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Will Electric Cars Be A Knockout Punch For Detroit?

"As interest in the technology snowballs, raw-material supplies could end up being the real problem," Stephen Wilmot wrote for the WSJ.

Detroit has, in the last few years, become almost a cliché example of America's auto industry decline. 

The city has lost 60% of its population since 1950 and, on Tuesday, Japanese company Toyota ( (TM) - Get Toyota Motor Corp. Report) became the country's best-selling automaker after outpacing Detroit-based General Motors ( (GM) - Get General Motors Company Report) for the total cars sold in 2021. 

But while American carmakers have been losing market share to Japanese producers for decades, the rise of electric vehicles is posing new challenges for the city.

In an analysis for the Wall Street Journal, Stephen Wilmot wrote that the supply chain shortages that have plagued the entire country throughout the pandemic are going to get worse as many buyers transition to electric cars. 

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The metals and other raw materials that go into making them are harder to obtain and currently in short supply due to escalating demand.

"Globally, optimistic forecasts for EV adoption are at odds with the slow ramp-up of metal supplies required for their batteries," Wilmot writes. "The dynamic is likely to reward those companies with the most robust supply agreements, which explains why the largest auto makers have been investing in cell production and deals with miners."

As a major manufacturer, GM is in a better position to solve these issues and gain back its leading ground in coming years — in the summer, it has committed to pouring $35 billion into electrical vehicle development over the next four years. 

But with significant innovation coming out of countries like Japan, supply chain problems are going to pose a significant challenge.

"As interest in the technology snowballs, raw-material supplies could end up being the real problem — as well as the higher vehicle prices they inevitably lead to," Wilmot writes.