Dealers cannot sell electric vehicles they do not have

It is crunch time for electric vehicle makers. Russia’s attack on Ukraine has highlighted concerns about oil dependency and petrol prices just as manufacturers finally start to make good on their promises to deliver a wide range of greener cars.

In the past 10 days, Ford, Stellantis and Honda have all announced ambitious plans to speed up EV production, and Tesla finally won permission to open a new battery factory in Europe.

An extraordinary surge in oil prices to the highest levels in 14 years is reminding would-be car buyers of the financial advantages of going green. This could prove to be a global version of last autumn’s UK petrol shortages, which drove up online searches for electric cars and contributed to a tripling of EV’s share of new British car registrations in February, to nearly 18 per cent.

The potential for a step change is especially high in the US. Prices at the pump are always more volatile there and are currently heading for a new record. Americans have also been less enthusiastic about EVs than drivers in other big markets, because of smaller government subsidies, long driving distances and a lack of options beyond Tesla’s luxury cars.

Last year, US EV sales more than doubled but they still add up to less than 5 per cent of new passenger vehicles, compared to about 14 per cent in both China and Europe. China accounted for half of all EV sales last year, and purchases of battery-powered cars overtook diesel engines in Europe.

Meanwhile US consumers are still fretting about whether EVs work efficiently in cold weather and wondering if they make winter traffic jams worse. Never mind that Norway, long the EV global leader, is not known for mild winters.

Rising oil prices have already started to drive up consumer interest, as has a massive advertising push that saw half a dozen EV brands promoted during last month’s Super Bowl. But dealers cannot sell cars they do not have. The global semiconductor shortage and shipping delays have left inventories at low levels. Demand for plug-ins was already growing faster than most carmakers had anticipated and crucial components for batteries have long lead times.

Ford had to pause taking orders on the electric version of its popular F150 pick-up truck in December because it could not keep up with demand. Most of the advertised cars won’t be obtainable in the US for months to come. Even in Europe, where EV manufacturers have been ramping up for longer, wait times of 9 to 12 months for popular models are not uncommon.

“EVs are defined more by supply than demand right now,” says Dan Levy, analyst at Credit Suisse. Carmakers “are updating their targets every six months. The question is can the supply keep up.”

The fallout from the war certainly hasn’t helped. A clutch of major auto groups shut Russian plants because of the invasion. Some also halted production elsewhere because of supply chain issues. Ukraine is a major producer of the miles of cables and connectors that power many cars’ electrical systems — known in the industry as the “wire harness”.

While that production can be moved elsewhere if it must, Russia’s role as a key source of rare earth minerals creates a far more lasting problem. Prices of nickel used in many batteries soared so high this week that trading had to be halted. (Combustion engine cars are also vulnerable: Russia supplies palladium, needed for catalytic converters.)

The west has largely failed to plan ahead for the growing mineral demands of the energy transition. Unless environmentally minded investors rethink their usual scorn for mining, the lack of secure supplies of rare minerals will further drive up the already higher cost of electric vehicles as well as increasing production times.

There is a significant risk that many new car buyers who might have been inspired to try an EV will become discouraged by the waiting lists and higher prices. I should know — my family wanted an electric SUV but settled for a hybrid when BMW could not provide even an estimated delivery date. Many others will opt for another petrol model, delaying their personal energy transition for several years. By the time that car wears out, the current oil price spike may well be history. The petroleum industry is far better set up to increase production than rare earth miners.

Online searches for electric cars have already started to drop off in the UK, now that the petrol crunch has eased. And Americans have a long record of returning to gas guzzlers once oil prices fall, says Stephanie Brinley of S&P Global Mobility. This crisis, like so many others, could turn out to be another terrible waste.

brooke.masters@ft.com

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