When the car industry begs to be regulated, you have to wonder about the regulations. And the motivations.
Is it a case of being crazy . . . or crazy like a fox?
The car industry – well, about a third of it so far (Ford, Honda, BMW, VW and Mercedes) wants to be forced to make cars that average close to 50 miles-per-gallon by 2025, as fatwa’d about four years ago by the federal regulatory apparat.
The current head of the federal government – President Trump – is trying to rescind the fatwa or at least dial it back to something more technically and economically feasible. In a startling turnabout, the car companies have stated that even if Trump dials back the federal fatwa, they will impose it upon themselves by embracing a mirrored fatwa issued by the state of California. Which will then become a de facto national fatwa.
It sounds crazy – self-destructive, at least.
Nor demanded by the market – but that’s another thing.
As Trump pointed out the other day, the cost of the technology – the physical hardware as well as physical changes to the way cars are designed – that will be necessary to get cars to average nearly 50 MPG (as specified by the fatwa) in just five years’ time will cost thousands of dollars per car. Trump says about $3,000 per car – which is very close to the mark because the only current cars that average 50 MPG and so fatwa-compliant are hybrids – models like the Toyota Prius and Kia Niro.
These hybrids cost about $3k more than an otherwise similar non-hybrid. This is what the government wants you to spend to save gas. Or rather, it’s what Trump doesn’t want you to have to spend. But the car industry – VW, Ford, Honda, BMW and Benz, anyhow – wants you to spend.
Wants you to have to spend.
And you’ll pay more than just $3k.
Trump failed to explain that if the fatwa stands, it will take more than a few hybrids to get to 50-something MPG. It will take a lot of electric cars. These use no gas, of course – and so they are a boon to the Corporate Average Fuel Economy (the fatwa’s formal name) math. Each EV sold makes it feasible to sell non-EVs that aren’t hybrids and don’t – and can’t – achieve 50 MPG.
Trucks, for instance.
One 28 MPG truck plus one infinite MPG EV divided by two (this is crude, but it helps explain the math) equals . . . closer to 50 MPG and fatwa compliance. The more EVs in the mix, the better the CAFE compliance math.
But there’s a fly in the soup.
We hear talk about “breakthroughs” that will reduce the cost of EVs, but the fact is that you can’t buy any currently available EV for less than $30,000 (the entry-level version of the Nissan Leaf with a smaller battery and just 150 miles of range) which is $6,230 more than the price of the 2019 Prius ($23,770) or twice the compliance cost estimated by Trump. It is also more than twice the price of a current non-electric economy car – which is actually economical. It might not get 50 MPG – but you don’t have to spend $23k on it.
So, absent the “breakthrough” we keep hearing about (and have been hearing about, for literally decades but which has yet to materialize and may never materialize) people will either pay a great deal more for EVs – or they will pay a great deal more for non-EVs, which will become more expensive to buy in order to absorb the cost of building all those unsold (or given away at a loss) EVs.
It sounds stupid – and it is.
There is another reason for their embrace of the 50 MPG fatwa that goes beyond green – the lust for mandated profits in the name of “saving” on gas.
It is, simply, the offloading of their regulatory burdens.
Electric vehicles are categorized by the regulatory apparat as “zero emissions” vehicles – which means zero compliance costs . . . for the car companies. No more having to sweat passing federal emissions certification tests – which don’t apply at all to electric cars.
Emissions compliance costs won’t go away; remember that the main gripe leveled at today’s non-electric cars is that they “emit” carbon dioxide. Well, so do electric cars – just indirectly.
The companies which make EVs won’t have to worry about tailpipe emissions regulations and compliance costs. But utilities – the power companies – will.
They’ll be regulated all the more – and those costs will be offloaded onto the backs of their customers, in the form of higher electricity costs.
But the car companies will avoid those costs.
It makes sense once you understand it. The car companies are demanding to be regulated in order to be freed from being regulated.
But it won’t be free.
We’ll be paying a great deal more for cars, soon. And even if you don’t buy a new car, you’ll be paying more for electricity – to cover the cost of all those shifted compliance costs.
The Orange Man is trying. But he hasn’t done the best job explaining.
Maybe this will help.
. . .
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