EV Demand Is Growing, and Domestic Production's Rising to Meet It

North American electric car production is nearing the sweet spot, BMW is talking up hydrogen and doesn’t care if it’s uncool, and Gordon Murray’s successor to his McLaren F1 has reached series production at last. All that and more in The Morning Shift for Wednesday, March 15, 2023.

1st Gear: Supply, Meet Demand

In December, electric vehicles accounted for 7 percent of all automotive production in North America. Meanwhile, EVs accounted for 5.8 percent of all new cars sold in the U.S. during the third quarter of 2022. On paper, it would seem like supply is exceeding demand, though, of course, far more people are likely in the market than actually pull the trigger. In broader, more realistic terms, domestic production of EVs — meaning those that qualify for federal tax rebates — is beginning to satisfy consumer interest, particularly as companies other than Tesla kick up their output. From Bloomberg:

Indeed, while American EV demand remains hard to pin down, it is likely far higher than supply. Some 26% of US drivers say they intend to buy an electric vehicle, according to the American Automobile Association. And if other countries are any guide, that is the precise share of new car sales in the US that could be fully electric by the end of 2025 — that is, if there are enough EVs to purchase.

“What we’ve seen in the past year is a tremendous growth in what we call the mass market,” said Elizabeth Krear, vice president of the EV practice at JD Power. In October, for example, a JD Power survey found that more EV customers were considering a Chevy than a Tesla, Krear says. (Though Tesla regained its bragging rights after cutting prices in January.)

The year-end EV blitz suggests supply is gradually closing the gap with demand, and buying an electric car is likely to be less fraught for Americans in coming months. But US EV production is still very much in first gear. Ford plans to have its factories on pace to crank out 600,000 electric vehicles a year by the end of 2023; that would be a six-fold increase over its output in 2022. The automaker aims to push that pace to 2 million units by the end of 2026.

The article goes on to cite General Motors’ moves to try and become second only to Tesla in terms of EV volume — but also name-drops the GMC Hummer EV and Cadillac Lyriq, two cars that have not yet enjoyed the manufacturing ramp-up they should’ve already had by now. The Hummer is built in Detroit, while the Lyriq is made in Tennessee. These details are important because if your EV is made in America, you stand a better chance of selling it these days. Which brings us to…

2nd Gear: Hyundai’s Insult to Injury

The top eight EV models in January were all cars made in the U.S. — three Teslas, both versions of Chevrolet’s Bolt, the Ford Mustang Mach-E and F-150 Lightning and even Volkswagen’s ID.4. You know what’s notably absent from that list? Hyundai and Kia’s critically acclaimed EVs, which stormed out the gate with strong sales last year right up until the law changed. From Automotive News:

The top eight EVs in January were all made in North America, including three models from Tesla, two from Ford and the newly surging VW ID4 crossover that began production in Chattanooga last year.

Hyundai’s imported Ioniq 5 crossover fell to ninth place from seventh place for full-year 2022. Kia’s Korean-made EV6 was no longer among the top 10 EVs in January, after coming in eighth for 2022, according to Experian.

The shift in the EV landscape comes after passage of the Inflation Reduction Act last year, which changed eligibility for the U.S. federal tax credit of up to $7,500. Starting in August 2022, the incentive for the first time required that EVs be assembled in North America. […]

While new EV registrations grew 74 percent from January 2022, the tax credit revisions slowed the red-hot growth of Korean imports from Hyundai Motor Group, which for much of last year was running second to Tesla.

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Last fall, Hyundai broke ground on a new facility in Savannah, Georgia dedicated to manufacturing EVs and batteries. The automaker expects it to be possibly churning out cars as early as the third quarter of next year. Hyundai’s got deep pockets — it doesn’t desperately need the plant up and running now — but you know it’d sure love for it to be ready ASAP. If it’s any consolation to Hyundai, once the Treasury issues its battery sourcing guidance, it’ll be far from the only EV maker left in the lurch.

3rd Gear: BMW’s Big Into Hydrogen

BMW expects half of its total sales to be comprised of EVs before the end of this decade. It even sees potential in floating a hydrogen fuel-cell model sooner rather than later. From Reuters:

One of the most prominent advocates among carmakers of hydrogen fuel cell technology as a worthwhile option alongside battery-powered cars, Chief Executive Oliver Zipse said he could also envisage a hydrogen-powered vehicle going into production by mid-decade.

Key to making that happen is an expansion of the hydrogen fuelling network, which was mainly in the hands of the heavy vehicle transport industry, development chief Frank Weber added in a press conference dedicated to the company’s annual results.

“We see hydrogen-electric vehicles as a meaningful complement to e-mobility, even with something of a time lag,” Zipse said.

The BMW iX5 Hydrogen* test vehicle, with a range of 500 km (310 miles) and an ability to refuel in three to four minutes, was being tested in various countries, BMW said in a statement.

BMW’s the first company that’s not Toyota, Honda, or a commercial truck startup I’ve heard boosting hydrogen in quite some time. Not surprisingly, BMW actually sources its fuel cells from Toyota. The German automaker says that the tech is ideal for longer journeys when a need to refuel quickly is especially valuable, though that’ll really depend on how common hydrogen refueling stations are. Some things never change.

4th Gear: GM Has Idled, Will Keep Idling

GM won’t say precisely what supply chain issue forced it to idle its Silao Assembly Plant in Mexico that builds pickup trucks earlier this month. Whatever it is, it hasn’t cleared up yet and the pause will continue through March 20. Again, per Reuters:

The largest U.S. automaker previously announced it was halting production from March 4-12 at its central Mexico plant because of a supply chain issue. The automaker said is working with suppliers to resolve the supply chain issue and plans to resume production next week.

GM declined to say what the supply issue was but said it was not related to semiconductor chips.

GM Chief Financial Officer Paul Jacobson said in January the automaker continued “to face some supply chain and logistics issues, but overall, things remain trending in the right direction.”

Last month, GM said it would idle its Fort Wayne, Indiana, assembly plant that builds Chevrolet Silverado and GMC Sierra pickup trucks for two weeks starting March 27 to maintain “optimal inventory levels with our dealerships.” GM said the Mexican production halt was not related to efforts to optimize inventory.

If nothing else, this is the unavoidable kind of production stoppage, not the sort caused by a desire to create artificial scarcity and goose sticker prices by only churning out the most loaded, high-margin models. I guess that’s a silver lining.

5th Gear: One Satisfied Customer

Remember Gordon Murray Automotive’s T.50 — the most spiritual of all the successors to the McLaren F1, so long as you discount everything McLaren has made in the last 30 years? It’s taken quite a while, but the first customer-destined T.50 is undergoing assembly now, and Gordon Murray just placed his mark on the chassis with a silver Sharpie, according to the company’s social channels.

One almost down, 99 more to go.

Reverse: The Eisenhower Tunnel

On this day 55 years ago, I-70’s Eisenhower Tunnel began construction. More than 11,000 feet above sea level, it’s one of the highest tunnels in the world. Turns out boring through earth is a little harder that high up, which is why one engineer famously said “we were going by the book, but the damned mountain couldn’t read.” From History.com:

On March 15, 1968, construction starts on the north tunnel of the Eisenhower/Johnson Memorial Tunnel on Interstate 70 in Colorado, some 60 miles west of Denver. Located at an elevation of more than 11,000 feet, the project was an engineering marvel and became the world’s highest vehicular tunnel when it was completed in 1979. Four months after opening, one million vehicles had passed through the tunnel; today, some 10 million vehicles drive through it each year.

The north tunnel (or bore) was finished on March 8, 1973 and named for America’s 34th president, who was in office from 1953 to 1961. Construction on the south tunnel began on August 18, 1975, and was finished on December 21, 1979. The south tunnel was named for Edwin C. Johnson, a Colorado governor and U.S. senator who was a big supporter of an interstate highway system across his state. (Interstate 70 stretches more than 2,100 miles from Interstate 15 near Cove Fort, Utah, to Baltimore, Maryland. It was America’s first interstate highway project. Construction began in 1956 and ended in 1992 in Glenwood Canyon, located near the city of Glenwood Springs in western Colorado.)

The north tunnel cost $117 million to construct and at the height of the building process, some 1,140 people worked three shifts, 24 hours a day, six days a week. The south tunnel cost $145 million and employed 800 workers, approximately 500 of whom were involved in drilling operations.

Neutral: You See the Strangest People at the Oscars

So last night I had that double-take moment everyone already had on Sunday, which was noticing famous Scuderia Ferrari boss and ex-FIA head honcho Jean Todt at the Oscars. As everyone’s well aware now, I had no idea he was married to Michelle Yeoh, who of course just won the Academy Award for Best Actress. The world’s a wild place.