U.S. Electric Car Sales Climb Sharply Despite Shortages

There is a shortage of semiconductors and raw materials, which is limiting production. However, buyers remain enthusiastic about purchasing semiconductors.

Americans are buying electric vehicles at a record pace, even though they cost more and it can take a long time to get them. This shows that the internal combustion engine is on its way out.

Vehicles that run on batteries accounted for 5.6 percent of new-car sales from April through June, still a small slice of the market but twice the share from a year ago, according to Cox Automotive, an industry consulting firm. Overall, new-car sales declined 20 percent.

Some companies like Tesla, Ford Motor, and Volkswagen have been struggling to build more electric cars quickly. This is because they have been running into shortages with semiconductors. These are even more essential for electric cars than gasoline cars. Prices for lithium and other raw materials needed for batteries have also been going up.

"The transformation is real," said John Lawler, the chief financial officer of Ford. Ford sold 15,300 electric cars from April through June, a 140 percent increase from a year earlier.

However, the popularity of electric vehicles has taken the industry by surprise and exposed deficiencies that could slow the transition to battery power. This is considered essential to containing climate change.

One of the lessons for Ford and other carmakers is that the switch to electric vehicles requires them to fundamentally remake their factory and supply networks. For example, to make the transition, they have begun underwriting makers of advanced batteries. They are also dealing directly with mining companies to secure scarce raw materials. Ford is planning a $5.6 billion complex near Memphis to build electric vehicles.

Carmakers and suppliers have announced plans to invest more than $500 billion worldwide through 2026 in order to upgrade their factory networks and supply chains. However, it will take several years for manufacturing capacity to meet demand.

Another obstacle to electric car ownership is the lack of public charging stations. Apartment dwellers, in particular, have few places where they can plug in their cars. Numerous companies are competing to build networks of charging stations, but the process is slow. The Biden administration has pledged funding to help speed up the process.

"The market is ahead of the charging network," said Cathy Zoi, the chief executive of EVgo, which operates more than 850 fast-charging stations in the United States.

Electric cars are much more costly than gasoline cars. They are out of reach for many buyers, even when the fuel savings are factored in. The average price for an electric car in the United States is about $66,000, compared with $46,000 for all new cars. One reason is the cost of batteries, which rose in price because of shortages of raw materials after declining for years.

"In order to get 15 percent of the market, or 25 percent or 50 percent, we're going to have to appeal to a much larger group of people," said John Bozzella, the president of the Alliance for Automotive Innovation, an industry group. "That's where the challenge lies."

Electric vehicles are becoming more popular in the United States, but they are still much more popular in Europe and China. In Europe, around 10% of new cars sold are electric. In China, around 20% of new cars sold are electric. This is partially because their governments offer subsidies and put quotas on how many electric cars must be sold each year. However, part of the reason for their popularity is that there are more lower-priced models available.

Government policy also affects the United States. For example, California requires manufacturers to sell a certain number of zero-emission vehicles. In addition, many people in California drive electric cars. However, the Biden administration's efforts to promote electric vehicles nationwide have faced strong opposition in Congress.

According to Felipe Smolka, a partner at the consulting firm EY who follows the electric vehicle market, sales of cars in the United States will increase as battery-powered cars become more popular. People will stop buying cars that run on fossil fuels because they are afraid that these cars could become obsolete and lose their resale value. Carmakers have largely stopped investing in internal combustion engine technology.

"The energy behind this transition is already very high," Mr. Smolka said.

Not all carmakers are selling electric vehicles at the same rate. There is a growing divide between the companies that have begun to sell cars that can compete with Tesla's popular models and those that have not.

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