This isn't going according to plan.
The average gallon of gas in the U.S. hit a high of $4.59 this week, about 51% higher than a year ago, according to data from the AAA.
Not surprisingly, people are looking to the electric vehicle as a way of staunching the flow of cash from their wallets.
The numbers have been encouraging.
Electric vehicle sales in the United States surged to a record high of over 200,000 vehicles during the first quarter.
A new study from Experian shows that registrations for electric vehicles shot up 60% in the first three months of 2022.
Interest in buying an electric vehicle soared 70% since January, according to a report by Recurrent, a car industry analysis company.
But Recurrent also found that people who wanted to buy EVs have been having a tough time because of inventory issues, supply chain problems and price increases of 25% from a year ago.
Meanwhile, demand for EVs is so high that people owning them who decide to sell have recouped almost all of their original purchase price, Recurrent said.
Automakers have been blunt in their assessment of the situation.
All Sold Out
The German automaker, which recently said it was investing in lithium-ion battery plant in Kokomo, Ind., said last month that the demand for chips in cars remain high as supply chain constraints persist and will not improve until 2024.
Chief Financial Officer Arno Antlitz told German daily Boersen-Zeitung that there will not be enough semiconductor chips until 2024 because of the ongoing supply chain bottlenecks from the global pandemic.
Stellantis (STLA) - Get Stellantis N.V. Report CEO Carlos Tavares said he expects a shortage of EV batteries by 2024-2025, followed by a lack of raw materials for the vehicles that will slow availability and adoption of EVs by 2027-2028.
No Time To Adjust
“The speed at which we are trying to move all together for the right reason, which is fixing the global warming issue, is so high that the supply chain and the production capacities have no time to adjust,” he said, according to CNBC.
Rivian's (RIVN) - Get Rivian Automotive Inc. Report CEO RJ Scaringe issued a similar warning, stating that a shortage of battery supplies for electric vehicles could be a more serious challenge the current computer-chip shortage.
"Put very simply, all the world’s cell production combined represents well under 10% of what we will need in 10 years,” Scaringe said, according to the Wall Street Journal. “Meaning, 90% to 95% of the supply chain does not exist.”
A recent report by the research firm E Source said that the cost to produce electric vehicles is ready to surge over the next four years.
EV Costs Have 'Massively Risen'
E Source estimates battery cell prices will surge 22% from 2023 through 2026, peaking at $138 per kilowatt-hour, before they resume a steady decline through 2031— possibly to as low as $90 per kilowatt-hour.
The projected price hike is being driven by increased demand for raw materials, such as lithium.
Earlier this month, Wells Fargo analyst Colin Langan downgraded both Ford (F) - Get Ford Motor Company Report and GM (GM) - Get General Motors Company Report, writing that battery electric vehicle costs have "massively risen" and raw material supply is tight, yet tough U.S. regulations likely require more BEV sales.
Langan said that the raw material increase adds $4,800 and $8,500 in unplanned costs to the Ford Mach-E and Lightning, respectively.
Both companies are facing material risks as they consider substituting their popular gas-powered models for electric versions.
Ford relies on F-Series for over 60% of its profits historically, making possible substitution away from the combustible engine F-Series to the Lightning a material risk.
GM relies on large pickups for over 40% of its profits historically.
Langan said that a possible substitution away from the combustible engine Silverado to the electric version leaves the company open to a material risk.