Just 4% of North American Car Production Is Electric

Source: By Kyle Stock, Bloomberg • Posted: Tuesday, September 27, 2022

The bulk of US assembly lines are still churning out inefficient vehicles, keeping EVs largely unaffordable and unavailable.

President Biden Visits General Motors' Factory Zero Electric Vehicle Factory
Photographer: Emily Elconin/Bloomberg

For those with their hearts set on buying an electric car, here’s the critical math: Somewhere around one quarter of US drivers want one, but just 4% of the vehicles coming out of American factories fit the bill.

North American factories stamped out 7.4 million cars and trucks in the first half of this year, but only 323,000 of them were battery-powered, according to BloombergNEF and market forecaster LMC Automotive. That calculus is contributing to the dearth of affordable electric options, and means it will likely be years before everyone in the US with EV dreams is able to realize them.

“For the last two years or so, you’ve seen demand outpace supply,” says BloombergNEF analyst Corey Cantor. “For me, it’s totally an output question now.”

The lopsided production is a result of both tricky economics and manufacturing complexity. Car companies say they need to keep selling internal-combustion vehicles to fund the R&D necessary for the EV transition. Many are also rushing to simultaneously secure battery supplies, add EV assembly lines and hit ambitious deadlines for sunsetting their gas-powered machines.

“If you invest in inventory too early, you run into cash-flow issues; if you invest too late, you miss out on demand,” says Kathy Gersch, founder of Kotter International consultancy. “In this case, they’re really, really late.”

With the advent of electric startups like Rivian, Gersch says the situation for auto incumbents is not unlike Blockbuster Video launching a movie-by-mail service only after Netflix had amassed more than 1 million subscribers. The share of inefficient vehicles commanding domestic assembly lines also drastically undermines the carbon reductions from nascent EVs.

Consider the Stellantis plant in Detroit, one of the busiest car factories on the continent. It stamped out almost 175,000 vehicles in the first half of the year — all of them Jeep Grand Cherokees (about 22 miles to the gallon) and Dodge Durangos (closer to 18).

Over at Ford, 3% of North American production in the first half of the year was electric, while large gas-powered trucks and SUVs comprised more than two-thirds of its domestic output. The company made 34,000 Mustang Mach-Es, a compact electric SUV, but stamped out roughly twice as many Broncos, a burly trucklet that manages about 20 miles per gallon of gas.

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Auto executives know how high EV fever is running; it’s just that slow-rolling the path to electrification is arguably sound business. Ford, for example, has struggled to turn a profit on its EVs, in part because of rising commodity costs. And even though the industry is relatively fat on factory space, big batteries are only trickling out. Stellantis won’t have a North American battery source until 2024.

“You’re going to see pressure on the bottom line when we launch our EVs,” Ford Chief Financial Officer John Lawler told analysts at a conference in June. “They’re not going to be positive.”

Bloomberg Intelligence analyst Kevin Tynan puts it more simply: “Not every sale is a good sale.”

The electric cars are coming, though: LMC expects North America to nearly quadruple EV production by 2025. Ford is hustling to spin up three battery factories and two assembly plants in the Southeastern US, with the hope of being able to build 600,000 EVs annually sometime next year and 2 million a year by 2026. Stellantis is planning on half its US sales being electric by 2030. General Motors, meanwhile, just opened a critical battery plant this month in Ohio, and booked an order from Hertz for 175,000 battery-powered rigs.

With demand running so hot, these big bets are an existential imperative, even if profit margins aren’t quite as fat as executives would like. “At this point, there’s no reason for automakers to wait,” Cantor said, “otherwise Tesla will just eat up the market share.”