Gus Carlson is a U.S.-based columnist for The Globe and Mail.
The problem with government mandates aimed at manipulating free markets is they are typically based in political expediency, not commercial reality.
As more potholes appear on the road to electric-vehicle nirvana, edicts by lawmakers in Canada and states such as California and New York to require all new-car sales be EVs by 2035 are proving the point: Politically motivated virtue signals rarely withstand pressure testing from real-world market forces.
Those forces are now schooling government on the scope and timeline for broad adoption of EVs. And if they’re paying attention to what’s happening – and not happening – in the EV world, lawmakers should back off their ill-considered bulls and wake up to the reality of the marketplace, as ideologically sobering as that may be.
The downsides of swimming against the tide on this threaten the economy. While automakers ramp up EV production to meet the looming mandates, dealers are swamped with huge inventories of unsold EVs – inventories well above the national average for gas-powered or hybrid vehicles. Consumers are balking at high EV prices, high maintenance and insurance costs, and range anxiety exacerbated by lack of charging stations. Some automakers have laid off employees at EV plants or redirected resources because of sagging demand.
In an open letter to U.S. President Joe Biden late last year, a coalition of more than 3,000 U.S. auto dealers called for the administration to “tap the brakes” on its aggressive EV posture because the enthusiasm of early adopters had stalled.
“BEVs (battery electric vehicles) are stacking up on our lots,” the dealers wrote. “Today, the supply of unsold BEVs is surging, as they are not selling nearly as fast as they are arriving at our dealerships – even with deep price cuts, manufacturer incentives, and generous government incentives.”
Signs that mandates are out of step with market reality are everywhere. A week ago, market leader Tesla warned investors of slowing growth in EV sales this year, sending its shares down 12 per cent and wiping out US$80-billion of its market value. Financial results for the most recent quarter disappointed, with adjusted earnings per share down 40 per cent from a year earlier, and revenue falling short of forecasts – the second consecutive quarter the company missed analysts’ forecasts.
Also last month, rental-car giant Hertz said it would sell a third of its EV fleet – about 20,000 vehicles – and back off its plan to convert a quarter of its global fleet to EVs by the end of 2024. The company cited weak consumer demand for EVs as well as their high maintenance and insurance costs, and lack of charging stations.
Insuring EVs has become a big cost headache. Bloomberg reported recently car-insurance premiums overall have increased because of the rising costs of EV insurance. In Britain, for example, EVs cost twice as much to insure as fuel-burning cars, and the premiums grew faster for EVs than for gas and diesel cars. The reasons: Hard-to-fix batteries and longer repair times.
Reliability, too, is an issue. In its annual car-reliability survey of more than 330,000 owners, Consumer Reports said EV owners continue to report far more problems with their vehicles than owners of conventional cars or hybrids. On average, EVs from the past three model years had 79 per cent more problems than conventional cars, including engine, transmission, electric motors, leaks and infotainment systems, the survey said.
Remarkably, the Biden administration, which has made EVs a centrepiece of its Green Agenda, has been part of the problem, not the solution. Two years ago, Mr. Biden earmarked US$7.5-billion to build a national network of charging stations. So far, only one has been built under this program.
Adding gravitas to the EV conversation, Akio Toyoda, chairman of Toyota Motor, predicted last week that EVs would, at their peak, capture only 30 per cent of the global market, the remainder filled by hybrid or hydrogen-powered vehicles. A main reason: More than a billion people live in areas with no or limited access to electricity.
With the global slowing of EV sales, Mr. Toyoda said people are “finally seeing reality” on EVs and reiterated his commitment to a multipathway approach that doesn’t depend on any one type of vehicle.
“Customers, not regulations or politics” should make the decision on what path to rely on, he said.
Mr. Toyoda’s may not be a socially popular point of view these days, but when the leader of the world’s largest automaker speaks, lawmakers should pull their heads out of their ideological clouds and listen. He knows a thing or two about how things really work here on Earth.