Pre-pandemic, the forecast for electric vehicle (EV) production was sunny. It remained so in some quarters in the early days of the crisis, before analysts realized slowdowns and supply chain issues would linger into 2021 and 2022. Manufacturers had difficulty producing cars of all types. Production of the Ford Mustang Mach-E and Chevy Bolt was suspended.
In 2023, can we really count on these vehicles to roll off the assembly lines?
Why the slowdown?
As you might expect, nearly all of the problems causing the slowdown were directly Covid-related, or part of the ripples it caused in the world economy.
The vast majority of current semiconductor chip production is located in China, which shut down earlier and longer than other countries. The resulting chip shortage was especially troublesome for auto manufacturers, as the average EV uses 2,000 chips, and today’s fossil fueled cars contain around half that number.
As Covid spread, demand plummeted for vehicles and other chip-heavy items. This meant canceled orders and lowered demand for the chip manufacturers. When demand returned, this slump made it difficult to get production back up to pre-pandemic levels.
Similar difficulties affected lithium battery production (which was hurt by the increase in costs to ship heavy materials) and EV production was also slowed by the snarls in all global supply chains.
6 Reasons to Expect Reliable Production
EV production is coming back online rapidly and is likely to surge far above pre-pandemic levels in the near-term.
Much of the bad EV news was market correction—Frequently, news items about EV manufacturers portrayed a struggling industry, even when they reported typical startup failures or corrections when firms were vastly overvalued. For example, Rivian Automotive lost 70% of its value in about a year, a hair-raising number until one learns that before the decline it had a higher market value than Ford!
A lot of money can make a lot of change—Auto manufacturers have already committed a trillion dollars in new investment to increase EV manufacturing capacity. This will ease shortages and meet rising demand. In addition, GM is investing $650 million in a partnership with Lithium Americas Corporation to ensure a steady flow of Nevada lithium to their four planned battery-building plants. The batteries they produce will be installed in the 1 million EV’s GM will produce yearly by the end of the decade.
Shipping costs have declined sharply—Rates in the shipping sector declined by two-thirds over the course of 2021 and began declining again in late 2022. This will reduce pressures on manufacturing and supply chains.
More EV models are hitting the market—More EV’s are offered for the 2023 model year than ever before, and more are from established big name auto manufacturers. If these companies were unsure about the ability to move these cars to buyers, they would have delayed their rollouts. Indeed, it’s estimated that there will be 75 consumer EV models by 2025, with even more aimed at the commercial market.
Charging infrastructure is growing—No matter how much manufacturing capacity there is, the success of EV’s as a technology will depend on customer demand, and the lack of fast-charging infrastructure in some regions has been an obstacle to that demand. However, the recent infrastructure bill contained funding for a nationwide network of charging stations, and state and industry incentives are contributing to an increase in stations.
The CHIPS Act—The Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act became law this year and is designed to increase the number of semiconductor chips made in America. It includes $52 billion in research funding and grants, and a 25% investment tax credit for facilities that increase chip manufacturing capacity.
Ready for a Partner?
Could you use some advice on the what, why, and how of electric vehicles and charging stations? Thayer Energy Solutions has experts on hand who are ready to help. Get in touch today at 815-282-1112, and together we’ll find the best options for your situation.