There’s a huge problem with President Joe Biden’s goal that half of all U.S. car, truck and SUV sales will be electric by the year 2030—consumers vastly prefer gasoline-powered engines.
According to the U.S. Energy Information Administration (EIA), between January 2017 and April 2020, about 93 percent of light-duty vehicle sales (i.e., cars, trucks and SUVs) had conventional gasoline-powered engines. Pure electric vehicles hovered between 1 percent and 2 percent of sales, but ended the period close to 1 percent. Hybrids, which are included in Biden’s plan, account for about 2 percent. [See the EIA graph.]
So the first major challenge is convincing consumers to buy electric. It won’t be easy. The Wall Street Journal ran a story last March with the headline “Electric Vehicles Are the Future—If Dealers Can Figure Out the Sale.” The article quotes one Missouri-based Chevy dealer who sold 4,000 vehicles last year—and nine of them were Chevy Bolts.
The second major challenge is ramping up EV production. Tesla commands about 80 percent of the U.S. EV market. That means that EVs produced by all other car manufacturers combined come to 0.2 to 0.4 percent of all U.S. vehicle sales.
Prior to the pandemic, about 17 million cars, trucks and SUVs were sold in the U.S. each year. So carmakers will have to ramp up EV production from a few thousand a year to millions—in 8.5 years!
Considering that the non-Tesla carmakers have had virtually no success making EVs that consumers want—at least not yet—Biden’s goal will almost surely fail.
So why are the automakers going along with Biden’s effort to push them to make expensive EVs? Reuters tells us, “The Detroit 3 automakers said the aggressive EV sales goals can only be met with billions of dollars in government incentives including consumer subsidies.”
And there it is! The automakers are happy to make the EV shift as long as the government hands over billions of taxpayer dollars. But doesn’t that make the government their customer rather than consumers?
Markets thrive when sellers strive to please consumers. Markets fail when sellers strive to please the government.
Washington has a long and often less-that-stellar history of imposing regulations on automakers. But for the most part, the automakers have been free to meet consumer demand.
The day may come when automakers produce EVs that consumers really want, much as Tesla has done for the high-end car market—and that’s fine with us. But Biden’s directive means automakers will be making EVs that the government wants—but consumers will have to buy.
August 10, 2021