It may not last — a few more sticks and carrots might do the trick, you never know — but, once again, ungrateful human beings are letting down the central planners who only want the best for them. And once again, the consequences are beginning to look very messy indeed. Electric vehicles (EVs) are not selling in the expected quantities. It’s no mystery why not. There’s price, to start with, but that’s not all. At this stage of their development and, critically, the development of supporting infrastructure (charging stations and so on), EVs do not work as a mass-market product, at least in the West (and in China, too, all is not as well as it could be).
A recent survey showed that more than a fifth of battery EV owners in China want their next car to be powered by fossil fuels. . . . Growth in sales of EVs has long been plagued by range anxiety, and this has now been supplemented by worries about charging infrastructure.
In the Soviet Union, consumers had to take the cars that the state might decide (if they were both lucky and very patient) to allocate to them, with the result that its cars were . . . nothing special. For now, however, drivers still have a choice, and are proving reluctant to buy EVs on the schedule set out by climate policy-makers and their accomplices/prisoners in the auto sector.
The good news for drivers is that EV prices are falling very sharply as automakers desperately try to sell what their customers won’t buy (it’s not such good news for EV owners looking at the resale value of their cars). The bad news for a typical car buyer (a Tesla buyer is not a typical car buyer) is that, like the Soviet buyers of old, they will have to cope with a type of car that, in many cases, will be far from easy to run.
But even if there’s good news for (some) drivers, these price cuts mean more woe for EV manufacturers.
Robert Lea, writing in the London Times:
Proprietary industry data seen by The Times shows that this time last year the global automotive industry expected to make more than 15 million battery electric cars in 2024. However, slowing consumer demand has led to that projection being cut by two million to a little over 13 million. Yet that remains about 50 per cent ahead of forecast consumer demand, which is predicting global electric car sales of about 9.3 million for 2024.
As mismatches go, that would be a biggie, and its root cause is that, in ramping up production, carmakers were reacting to pressure from governments (and a media possessed by climate panic) rather than customer demand.
And, according to Lea, this oversupply is going to get worse.
Lea:
If the projections are accurate, it means that in 2024, 2025 and 2026, the global industry will be making in excess of 20 million more electric cars than the market can absorb.
In a recent Capital Letter, I discussed the misallocation of capital that has been going on in the auto sector, a misallocation so great that one analyst quoted by Lea compares it with the dotcom bubble.
But one key difference between the EV mess and the dotcom fiasco is that the dotcoms did not employ that many people. Capital misallocation leads to capital destruction, and capital destruction leads to job destruction. The dotcoms did not employ that many people. But the auto industry employs hundreds of thousands. In countries with large auto industries, trouble in that sector will have a knock-on effect elsewhere economically. There will be political consequences, too, and they won’t be pretty,
Lea notes that the ending of EV subsidies in Germany led to a crash in sales of 30 percent. That number was exaggerated by pre-buying ahead of the end of the subsidy regime, but still. Sales are off by a similar amount in Sweden and Italy. In Norway, the deeply deceptive (it’s a long story) poster-country for Western EV enthusiasm, registrations have halved. In the U.K., EV sales are being propped up by tax-favored fleet buying. Individual buyers are no longer so keen. In the U.S. and Canada, some manufacturers are scaling back production because of lower-than-expected demand.
Adding another twist of the knife, there is the threat posed by exports of cheap Chinese EVs. With China’s economy in trouble (even if you are trusting enough to believe the recent GDP data), its EV manufacturers have additional reasons to shift product west (specifically to Europe), but they too may be running into resistance.
On April 8, the Financial Times reported that imported Chinese cars were piling up in European ports, in part because of logistical and paperwork problems, but also, according to some car-industry executives, because “Chinese carmakers were not selling their vehicles in Europe as fast as they expected.” This, they claimed, “was a big contributor to the glut at the region’s ports.”
Meanwhile, Lea explains:
Notwithstanding Chinese competition, European car manufacturers are in a bind: they face stiff regulatory demands to produce more zero-emission cars. If they drop production in line with lower demand then they face large penalties and fines. Industry estimates suggest that Volkswagen, whose brands include Audi, Skoda and Seat, could already be facing annual fines in excess of €4 billion for missed CO₂ targets.
The U.K., governed by a dying Conservative government, has a similar regime, and the U.S. is heading in the same direction.
Meet your quota, comrade, or else.
As noted above, some companies are beginning to rein in EV production. Others, however, are ploughing on.
Ben Marlow in the Daily Telegraph:
Stellantis…is planning to introduce more than 75 fully electric models this decade [despite what its CEO thinks of EV technology], while Volkswagen has earmarked €180bn for electrification. It is a massive throw of the dice.
Elon Musk recently said that China’s electric upstarts will demolish most Western carmakers unless trade barriers are erected. But it may not come to that. Some could end up squandering such vast sums of capital that they end up destroying themselves.
The bailouts are coming.
Shareholders not in thrall to ESG or climate fundamentalism ought to start speaking out.
In the climate-fundamentalist Financial Times, Nathalie Thomas attempts to restore calm:
As long as governments maintain 2035 targets to ban new combustion engine vehicle sales, a tipping point should still come.
In other words, once their choice to buy anything else shrinks and is then abolished, drivers looking for a new car will appreciate how good EVs really are.
Life will be good on the collective farm. It really will.