Are Electric Vehicles About To Sweep The Country?

February 23, 2023 Francis Menton 98 Comments  @ Manhattan Contrarian 

It seems like all the smart people have made up their minds that the future of automobiles belongs to electric vehicles. In August 2022, California, by regulation, adopted a ban on gasoline-powered cars by 2035; and in September 2022, New York promptly followed with its own ban, also by regulation, and also set for 2035. And at the federal level, in 2021 the Biden Administration ordered that all agencies move toward 100% procurement of electric vehicles, also by 2035. Meanwhile, by means of a thicket of regulations — from vehicle mileage standards to pollution caps and more — the administration overtly seeks to force manufacturers to convert their lineups to EVs as fast as possible.

So, are electric vehicles about to sweep the country and become the dominant form of transportation? I bet against it. This is just a specific instance of the general principle that it is always wise to bet against central planning of the economy. EVs may be a successful niche product for a small number of wealthy consumers, but the idea that they will fully replace gasoline powered cars in short order is the dream of central planners, who think they can implement their dream by coercion. Central planning never works, and won’t work this time either. The reason is that the would-be central planners don't know enough, and can’t ever know enough, to put together all the elements to make a fully functioning economic sector.

Mark Tapscott has an interesting piece today at PJ Media titled “Three Huge Reasons Why Electric Vehicles Will Never Dominate American Roads.” Tapscott’s reasons are all good ones, which I would summarize as (1) despite vast government subsidies and rebates, EVs are still far more expensive than gasoline-powered cars, (2) even with greatly increased sales, the existing gasoline-powered cars will not go away and will still be on the road and the dominant vehicles in 2035 and even 2050, and (3) the increased amounts of necessary minerals for the batteries, from lithium to nickel to cobalt, are never going to materialize. Key quote:

[All the] federal tax credits are available to help obscure the fact that EVs remain extremely costly for consumers and offer unproven maintenance and reliability records. No wonder that, despite the immense pressure being put upon consumers to buy EVs, they still only make up about seven percent of all new-vehicle purchases.

Let me generalize from that. The current automotive sector of the economy represents thousands of elements coming together via private markets to satisfy customer demand. Each of the elements falls into place because someone perceives an opportunity to make money by providing that element. As just one example, gas stations don’t exist because the government ordered them up, but because entrepreneurs perceived that they could make money by building the stations and buying the pumps and making gasoline available at that location at a price that would cover all costs and allow for a profit.

Contrast that to what is now supposed to happen for electric vehicles. The government is allegedly going to be paying for some half a million charging stations around the country. Maybe that’s happening, but I don’t notice any of them around where I live. And why does the government have to do this? If the demand were there, entrepreneurs would already be installing the stations. It turns out that the stations are quite expensive to construct (at least the “fast charging” variety), and then you can’t really mark up the electricity that has to be purchased from the local utility. So it has to be done with government subsidy.

And in the next step, the same thing happens with the charging stations that happens with every other government-ordered business: the stations break down, and since no one makes more money to be sure they keep running, they don’t get fixed. Among many, many articles on this subject, here is one from August 2022 at The Verge, headline “Electric vehicle owners are fed up with broken EV chargers and janky software.”

JD Power surveyed 11,554 electric vehicle and plug-in hybrid vehicle owners from January through June 2022 for its second annual Electric Vehicle Experience Public Charging Study. Despite big growth in the number of public EV chargers in the US, EV owners say the overall experience still sucks.

Well, check out the state of elevator operations or plumbing in the New York City Housing Authority projects. This is how socialism works.

Similarly, who has the incentive to be sure that there is sufficient electricity on the grid to recharge all the EVs when the owners want to charge them? In the gas car arena, oil companies make big money by finding and refining and delivering the product to the places where the customer wants to buy it. Over in the EV arena, the same jurisdictions like New York and California that presume to order up an all EV fleet also organize their grid on a central planning/regulated price model. Reliable fossil fuel power plants are ordered to be closed, and replaced with intermittent wind and solar generation. The all-knowing regulators then order that everything shall be electrified, and somewhere the little people are supposed to respond and make it happen, without any appropriate economic incentive. We shall see.

Inside EVs on January 18 reports that EVs had a big increase in sales and market share in the U.S. in 2022, going all the way to a 5.8% market share, after only a 3.1% share in 2021. The article somehow omits to mention how much of the sales increase was driven by the latest rounds of massive government subsidies. I have no doubt that the 5.8% can increase somewhat further over the next few years, particularly as government subsidies turn into a gusher. But ultimately a successful economic sector requires market incentives at all levels of the food chain. EVs don’t have that, and they almost certainly never will — except in the highly unlikely event that consumers suddenly decide that the advantages of EVs are so great that they are willing to pay double and more for a car. I’ll place a solid bet that market penetration of EVs will stall out at a low level well before 2035.