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How crazy prices and years of waiting times could destroy the electric car experiment?

How crazy prices and years of waiting times could destroy the electric car experiment?

Not long ago, you went to a car dealership to buy a new car and the salesperson turned, pushed, and pushed just to make a sale. “Sit inside.” “Nice is not it?” “Leather seats. Touch screen.” “What will it take to get you in this car today?” Then, with a wink, “Let me talk to my manager to get you a good price.” Now, due to chip shortages, supply chain problems, soaring inflation, staggering gas prices, climate change, the war in Ukraine and insatiable consumer demand, the roles of car salesman and buyer have reversed. With dealers these days, it’s often the consumer begging to make a deal. The situation is bad enough in the case of gas-powered cars and trucks. But when it comes to electric and hybrid vehicles, a massive inventory shortage has turned the buying experience into a war for scarce resources. That in turn yields prices that defy reality.

The wait for a new Tesla Model Y, the company’s latest crossover, is estimated take up to almost a year. The wait is about as long for most of Tesla’s other car models, including the s and XElon MuskFancy EVs aren’t the only ones with astonishing wait times. Volkswagen CEO Herbert Diess said recently the electrical variants of his company‘s cars, including the Porsche Taycan, Volkswagen ID.4 and Audi E-Tron, are all “basically sold out…in Europe and in the United States” for the rest of the year. Orders for Ford’s Mustang Mach-E luxury SUV are: Closed also for the year.

Consumer demand for electric trucks, meanwhile, is so strong that some manufacturers have stopped taking new orders indefinitely. Such is the case for Ford’s electric pickup, the Lightning, which has an astonishing three-year waiting period, according to Kelley blue book. Tesla’s Cybertruck, slated to enter 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 the first Cybertrucks than we could fulfill three years after production started,” Musk said said on the 2022 Financial times Future of the Car conference in May. Rivian, a slick new electric truck is in so much demand supported by means of Jeff Bezos, that used models are almost sold online double price of a new one.

According to Cars.com, which tracks sales in the US, demand is so high that dealer inventory of all new vehicles has fallen by 70% in the last three years: car dealers had 3.4 million vehicles 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 spends at a dealership before purchasing it was just three weeks, compared to 49 days a year earlier. In-demand cars rarely make it to a dealer, with eager buyers picking them up through pre-orders. Many vehicles are thousands of dollars over list price.

Much of this madness can be attributed to supply chain problems. The chip shortage, which we have heard about since the start of the pandemic, has consequences for the supply of all cars. But electric vehicles need components that are so in demand that miners and producers of the necessary metals and chemicals just can’t keep up. For example, batteries for electric cars are usually made of cobalt, nickel and lithium, the price of which has increased significantly, according to the consultancy Alex Partners. “Due to multiple global factors, the EV market is currently experiencing some unusual bumps,” says Josh D Boone, executive director of Veloz, a non-profit advocate for electric cars. “Automakers are working hard to ramp up production to their pre-COVID levels, but are facing ongoing staff shortages and supply constraints. Chip shortages, wire harness shortages and shipping delays are all issues related to the early pandemic-related shutdowns, ongoing supply chain complications, China’s zero-COVID policy and now the war in Ukraine.

Then there is inflation, which is both a cause and effect of these ridiculously high prices. According to the latest consumer price index, which measures inflation in the US, prices for all indexed goods have risen 8.6% in the past 12 months. Guess what the midpoint of that rise was. Bingo! New and used cars. The index noted that the price of new cars has risen 12.6% in the past year and that of used cars has risen as much as 16%. The world is so turned upside down that used cars are selling for more than people bought them for. You may have heard stories of people who bought a car three years ago and were able to sell it to the dealer today for almost the same price (or higher).

Often these economies work themselves out in a short period of time. We are already seeing some of the petrol car prices fall back to reality, but the end is not yet in sight for consumers looking to buy electric or hybrid vehicles. The war in Ukraine has put gas prices under pressure, which in turn has highlighted the benefits of electric vehicles. Meanwhile, a spate of new electric trucks has caught the attention of outback Americans who don’t want to drive crazy little electric cars, but do want what’s BIGGER, BETTER, and WORSE! Given that according to The New York Times, less than 1% of the cars currently on the road in America are electric, and that supply chain problems and inflationary spending are expected to continue for the foreseeable future, demand is likely to far exceed supply in the coming years.

However, there is another scenario where the laws of supply and demand are broken by rising prices and inventory shortages. Yes, consumers are willing to pay a premium to save money on gas, but there is a price cap above which buying electric simply makes no sense. So far this year, Tesla has lowered the price of some of its cars with several thousand dollarsand Musk has indicated more raises are on the way. Arnaud Deboeuf, chief manufacturing officer for Stellantis, an auto manufacturing company, told Bloomberg that: the switch to electric cars is “doomed” unless prices start to fall. “If electric cars don’t get cheaper, the market will collapse,” Deboeuf said. In other words, if the production of electric cars becomes so expensive that consumers decide they are not worth the price, carmakers could be forced to lower prices below what it costs to make them, profit margins could collapse and the whole system could collapse. on its own weight.

Ultimately, the importance of electric vehicles goes well beyond gas prices and supply chains. Replacing gas cars with electric ones is key to fighting climate change, especially in a world where the Supreme Court seems determined to tie the hands of the Environmental Protection Agency and other administrative divisions. Today, Americans who buy electric cars generally qualify for a federal tax credit of up to $7,500, and the Biden administration wants that to go to $12,500† But given the insane numbers flying around dealers these days, even the target may need to be a lot bigger if we’re to make a dent in the climate crisis.