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Banking

Electric Car Shortage: Dealers Struggle to Meet Growing Demand

Although sales of electric cars and trucks are increasing, their popularity is surging, making it difficult to find one nearby that is in stock. A recent study by the Sierra Club sheds light on the matter, showing that neither new nor used battery electric or plug-in hybrid vehicles were available for purchase in 2022 at nearly two-thirds of the US car dealers polled.

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The scarcity of EVs comes at a crucial time when transitioning to environmentally friendly transportation is vital for combatting climate change. Transportation in the US is the main contributor to greenhouse gas emissions, with passenger cars and trucks accounting for a sizable 57 percent of this percentage. In order to solve this environmental concern, the United States has pledged to cutting emissions in half from 2005 levels by 2030. As a result, significant automakers like General Motors have pledged to producing only electric cars, and some governments like California and New York are considering outlawing vehicles that run on fossil fuels.

The main challenge behind the EV shortage lies in supply chain blockages, particularly in semiconductor and battery production. Manufacturers are unable to satisfy the rising demand for electric vehicles because of these obstacles. Even well-known carmakers like Honda, Toyota, and Stellantis faced difficulties in making EVs and plug-in hybrids available for sale in North America last year. According to the Sierra Club survey, 44 percent of car dealers who lacked EVs expressed their willingness to sell them if they could get their hands on one.

However, the supply chain issues are not the sole reason for the EV shortage. A significant portion of car dealers (45 percent) said they would not sell EVs even if they were available. This reluctance can be attributed to the complexities of the car sales model, which can put dealers, manufacturers, and customers at odds. The economics of EVs can disrupt the traditional business model for dealerships, creating another critical bottleneck in the EV market. In some cases, dealers are granted monopolies in specific areas by manufacturers, limiting nearby options for buyers seeking specific EV models.

On the bright side, the rise of all-electric carmakers like Tesla and Rivian has led to a push for direct sales from car companies to customers, bypassing traditional dealers. This trend is forcing major auto companies and dealerships to adapt to the changing landscape of the automotive industry. It also lays the foundation for the development of future zero-emission vehicles.

The experience of purchasing an EV can vary significantly based on the car model and location.According to the report, only 11% of Honda merchants offered EVs for sale compared to 90% of Mercedes-Benz dealers. Dealers in states like Georgia and Florida had a higher percentage of EVs in stock than in Western states like California, Oregon, and Washington. The availability of EVs also varied across different geographic areas in the US.

Currently, all states have regulations that encourage or require carmakers to sell vehicles through dealerships. However, this setup poses a challenge for manufacturers looking to sell directly to customers in some states. Tesla, for example, operates a factory in Texas but cannot sell its cars directly to Texans. Instead, the vehicles have to be shipped out of the state before delivery to a Texas buyer.

Even though there aren’t enough electric cars on the road, the auto industry is moving in the right direction towards a greener future. Electric cars and trucks accounted for 14 percent of new vehicle sales worldwide in 2021, showcasing the increasing adoption of clean transportation. As automakers continue to invest in EV infrastructure and governments implement supportive policies, the accessibility and availability of electric vehicles are expected to improve in the coming years.

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