Could EVs Compete In A True Free Market?
https://issuesinsights.com/2024/04/19/could-evs-compete-in-a-true-free-market/
It seems we’ve reached “peak EV,” with sales in trouble and assembly line workers losing their jobs. The hard truth is electric vehicle sales would have never reached the level they have if the government had not trespassed into private matters.
The EV troubles are all around. Sales are slowing. Unsold cars have piled up in lots. Surveys plainly indicate that fewer Americans want them. In response to dramatically slowing sales, Ford announced last fall that it was delaying $12 billion in EV investments. Which should surprise no one, considering that the company lost nearly $73,000 on each EV it sold in the second quarter of 2023.
At roughly the same time, General Motors walked away from its EV strategy. Mercedes was excited about its new EVs just a few months back but learned that customers weren’t thrilled about about them. Earlier this year Hertz decided it would dump as many as 20,000 of its EVs. Now Tesla is laying off 10% of its global workforce, meaning around 14,000 former employees will be looking for new jobs.
Rivian is also dropping one-tenth of its workforce. The company’s share price fell 15% when the announcement was made. Production at Lucid, another EV startup, is expected to be “much lower than Wall Street’s expectations,” Reuters reports.
Meanwhile, BYD, the Chinese EV maker that’s heavily subsidized by Beijing, has seen a sharp fall in sales.
For years EV sales have been propped up like a corpse by public policy. The incentives to buy what are considered zero-emission automobiles but clearly are not come at an obscenely high cost. Research by the Texas Public Policy Foundation found that “nearly $22 billion in federal and state subsidies and regulatory credits suppressed the retail price of EVs” by an average of nearly $50,000. Or put another way, “the average model year 2021 EV would cost $48,698 more to own over a 10-year period without $22 billion in government favors given to EV manufacturers and owners.”
Federal and state tax credits and rebates account for almost $9,000 of that sum. Another $4,800 in subsidies is attributed to state zero-emission mandates and credits funded by hidden fees on gasoline vehicles.
Then there are $19,000 in indirect subsidies created by the federal Corporate Average Fuel Economy standards – “which in recent years have been made increasingly stringent in order to make [internal-combustion engine vehicles] more expensive and to drive EV adoption,” says the paper – and more than $3,000 due to the Environmental Protection Agency’s greenhouse-gas emissions standard.
Utility ratepayers also kick in about $10,500 per car. They have to bear the costs of systems upgrades that are needed to handle the demand for more power to charge the battery cars.
On a level playing field, with no subsidies and no incentives for either EVs or internal-combustion automobiles, EVs would be nothing more than novelty items, toys actually, owned only by a wealthy few. As Steve La Fleur and Todd Wynn of the Cascade Policy Institute have noted, the free market will reject them until they become “technologically and financially viable.”
That was 15 years ago, and EVs today are still inferior to the cars and trucks that burn fossil fuel.
Of course that matters not a bit to the Democrats. Their indifference to consumers is manifested daily in the White House’s unrelenting pursuit of economically ruinous emission and mileage mandates, and in states where officials have decided they are better qualified to make the automobile buying choices.
“The real boss” though, says Jon Miltimore of the Foundation for Economic Education, is the free-market economy. It’s not the auto industry, which wanted to build EVs when it thought it could rake in profits with help from policymakers, “and it’s certainly not the federal government.”
“You look at how much money they’re losing right now,” says Jason Isaac, a co-author of the Texas Public Policy Foundation study, of EVs “and they can’t compete.”
Maybe one day that changes. As long as companies are free to innovate, progress is always possible. But it’s not government’s job to support an enterprise until it can stand on its own, especially one whose payoff is so clearly uncertain.
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