September 16, 2022
As the world collectively strives to cut carbon emissions, several countries around the globe have pledged to replace the conventional internal combustion engine (ICE) cars on their roads with zero-emission electric vehicles. Unlike ICE cars, EVs run on rechargeable lithium-ion battery packs and produce zero emissions at the tailpipe. But despite the lofty electrification plans of most countries, plenty of challenges stand in the way of mass electric vehicle adoption.
One of them, experts warn, is the energy crisis that has gripped the world for months. With energy prices rising on an almost daily basis, the cost of producing electric vehicles has gone up as well. As a result, carmakers have passed these extra costs onto the consumer, making electric vehicles even more expensive than they were before. Before the Russia-Ukraine war impacted global energy prices, electric vehicles were already too costly for most consumers.
Aside from range anxiety, exorbitant costs were the number-one reason keeping most drivers from going electric. But in recent months, as carmakers have contended with increased energy prices, EVs have become costlier, and automakers such as Tesla and General Motors have raised the prices of their electric offerings. With no end in sight for the global energy crisis, experts warn that electric vehicle adoption could be significantly impacted.
Increased electricity prices coupled with a chronic shortage of crucial parts, as well as the rise in the cost of raw materials threatens the future of EVs, experts believe. Coupled with a widespread drop in disposable income among consumers, these factors could massively hinder the adoption of battery electric vehicles (BEVs) over the next few years. Current electric vehicle owners are already being forced to dig deeper into their pockets to charge their cars.
In many European countries, including Germany, EV owners have seen their charging costs increase by 10% both at home and in charging stations as reduced gas inflows from Russia have threatened the energy supply. Establishments such as discount supermarkets that offered free EV charging to their customers have also begun introducing charges, a trend that automobile economist Stefan Bratzel believes is an immediate threat to the nascent electric vehicle industry.
The explosion in electricity prices could pose an acute danger to the transition to electric vehicles, he says, stating that if electric vehicle operational costs went up, the surge in EV adoption could collapse. He is among a group of advocates that is urging the German government to ensure electricity prices remain lower than gas prices to encourage EV adoption.
It is now up to electric vehicle makers such as NIO Inc. (NYSE: NIO) to find innovative ways around the production cost increases so that car buyers can still find the price of switching to EVs affordable.
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