Last year, the demand for electric vehicles (“EVs”) grew in China, Europe and the United States while the demand for gas cars remained stagnant. This huge demand has led some carmakers to require consumers to fork out advance deposits as some models are sold out for the next year and more.
Fuel cars contribute to climate change through the emission of greenhouse gases while electric cars are environment friendly because they rely on clean energy for their operation. EVs accounted for 9% of all new cars sold globally last year, up from 2.5% in 2019. This year the number is expected to grow as the sector receives more investment. According to Scott Keogh, CEO of Volkswagen Group of America, the transition to electric vehicles is probably one of the biggest transformations in the history of capitalism.
This transition will affect almost 3 million Americans who produce and sell auto parts. According to industry experts, electric cars require fewer components, which means fewer workers would be needed, and makers of fuel injection systems and mufflers could go out of business.
Meanwhile, the cost of electric cars is likely to increase as a result of an increase in production costs. A car battery uses lithium, cobalt and nickel in its production, and those metals are now on high demand. A spike in prices of these raw materials may lead to a higher cost of purchasing an electric car.
Another limitation the transition is facing is the unavailability of charging infrastructure. There are less than 50,000 public charging stations in the United States, which has made it unappealing for users who drive long distances to charge their vehicles. As a way to improve the situation, Congress passed a $7.5 billion infrastructure bill in November that would include the building of 500,000 new charging stations.
Additionally, government assistance would be instrumental in accelerating the transition to electric vehicles. With more than 250 million existing gas cars, the government could offer incentives to ease the expense of consumers who purchase the cars.
As EV adoption continues reshaping the car industry, auto makers are the biggest beneficiaries to these developments. Tesla announced that it delivered about a million cars last year. Meanwhile, Porsche’s Taycan outsold the company’s best-selling 911 last year. Mercedes-Benz, on the other hand, sold almost 100,000 electric vehicles last year. Last year, Ford announced the electrified version of the F-150 truck, which has reservations for more than 200,000.
It could be a precarious time for automakers that have been hesitant in selling battery electric vehicles as the tide is clearly against them. Toyota has quickly realized this and will begin selling battery EVs this year after producing only hybrid vehicles. Other companies, such as Nikola Corporation (NASDAQ: NKLA), have opted to make hybrid vehicles as well as those running on other alternative clean energies, such as hydrogen.
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