Wednesday, September 26, 2012


"Any type of new industry is going to encounter some successes and some failures."

One of the first bits I wrote for the Washington Examiner was about the electric car.  Back then the Volt and Leaf were just about to come out and the press was buzzing with the news, all excited.  Surely this would launch a new wave of electric cars, a change in the market!  That would be kind of cool from my perspective, since I like the idea of the electric car, if it could be done right.
As I pointed out at the time, however, it was a massive waste of money for most people.  The big selling point of the cars was "ooh, gas is expensive, you can fill your "tank" for pennies!"  The problem is, with the base price of the car so high, it would take far beyond the typical ownership of a car to become cost effective, and that's not even counting replacement batteries - every 5 years or so, according to estimates.
Still, if you have a lot of money and just need a second town car, an electric car isn't too awful a choice.  You have to have a lot of money to make a $30,000 sedan worth buying for limited use, but its an option at least.
President Obama had a plan to get one million electric cars on the road in America by 2015, and spent $2.4 billion in federal dollars to make it so.  Now, at the current rate of sales, CBS News projects that 300,000 may be on the road by 2016.  And that assumes no slowdowns.
Already Karma Fisker is cutting back its production as the sleek, beautiful sports car continues to have problems (most infamously running out of power on Top Gear after a few laps).  And there are serious monetary problems with these cars.
Like all new technology, electric cars are very expensive to produce.  Each Volt sold earns about $40,000 less than it took to develop and build, according to recent reports.  In other words, even at $40,000 a model, GM is taking a bath on the car.  The theory was, like with the Prius, to get the car out there at a loss to establish the market then make money later, but the Prius sold fairly well and the Volt isn't.  So far, just over 21,000 of the cars have sold, many to federal motor pools.  The Nissan Leaf has sold even fewer in the US: 14,000.
It isn't just that there's no real market for electric cars, its that they're a lousy deal unless you want to be the first kid on the block or use your wallet to subsidize new technology.  You get a $7500 tax write off for buying an electric car, but according to the Congressional Budget Office, that write off would have to be more like $12,000 to make it cost effective compared to an ordinary gas-powered car (and that assumes today's gas prices and does not include the $10-15,000 battery replacement cost).
And in terms of environmental benefit, overall it is extremely questionable.  CAFE standards require a certain minimum overall gas mileage for an auto maker's line.  You have to get x MPG on average for all your similar models (non trucks, for example) or you get fined by the federal government.  Yes, you will search the US Constitution in vain for that particular power, but lets set that aside for today.
By putting out an electric car, you produce a car with zero MPG which greatly reduces the average mileage of the entire product line.  Almost nobody is actually buying the sparky car, but it counts for the CAFE standards.  That means the mileage (and "emissions") of the standard cars doesn't have to change much, if at all, to satisfy the EPA.
And since electric cars require strange and potentially deadly metals and substances to create the sophisticated batteries, their environmental benefits are a bit offset.  You wreck an ordinary car and the Biohazard team is out there to clean up various chemicals and glass.  But if you wreck a Prius, you are dumping chemicals in the environment from those batteries rarely found on earth and never in that concentration.
So the environmental benefits are questionable, the cost is excessive, the demand is much lower than advocates hoped, and overall the entire experiment is one more scenario of ignorant well-meaning gone wrong from the left.
So its small wonder auto manufacturers like Toyota are moving away from the electric car.  The subsidies aren't making it worthwhile, and the sales aren't there like promised.  Maybe some day this 19th century technology (yes they had electric cars in the late 1800s) will take off, but for now, its just not ready yet.  I'm sorry Al Gore.  Its not evil petrochemical companies killing the electric car.  Its customers and the limits of technology.
There is no electric car "revolution." There never was one. All we saw was a government using taxpayer money to try to help one sector of the economy survive in the delusion that all it was lacking was sufficient tax dollars to prosper.


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