Not too long ago, you’d walk into a car dealership to buy a new car and the salesperson would twist, jostle and push to make a sale. “Sit inside.” “Good, right?” “Leather seats. touchscreen.” “What would it take to get you into this car today?” Then, with a wink: “I’ll talk to my manager about getting you a better price.” Now, with chip shortages, supply-chain problems, rising inflation, staggering gas prices, climate change, in Ukraine Due to war and unsatisfied customer demand, the roles of car salesman and buyer have reversed. Today, at dealerships, customers often beg to close the deal. The situation is bad enough for gas cars and trucks. But when it comes to electric and hybrid vehicles, a massive shortage of inventory has turned the buying experience into a battle for scarce resources. In turn, producing prices that defy reality.
The wait time for the new Tesla Model Y, the company’s latest crossover, is estimated to be around a year. The wait is longer for Tesla’s other car models, including the S and X. Elon MuskTheir fancy EVs don’t just have astounding wait times. CEO of Volkswagen Herbert Dice He recently said that electric variants of his company’s cars, which include the Porsche Taycan, Volkswagen ID4, and Audi e-tron, are “basically sold in…Europe and the United States” for the rest of the year. Orders for Ford’s Mustang Mach-E luxury SUV are closed for the year.
Consumer demand for electric trucks is so strong that some manufacturers have stopped taking new orders indefinitely. According to Kelly Blue Book, Ford’s electric pickup truck, called the Lightning, has a three-year wait. Tesla’s Cybertruck, scheduled to go into production in 2023, has so many pre-orders that Musk said earlier this year that his company would stop taking new reservations. “We have most orders for the first Cybertrucks that we can fulfill three years after the start of production,” Musk said in 2022. Financial Times Future of car program in May. A slick new electric truck backed by Rivian is in high demand Jeff Bezos, Used models are selling online for double the price of new ones.
According to Cars.com, which tracks sales across the US, demand is so high that dealer inventories of all new vehicles have fallen 70% over the past three years: Car dealers had 3.4 million vehicles for sale in April 2019; As of this April, that number had dropped to just over a million. Consumer-research company JD Power reported in April that the average number of days a new car sits in a dealership before a purchase has slowed to just three weeks, compared to 49 days just a year ago. In-demand cars rarely make it to dealerships, with eager buyers snapping them up through pre-orders. Many vehicles are going for thousands of dollars above list price.
Much of this madness can be attributed to supply-chain issues. The chip shortage we’ve been hearing about since the pandemic began affects the supply of all cars. But electric vehicles require in-demand components that miners and producers of essential metals and chemicals simply cannot keep up with. Electric-car batteries, for example, made of cobalt, nickel and lithium, have seen their prices rise significantly, according to consultancy Alyx Partners. “Due to a number of global factors, the EV market is currently experiencing some unusual bumps,” he says Josh D. Boone, Executive Director of Veloz, a non-profit advocate for electric cars. “Automakers are working hard to increase production to their pre-COVID levels but face ongoing labor shortages and supply constraints. Chip shortages, wire-harness shortages and shipping delays have led to early pandemic-related outages, continued supply-chain complications, China’s zero-COVID policy and now in Ukraine. All are problems related to war.
Then there is inflation, which is the cause and effect of ridiculously high prices. According to the latest Consumer Price Index, which measures inflation in the US, prices for all indexed goods rose 8.6% over the past 12 months. Guess what’s at the center of that rise. Bingo! New and used cars. The index also noted that new car prices rose 12.6% from last year and used cars rose 16%. The world is so upside down that used cars are being sold for more than people are buying. You may have heard stories of people who bought a car three years ago and were able to sell it to a dealership today for the same price (or more).
Usually this economics works in short order. We’re already seeing some gas-car prices return to reality, but there’s no end in sight for consumers looking to buy electric or hybrid vehicles. The war in Ukraine has juiced up gas prices, highlighting the benefits of electric vehicles. Meanwhile, a string of new electric trucks have caught the attention of Americans who don’t want to drive stupid little electric cars but want something bigger and better and badder! Type, given The New York Times, Less than 1% of cars on the road in America today are electric, and supply-chain problems and inflationary costs are expected to continue for the foreseeable future, with demand outstripping supply for at least the next few years.
However, there is another situation where the laws of supply and demand are broken due to rising prices and shortage of inventory. Yes, consumers are willing to pay a premium to save money on gas, but there is a price ceiling above which it makes no sense to buy electricity. So far this year, Tesla has raised the price of some of its cars by several thousand dollars, and Musk has indicated that more increases are on the way. Arnaud Deboeuf, The chief manufacturing officer of automaker Stellantis told Bloomberg that the transition to electric cars is a “dood” unless prices start to fall. “If EVs don’t get cheaper, the market will collapse,” DeBoeuf said. In other words, if electric cars become so expensive to manufacture that consumers decide they’re not worth the price, automakers may be forced to drop prices below what it costs to manufacture them, profit margins fall, and the entire system collapses. On the weight itself.
Finally, the importance of electric vehicles goes beyond gas prices and supply chains. Replacing gas cars with electric cars is key to fighting climate change, especially in a world where the Supreme Court has decided to tie the hands of the Environmental Protection Agency and other government departments. Today, Americans who buy electric cars typically qualify for a federal tax credit of up to $7,500, and the Biden administration wants to push that to $12,500. But given the crazy numbers flying around dealerships these days, even the target number might have to be pretty big if we want to make a dent in the climate crisis.