States, Semiconductors, and the EV Transition
State governments have announced plans to phase out the purchasing of combustible engines of certain automobile types. New York and California plan to ban or phase out most in-state sales of gasoline-fueled vehicles by 2035 — two of the largest markets in the country. But converting to electric vehicles (EVs) has challenges: it requires increasing production and building out EV charging infrastructure. All complicated by the current semiconductor shortage.
The semiconductor shortage is a global problem impacting production of laptops, gaming consoles, and automobiles. The pandemic, labor shortages, and other supply chain issues has only exacerbated this problem. Shortages have caused delays in production for some of the largest automakers including Toyota, Volkswagen, GM, and Nissan. One estimate from the middle of last year was that the semiconductor chip shortage could cost the global automotive industry $110 billion in revenue in 2021. And with electric vehicles requiring more semiconductor chips than traditional gasoline-powered cars, the shift to EVs will only compound the problem.
Governments mandating the shift to EVs may not be able to meet their targets if the shortage continues. The lack of chips may further delay or halt production of electric vehicles, stalling the progress towards meeting climate goals. It’s a complex problem with no easy solution.
Considering April 22 was Earth Day, this week looks at the semiconductor shortage and its impact on EV transition.
Car Makers and the Chip Shortage
- BMW’s CEO expects chip shortage to last into 2023 Reuters
- Ford’s first-quarter sales fell 17% as the automaker battled a chip shortage CNBC
- Some New Audis Have a ‘Semiconductor Shortage Package’ The Drive
- Toyota and Other Auto Makers Just Can’t Shake the Chip Shortage Barron’s
Electric Vehicle Issues
- Rivian (RIVN) Expects EV Battery Shortage to Eclipse Chip Crisis Nasdaq
- The Rise of Brand-New Secondhand EVs Wired
- Ford Fiesta Three Door Dropped Amid Chip Shortage, EV Pivot Ford Authority
- Interest in electric vehicles is increasing — but good luck getting one without a long wait Penn Live
What Can Be Done?
- Transatlantic Cooperation on Semiconductors German Marshall Fund
- The House and Senate are far apart on their bills to address computer chip shortage NPR
- Samsung says it will build $17B chip factory in Texas NPR
- Intel is building a $20 billion computer chip facility in Ohio amid a global shortage NPR
- Auto Experts Suggest Remedies for Semiconductor Shortage Wards Auto
CHART OF THE WEEK
Another problem complicating the transition to EVs is the need for charging stations. Estimates are the U.S. needs between three and seven million public charging stations to meet the demand of a mass switch to EVs. And that’s not taking into account the need for home chargers. The cost of building out this infrastructure will fall on taxpayers, utility companies, and private businesses.
In many states and territories, a recurring theme in Governors’ 2022 State of the State speeches has been the adoption and production of electric and alternative fuel automobiles, as well as fueling/charging infrastructure. More than two dozen Governors have mentioned electric or alternative fuel automobiles in their State of the States, a fourfold rise since 2021 according to the National Governors Association. The increased activity of Governors in promoting electric and alternative fuel vehicles is attributable, in part, to recent market developments and federal actions.
Additional funding became available within the bipartisan infrastructure law. The federal government has launched a $5 billion assistance fund for electric vehicle infrastructure and state governments will need to submit EV charging infrastructure proposals in order to take advantage of the money. The National Electric Vehicle Infrastructure (NEVI) Formula Program will make $615 million available to states in fiscal year 2022. Finally, a $2.5 billion competitive grant program for states, to increase charging access along alternative fuel corridors and in rural and underserved communities, will be announced later this year.
- The Issue: The paper identifies and quantifies major determinants of future EV demand
- Key Findings:
The first $500 billion in cumulative nationwide EV subsidies is associated a 7–10 percent increase in EV market share in 2035, an effect that diminishes as subsidies increase. The rate of intrinsic demand growth dwarfs the impact of demand-side subsidies and battery cost declines, highlighting the importance of non-monetary factors (e.g. charging infrastructure, product quality and/or cultural acceptance) on EV demand.