that some gasoline-fed vehicles will manage to slip past these deadlines is very high.
“There are a lot of new challenges for automakers in doing all of this stuff,” Abuelsamid said. “They know how to assemble vehicles, but much of the rest is new and convincing consumers they know what they are doing won’t be easy.”
The slow rollout of new EVs gives the false impression that we have time when, in reality, the clock is ticking
The slow rollout of new EVs gives the false impression that we have time when, in reality, the clock is ticking. There are roughly 280 million cars and trucks on the road in the US today, only 3 percent of which are electric. Americans typically buy 16–17 million cars every year, which means it will take roughly 16 years of EV-only sales to completely replace all of the gas cars currently on the road.
Meanwhile, climate change experts insist that we have to limit global warming to no more than 1.5 degrees Celsius above preindustrial levels in order to avoid some of the worst-case scenarios that climate change could create. We’re on track to surpass that in a few decades.
Much depends on the speed and efficiency of automakers to churn out electric vehicles — while the rest of us grapple with the ravages of car dependency. Fewer cars on the road, especially in urban areas where they create congestion and undercut more sustainable modes of transportation, will be essential to fighting climate change. Experts believe that smaller, battery-powered vehicles, like electric bikes, can help pave the way by replacing car trips and making cities more liveable.
But that’s probably not the watershed moment that car companies had in mind.