Although they do seem popular in certain circles, currently electric cars only make up about 3% of total car sales. Automakers are going to fast track the making of electric cars, but there are several other factors that are coming into play here that will offer challenges to the plan.
One huge factor that works against electric cars is the element of cost, as they are wildly out of reach for the typical consumer, coming in around $66 K each. “That’s not going to fit in a lot of people’s monthly budgets at this point in time,” says Jessica Caldwell,executive director of Insights at Edmunds. “They [automakers] have to introduce the more expensive, more costly, higher-margin vehicles first to make the money to start to finance some of the lower-cost vehicles.
“Several big name car companies like General Motors and Chevrolet are hustling to release more cost-effective and affordable cars, which will hopefully lower the cost enough for an average citizen to enjoy them. President Joe Biden is also helping the cause with his Inflation Reduction Act, providing a $7,500 tax credit for people who are buying an electric car.
So why are electric cars that much more expensive?”The batteries are simply more expensive than the internal combustion engine,” says Carla Bailo, president and CEO of the Center for Automotive Research. “Most manufacturers are saying by 2025 batteries will be on par with the cost of an internal combustion engine and when that happens, that will definitely help bring the price down.”
As with other goods and services, the world’s dependence on China is a real issue here. “Something in the order of about 90% of the lithium that’s used in batteries is processed in China right now, which is not a desirable situation,” says Sam Abuelsamid, an analyst with Guidehouse Insights. Because China has such a chokehold on business, it is difficult to get out from under their control. Finding new sources of raw materials can be difficult, so people end up relying on China.
“Obtaining minerals from places with which we have trade agreements is going to be the biggest challenge because there’s huge competition for that,” says Michelle Krebs, executive analyst with Cox Automotive. “Everybody’s scrambling to cut deals for the minerals.”
Finally, even if you have an electric car, you cannot guarantee that when you drive around, you will find a reliable charging station. The federal government is spending $7.5 billion to expand the country’s charging infrastructure.
According to Advisor to Berkeley Capital, Adnan Zai, “The emission rules handed down by a few states will run into practical implementation issues. For one, until they develop a better mileage/distance machine on the cars as well as more efficient charging systems, the electric car is just a novelty.”
Understandably, if California and other states get their way, the whole scope of the automobile industry will shift, from creating transmissions and gas engines to electric motors and architectures. Companies will need engineers with a different set of skills for this transition. The transition is bound to be a bumpy ride.
At the end of the day, a lot is going to change about the electric car industry if California and other states are going to move towards them in the next 12 years. We will see if the United States finds the resources and resilience to make it happen.
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