In December 2020, one of the leading lobbyists representing U.S. carmakers, the Alliance for Automotive Innovation, published a report previewing the industry’s forthcoming transition to an all-electric future.
“[T]he auto industry plans to invest $250 billion in vehicle electrification by 2023,” the report read, “and IHS Markit predicts there will be 130 models available in the U.S. by 2026.” But there remains a significant obstacle to the widespread adoption of zero-emissions vehicles: their exorbitant price. Most consumers just can’t afford the cost of an electric vehicle when a similar gas-powered model is $20,000 to $50,000 cheaper—even with preexisting federally backed $7,500 consumer rebates. Both Washington and state governments, the Alliance concluded, must do more.
That report observed that electric car sales surged in New York when a state-level consumer rebate was implemented. Likewise, sales plummeted in Georgia by a staggering 90 percent when a similar rebate was phased out. We’re left to conclude that the rebate is as much the product as the car itself.
While the Alliance observed that market forces cannot be tamed forever, there is a lot that governments can do to induce consumers to buy electric vehicles. “Incentives can range from state or federal purchase/lease incentives, to consumer benefits such as free or preferred public parking, HOV access, and free charging, among others,” it recommended.
Automakers knew what they were getting in Joe Biden. The president campaigned on a pledge to expand the number of electric-vehicle-charging stations around the country and incentivize the purchase of zero-emissions cars. This week, Biden is beginning to make good on his campaign-trail promise as he begins to make the case for a major public investment in the electric-car market. The White House is calling for a $174 billion package that would provide grants to battery makers and $100 billion in consumer rebates for electric-vehicle purchasers.
Carmakers have enthusiastically responded to the new order. This year, General Motors promised to phase out the production of vehicles powered by the old internal combustion engine by 2035. Honda promised to follow suit by 2040. In 2050, Ford will achieve carbon neutrality and is today pitching an electric version of the popular F150 truck (at a cost well above its fuel-powered alternative). The supply side is, however, only half the equation.
An artificially inflated number of electric vehicles on the road will necessitate the development of a very different infrastructure than the one we have today. If the power goes out for several days due to disaster (as was the case in Texas last year) or public policy (as is occasionally the case in California) in a future dominated by battery-powered cars, the emergency backstop represented by your vehicle will no longer be there for you. Fortunately, taxpayers have a role to play in preventing that circumstance, too.
“A model utility with two to three million customers would need to invest between $1,700 and $5,800 in grid upgrades per EV through 2030, according to Boston Consulting Group,” Reuters reported. “Assuming 40 million EVs on the road, that investment could reach $200 billion.” Experts predict that the increased strain on America’s power generation and distribution capacities require the nation to produce by 2050 twice the electricity it does today—a daunting prospect if the future is going to be powered by renewable sources of electricity, including land-hungry solar farms and intermittently active windmills. Doubling the nation’s electricity-generation capacity through the use of cheaper fossil fuels would, however, defeat the purpose associated with a transition to electric vehicles.
In all this, the consumer seems to be an afterthought. According to Kelly Blue Book data, U.S. auto sales in the first quarter of 2021 rebounded from a mid-pandemic lull dramatically with nearly 4 million vehicles sold. Of those, fewer than 100,000 were electric vehicles. Subsidizing this product to the point that it approaches affordability won’t eliminate the battery-powered car’s more affordable competition.
Even if “100 percent of vehicles sold were electric starting today,” automotive analyst Sam Abuelsamid told NPR, “it would still take 20 to 25 years to replace the entire vehicle fleet with electric vehicles.” And according to at least one industry survey, a full 20 percent of electric-vehicle owners switch back to gas-powered cars, mostly as a result of its inconvenience.
So, what can you do about the existence of this attractive alternative to electric vehicles? Some have suggested rather innovatively draconian solutions to this conundrum. Lawmakers in Washington state passed a bill last month that bans the sale of gasoline in the state. This could be implemented as soon as 2030. Such an initiative would presumably foster the development of a lucrative black market in illicit petrol, the policing of which would be financed by the government. Others have proposed a government buyback of gas-powered cars to get them off the roads and out of the hands of would-be purchasers. In any and all cases, it’s the taxpayer that foots the bill.
Have policymakers ever considered the long-term viability of the marketplace they’re trying to create from scratch? The trajectory of the electric-vehicle market suggests that innovation and competition will continue to drive down prices in response to market pressures, of course. But market forces are already at work addressing the problem that all this spending is intended to solve. “I started working in this area of air-pollution control back in 1971,” California Air Resources Board chief Mary Nichols recently confessed. “And in that time, the air emissions from internal combustion engines have been slashed by over 90 percent—twice.”
Innovation is not a force that applies to green technologies alone, and it didn’t take a taxpayer-financed moonshot to make this happen.