Electric vehicle (EV) sales are soaring like never before. Results for the first quarter indicate nothing but happy news for the electric vehicle makers. The auto industry claims good performances in electric vehicles despite supply chain challenges and higher upfront prices. Major auto player Ford declared a growth rate of 139% while Volkswagen witnessed a 65% increase, and Tesla registered a rise of 81%.
Concerns among consumers over rising oil costs and tax incentives are thought to be the reason for the recent amazing performance of electric vehicle sales.
Global oil prices have skyrocketed as a result of rising inflation following the COVID pandemic recovery and the Russian invasion of Ukraine. The average price per gallon in the US recently stood at USD 4.25, up from USD 2.92 a year ago.
While increasing gas prices have prompted American consumers to think about purchasing electric cars, tax incentives, such as the federal tax credit of USD 7,500, have also played a huge role in inspiring many to switch to electric vehicles.
Although electric vehicle sales appear to have a future, there are worrying shortages of essential materials, which may hinder automakers’ ability to meet demand while maintaining low prices.
The shortages are caused by a number of issues, including sanctions against Russian metals, COVID lockdowns in China, embargoes against minerals from Xinjiang, and the backlog in US mining project approvals.
The most pressing scarcity is lithium, a vital component of batteries. Compared to last year, the cost of lithium battery cells has already risen from USD 105 to USD 160 per kilowatt-hour, and if supply constraints are not resolved, costs will keep increasing.
There have long been recommendations for producing more lithium batteries. It was foreseen by Tesla CEO Elon Musk in November 2021. He made light of the possibility that Tesla would have to enter the mining industry later in April on Twitter. But it’s not just Tesla alone; due to a lack of batteries, Volkswagen has already sold its entire electric vehicle inventory in the US.
China currently dominates the lithium battery business. It refines 80% of the world’s raw materials, owns 77% of the world’s cell capacity, and produces 60% of the world’s battery components. Lockdowns imposed by the government have had a catastrophic impact on world productivity. These slowdowns not only endanger American industry but also national security because these batteries are employed in electric vehicles and a variety of US defence technology.
The public and private sectors must collaborate to boost investments, advance mining and production in the United States and the Western Hemisphere quickly, and diversify supply chains to lessen our reliance on Chinese lithium in order to handle this threat.
Businesses have been stepping up to the plate and investing in electric vehicles and the essential components required for making these vehicles.
Tesla just purchased 10,000 acres in Nevada to start mining and established a Gigafactory in Texas to act as its primary manufacturing plant. SK, a South Korean firm, is getting ready to launch a sizable battery factory in Georgia where it will produce batteries for Ford and Volkswagen.
As part of its plan to obtain lithium from the Salton Sea in California’s Imperial Valley, where the Berkshire Hathaway Power Plant is attempting to produce up to 600,000 tonnes of lithium carbonate annually, GMC announced that it will invest in Controlled Thermal Resources, a business that uses geothermal energy to extract lithium.
Despite these actions being praiseworthy, the problems cannot be resolved by the private sector on their own. The Joe Biden administration must promote divestment from key minerals made in China.
The White House has so far set aside more than USD 7 billion to improve the country’s battery supply chain. As part of that investment, USD 3.1 billion, according to Joe Biden, will be given to businesses that produce and recycle lithium batteries. The Defense Output Act was also approved by the White House in March, which will significantly enhance battery production.
However, the Biden administration needs to go further. While exploring minerals that can replace lithium in batteries, the White House ought to offer incentives to firms willing to invest in battery plants in the US. China operates 93 large battery plants, compared to just 4 in the US.
New mining facilities must be approved quickly by the federal government. Eliminating regulatory barriers to mining will not only boost investment but also shorten the response time for urgent shortages, and solve a critical need in national security.
Finally, the US sector needs to diversify its supplies in order to completely lessen its reliance on lithium. Some firms have already identified viable solutions.
Iron-based grid batteries are being developed by ESS Inc. of Oregon, which will reduce the need for lithium and increase the supply of electric vehicles. Since the ocean is thought to contain up to 180 billion tonnes of lithium, a German Tech Institute assumes they can filter seawater to get additional lithium.
With everything said, the electric vehicle is the wave of the future for the auto industry, but for this revolution to truly succeed, the public and private sectors must collaborate to reduce the regulatory burden on mining and production as well as to challenge China’s dominance by promoting investment in domestic or “near-shore” lithium resources and expanding the range of practical battery options.
The problem does not lie only with the shortages of essential materials but also with the urge for people to shun fossil fuel-powered vehicles and opt for electric vehicles.
After persuading a reluctant Congress to invest heavily in electric vehicles, the White House must now convince tens of millions of hesitant drivers to buy them.
The administration aims to stop fossil fuel-powered transportation as electric cars struggle to shed their image as unreliable and difficult to charge. But unfortunately, GOP lawmakers are spreading these perceptions to harm the administration’s plan.
Federal agencies are hurrying to improve electric vehicle driving and boost public confidence by providing 500,000 new chargers and forming a new office to coordinate the changeover.
Additionally, the climate measure Joe Biden signed recently combines incentives for car buyers with prizes for carmakers who increase electric vehicle production and shift manufacturing lines to the US, providing the firms with a new impetus to embrace the change and promote the vehicles.
Even electric vehicle loyalists are frustrated by wait lists and increased pricing, adding to the administration’s difficulties.
Gregory Pierce, co-director of UCLA’s Luskin Center for Innovation, predicts a rough few years. Even with subsidies, there aren’t enough affordable electric vehicles.
Robert Fernatt, director of the state’s electric auto association, said it’s “very tough.” A vast region of West Virginia has no fast charging stations for anything but a Tesla, an expensive premium car. He advises out-o-state travellers to avoid West Virginia.
Even California, the country’s electrification pioneer, faces challenges in accelerating the change. Even with state and federal subsidies for low-income drivers that could soon add up to USD 17,500 for a used model, getting drivers into the cars is difficult.
At whatever price, selling most drivers on the autos will take time. According to an April survey by Consumer Reports, most drivers would not contemplate buying or leasing an electric vehicle today.
Many owners of the 2.5 million electric cars in the US love them. However, getting there has been expensive and resource-intensive, mainly focusing on a few states. As a result, only 5% of new automobiles sold are zero-emission, and nearly half of those sales are in California.
Joe Biden’s aim of selling half of all new automobiles as electric by 2030 will require many more states to adopt California’s and Massachusetts’ intensive outreach and regulatory measures.
However, not everyone is on board. The GOP is still working for the fossil fuel lobby, which wants to slow down the transition to green energy.
Meanwhile, Lucid Group, a California-based electric vehicle manufacturer, has announced that it would be opening its first overseas manufacturing plant in Saudi Arabia. Apart from this, the Kingdom of Saudi Arabia will give up to USD 3.4 billion in financing and incentives over the following 15 years.
According to a press release issued by the luxury automobile company recently, the manufacturing plant would be able to build 155,000 vehicles per year and will first service the local market. The automobiles will thereafter be exported to other countries.
Currently, Lucid’s factory which is based in Arizona can produce 350,000 units a year. Furthermore, Saudi Arabia’s minister of funding, Khalid al-Falih has stated that the country needs electric vehicle battery manufacturers, suppliers, and others who will open stores in the country, potentially creating 30,000 jobs.
Khalid al-Falih concluded by stating that Saudi Arabia is dedicated to its transition away from traditional fuels and sustainable energy.