The EV Industry Has Convinced Investors, Now It Needs Consumers

For years EV-related headlines had Tesla in them. It was something of a must - any EV news was either about Tesla or about another company taking on Tesla. But not anymore. 

Now that all the Detroit auto giants have joined the race for an electrified transport system, it's about much more than challenging the dominion of Tesla.

Normally, the Consumer Electronics Show in Las Vegas is, true to its name, about consumer electronics. This year, however, the stars of the CES were electric vehicles. Ford's F-150 Lighting, GM's Chevy Silverado and plans to have 10 models in just two years (up from two currently), and Stellantis's announcement that its Chrysler brand will be fully electric by 2028 were among the highlights of the show.

The game is really on for EVs, and it is going to be intense. Already the news from Detroit has hurt one of the most promising EV companies, at least stock-wise. Stellantis announced earlier this month that it had struck a deal with Amazon to use the company's Web Services and other technology in its smart cockpit software. The news immediately sent down the stock of Rivian, an EV startup with big plans and a comfy deal with Amazon to sell its e-vans.

On the other hand, Ford's stock soared on the news that it had received more reservations for the F-150 Lightning than it had expected, giving it a market cap of $97.6 billion last Friday, per a Wall Street Journal report. The Lightning is coming out later this year in limited numbers. GM's Silverado, an electric version of its bestselling model, is coming out in 2023.

Yet the planned electric vehicle revolution that has had investors scrambling for EV maker stocks and companies pouring billions into new manufacturing capacity is not without its challenges. Batteries are a vital component of electric cars and the most expensive single component. While Ford is offering starting prices of $40,000 for the F-150 and GM has also said the Silverado will begin at $40,000, no one really buys basic models, do they? And the Silverado can cost up to $105,000.

Battery costs have been hailed as falling fast, but this is already changing as the market for metals and minerals swings into a deficit due to a lack of new production and long lead times for new mining projects. Demand for nickel, for example, one of the key battery metals for long-range vehicles, is forecast to soar 19-fold between now and 2040, and miners are already racing to secure supply.

There is also the thorny issue of local production. The Biden administration, like the Trump administration before it, has made a big deal out of stimulating local production. But with mining, it has been tricky, with opposition from environmental organizations about as fierce as it is against new oil and gas pipelines. This would mean continued reliance on imports and vulnerability to price swings, which would affect end prices and therefore appetite for EVs, even with federal and state subsidies.

Speaking of appetite, it remains a challenge regardless of enthusiastic reports about surging EV sales. For all the surges - and EV sales in the U.S. did surge by as much as 88 percent last year - they still account for a minuscule portion of total car sales, at 3.2 percent for last year.

Put simply, after winning the trust of investors, EV makers, including majors such as GM and Ford, need to win the trust of the average American driver. The recent GM total recall of Chevy Bolts after faulty batteries caused fires in several of them will not help in this endeavor, and neither will the lack of charging points across the country. A greater variety of models, on the other hand, will help.

By Irina Slav for Oilprice.com

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