Watching the electronic vehicle (EV) market collapse is interesting. It is a lesson in “forcing a market”. For a long time, Tesla ($TSLA) was the only game in town. There were other startup electric vehicle manufactures, but they went bust. Tesla was able to stay afloat due to the sheer force of nature that is Elon Musk.
EVs are popular because of “global warming”. Of course, that logic ignores all the supply chain inputs that aren’t friendly to the environment to make an EV along with all the unrecyclable and toxic components of EVs that need to be disposed of once their useful life is over.
Tesla had some help. The global warming fanatics saw EVs as not only a way to “cure” global warming but many of them saw EVs as a way to control people. EVs need to be charged and the central authority owns the electrical grid. Hence, they could shut down parts of the grid and you would be trapped. However, you could use solar power to charge your car assuming you had no access to a fossil fuel powered generator. But, because EVs also run on software, the central planners could use it to limit your movement.
Many people would say that the above paragraph is totally crazy, but after Covid and what the government did and continues to do to eliminate freedoms that we previously had, I don’t think it’s far-fetched.
I heard an ad on the radio for the Moderna mRNA vaccine that doesn’t work which was totally designed to scare you yesterday. These people just think it’s the “messaging” when the rest of us look at execution and results.
Believe me when I tell you many of these apparatchiks that currently have power are truly evil. They are evil when they pick winners and losers, and they are even more evil when they try to upend the Bill of Rights and The Constitution. Socialists and Communists aren’t your pals.
What did the government do to encourage the market? Subsidize subsidize subsidize. When it ran out of ideas for subsidies, it came up with tax breaks or government contracts. The government doled out money for research. It has spent trillions on the development of EVs all in the name of global warming. It’s not because people want them.
They subsidized the entire supply chain for EVs. They subsidized green energy. The subsidy for solar is so rich that the payback on my house shrunk from 10 years to 5. Tesla wouldn’t be where it is without them.
Not only that, but Biden has deliberately tried to crush the fossil fuel industry sending energy prices significantly higher to try and push people to EVs.
That’s not to say Tesla isn’t a super cool car that is technologically ahead of its time. It is! I love them though I don’t own one yet. But, the company had a huge push from governments, not just the US government. Elon Musk is an incredible person.
Now that all car companies have entered the EV space, what are we learning? They lose money and not just a little. Ford ($F) is going to lose $4.5 billion on EVs. VW European orders are down 50%. For what it’s worth, wind power companies lose money too. I predicted this would all end in tears. All automakers that have embraced electronic vehicles and made splashy announcements about how their car company will be fully electronic by a certain date are failing. In response to the increased competition, Tesla has cut prices not once, but twice.
Why are they losing money? Because in the free market, their customers aren’t buying what they are peddling.
The mainstream press will try and put lipstick on this pig. But, the truth is for the average person, owning an EV is more expensive than owning a fossil fuel car. I can buy an efficient Ford Mustang for $33k, or a Ford Mustang EV for $45k. I know it’s my opinion, but the Ford Mustang EV is ugly and the gasoline-powered one looks cool.
This is another lesson in how governments screw up markets. They do it in healthcare, farming, and plenty of other markets too. Back in the 1970s, they instituted CAFE standards on cars and all automakers lost a bunch of money because those standards forced them to produce cars no one wanted and they still do to this day. The end result is you pay more for the things you want and need because the government is involved.
When I was on the board at CME, we always explored new products. We wanted to figure out how to grow our business. Once the regulations were streamlined and we had an electronic platform, we were able to fix the costs of taking a product to market. We tried a bunch of things after listening to customers and very few of them worked.
What’s a market need? Natural buyers and sellers are the core ingredients. The elasticity of supply and demand along with substitutes and preferences allows for supply and demand curves to form. ANY government (or central authority) intervention in the form of subsidies, taxes, or regulation screws up the market. See this for evidence.
In the case of EVs, there are natural sellers but there simply aren’t enough buyers out there to make a huge market.
We should not bail out the automakers. They could have stood up to the governments and said that there wasn’t demand. If they had capable management teams that had objectively surveyed the marketplace, they would have known that. Instead, they took easy money and tried to force a market.
Their companies and shareholders will suffer.
Best for every subsidy and tax break to end. Governments pull back. The manufacturers will work through their inventory and figure out what the real demand is and make decisions to act accordingly.
But, global warming isn’t science. It’s global fanaticism that is unattached to reality. Don’t expect it to change.
Of course, you are right. One thing to add. The fed held interest rates below inflation 85% of the time over the last 15 years. This allowed government to finance subsidies at artificially low rates. They “forced” the market in every way they could get away with. But in the end, as you say, you can’t force. The Stone Age did not end when we ran out of stones, nor did it end when governments decided it should.
It looks to me like there are market forces at work that the government doesn't control. Within the ev market manufacturers still need to manufacture a car that buyers want. Many buyers seem to prefer Tesla. Not so much Ford and GM. This really rankles democrats because Tesla is non union. The federal government is attempting to rectify this by investigating Musk and Tesla and SpaceX and whatever else they can think up.