Mandates??
My Wednesday column usually centers around some political BS. How badly Joe Biden is running the country or some Donald Trump argument that holds little water.
Today will be a touch different. It starts with politics, sort of, and ends with something resembling economics or business.
Try and separate the two and it’s next to impossible sometimes.
One of the platforms President Biden used to get elected was that he firmly believed that we can wean ourselves off of fossil fuel and create a society where our impact on the planet is less than it is now.
He has been listening to those little voices in his ear for a few years now and while there is definitely some improvement as far as going carbon neutral. We are nowhere near his goals. We probably never will be.
I have repeatedly said that I don’t think it’s a bad idea to put more electric vehicles on the road. I have also said that it should be a choice and should never be mandated.
That is my political hot button for today. Mandating anything in this country has been a problem since the Federal Government became the all seeing, all powerful deity it has become. My guess it started around the era of The New Deal. I could be wrong.
I could go through a list of failed mandates over the years but all you have to do is look at Federal, State and Local reaction to Covid 19 and you will know that these things are divisive.
The Federal Government is using the power of the EPA to mandate by 2027 that certain emissions must be met on new vehicles. Now this would not be all that Earth shaking if the standards were actually doable with the present technology. They are not. So what this does is force Auto manufacturers to manufacture vehicle with zero emissions, i.e. Electric Vehicles or Hybrids. Thus, when all the cars a manufacturer produces total up their emissions, they reach President Biden’s goal.
It is an end run to get to a place the administration wants to get to. GM, Ford, Stellantis and Toyota have fought this new emission standard, saying it is not enough time to ramp up manufacturing and get them to the point that they pass the new standard.
I am sure as this plays out, their will be court challenges and if Donald Trump wins, there will be a good chance it will be rolled back or cancelled.
While it may be somewhat environmentally sound, it is not politically sound and like other mandates, Americans tend to push back on their government telling them they HAVE to buy something different from their previous purchase.
I bring this up because it seems to me that the American public is not yet fully embracing the whole EV/Hybrid car thing.
Sure, the geeks will always buy a Prius. Sure, all those posers will buy the Hummer EV or the Rivian, but will that truly make a dent in the emissions problem in this country. Absolutely not.
I have a few friends that have Teslas and they love them. They love never having to role into a gas station. They love the fact that the car is well designed, well manufactured and has very few moving parts. Yet, they will not extend their leases. They will not buy back the vehicle from the dealer. They are done when they are done. Why is that?
Simple. The life expectancy on any battery, no matter what it is, is finite. You own it, you have to replace it. You will spend anywhere from 7,500 to 12,500 dollars replacing it. Why would I buy something that I know at some point I am going to be on the hook for that expense? Makes no sense. So, you turn it in. You move into the next EV and the cycle hopefully for Tesla or Rivian will continue. However, in the coming two years there will be an incredible amount of used Teslas out there. What happens to them? Does Tesla take the car back, install new batteries at X cost and then put them on the leasing market? I have no clue and I did a little research and this is what I found out:
Tesla has no buyout option on it’s leases so they take back ownership of the car and then they either reprogram them to become driverless vehicles (a crappy option since very few cities allow it totally) or they resell them, batteries and all. Im not sure that is a great business model because why would I ever buy a three or four year old Tesla that has, maybe, three years left on the battery life?
Great ideas in principle but in actuality, a very crappy business model.
Time will start catching up with this industry and the powers that be in this country will have to decide how to deal with a mandate that basically Eff’s everyone.
There is another issue that is much closer to everyone’s heart and that is cost. EV’s in this country are not cheap. Hybrids are a little cheaper but a hybrid actually needs a fossil fuel to run and to put it bluntly, the whole idea of a hybrid irritates me. I won’t buy one and I’m either going to continue to be that Gas Guzzling American or some fully organic electric vehicle driver, no middle ground here.
Without the Federal tax incentives, people are less inclined to spend an additional six to eight thousand dollars on an electric vehicle. It’s economics that the politicians refuse to understand. It’s a political decision to mandate this transition but, it along with the American public telling DC, no thanks, it’s an economic one as well.
There is an idea that is floating about regarding this transition to EV’s that competition and a broader selection of EV’s will help bring the costs down and make them much more competitive with gas engine vehicles and in theory, they may be right, but in actuality, it takes a lot longer to get competitive scales that weigh in the consumers favor. As of right now, it seems Tesla is the only company that is actually profiting from the sale of EVs. Ford isn’t. GM is nowhere near. Toyota has not jumped in like the others and their formula works better with their emphasis on hybrid. The European manufacturers will take years to get to that level of profitability but they will. Not by 2027 though.
So to buy into Biden’s plans, it will cost the US auto industry multiple billions in profits lost and for what?
He doesn’t care. That is the political issue here. Biden is tone deaf to the American people. He has always been semi brain dead but now he is going to ramp that tone deafness up a notch and in the grand scheme of things, as far as this election is concerned, it won’t be brought up very much, but it can be critical if the Republicans can develop some sort of platform that voters can look at and say, “Holy smokes, this isn’t right and I want a choice, enough of the government telling me what I can and cannot buy”.
I sound like a Libertarian huh?