By the early 1990s, all of America's self-respecting yuppies and retired suburbanites were buying electric toasters - sales reached four million. But this craze quickly subsided when budding amateur bakers discovered that filling a metal mold with the precise amount of flour, eggs, bread, yeast and salt required far more money and time than a trek to the nearest bakery. Aren't electric cars the breadwinners of our time?
Despite the entrepreneurial gift of Tesla founder Elon Musk, as well as billions of dollars in government subsidies for electric vehicles, consumers still apparently prefer to drive to a gas station and fill up in five minutes, rather than remodel their garages and frantically search for charging stations in parking lots. shopping center. According to JD Power, 21% of public car charging stations simply don't work. Consumers are starting to shun electric vehicles, and this will affect not only the auto industry, but also US-China relations, government budgets and commodity prices.
There is increasing evidence of this change. In January of this year, Hertz, which bought 2021 Tesla cars in 100 with great fanfare, made a sharp 180-degree turn and began writing off a third of its entire fleet of electric vehicles, leading to a $245 million drop in profits. Hetz's promise to buy 175 electric vehicles from GM will most likely not be fulfilled. Outside of affluent, trendy communities, consumers are passing up electric vehicles and buying hybrids and gasoline engines instead.
In the fourth quarter of 2023, sales of electric vehicles grew by only 1,3%. According to Edmunds, electric cars typically sit at dealerships three weeks longer than gasoline-powered cars. Mercedes Benz EKS electric cars have been on the stands for four months, so the company's CFO recently admitted that the market is "pretty rough". Consumers are shunning electric vehicles despite a price war in which Ford, Tesla and GM cut prices by an average of 20%, causing Ford to lose $36.000 on each vehicle sold.
Meanwhile, state governments, even though their budgets are extremely small, encourage and support the sale of electric vehicles with huge subsidies. California continues to dole out $7.000 for each new electric vehicle (on top of the maximum possible federal tax credit of $7.500), even as it reports a record budget deficit of $68 billion. New Jersey is sending a $4.000 check to electric car buyers even as state revenue declines. How will debt-ridden state governments keep this money tap open?
Companies that doubted the prospects of electric vehicles and bet on hybrids (for example, Toyota) are now looking extremely shrewd. At the end of last year, Toyota's stock market quotations were 40% ahead of GM's quotations. Under fire from EV enthusiasts and Wall Street analysts, Toyota Chairman Akio Toyoda said last October that people were finally "starting to see reality." Auto workers' unions are relieved that electric vehicles require 90% fewer parts and 30% fewer man-hours to produce.
All this, of course, in no way diminishes the ingenuity of the engineers and designers of electric vehicles. Watching smart cars race or parallel park an electric car, it's hard to believe that these vehicles were once disparagingly referred to as fancy brand golf carts. Elon Musk has been given various (some unprintable) characterizations, but his cars outperform Porsches, his rockets fly better than NASA's, and his insider trading saga left SEC lawyers in the dust.
However, all this does not mean that Mask always wins. In addition to physics and consumer inertia, electric vehicles also encounter other obstacles, primarily grid failures. The number of Americans who suddenly lose power is increasing, and the length of the outage is increasing. According to the US Energy Information Administration, between 2013 and 2021, the average duration of a power outage doubled (from 3,5 hours to more than 7 hours), with the frequency of power outages increasing by nearly 20%. It is not surprising that in such a situation people do not want to tie their mobility to a wall socket, especially if we remember the doubt about the reliability of renewable energy sources (sun, wind), which will always be threatened by clouds and conditioned by calm weather.
America is certainly not alone. Chinese automaker BID (Build Your Dreams) made headlines recently for selling three million electric vehicles last year, compared to Tesla's 1,8 million. But China's faltering economy is vulnerable to weaker US sales. Chinese officials and the private sector have high hopes for battery production in countries such as Zimbabwe, the Democratic Republic of Congo, Cuba and Russia, where lithium, cobalt, cadmium and other important minerals are mined. But will China continue to bribe African political leaders if the prices of these commodities fall? How long will this faucet stay open?
The toaster craze of the 1990s was not supported by government subsidies, government rulings, or huge discounts provided by companies to increase market share. If all this had happened, then probably those bakers would have been in fashion for a few more years. Electric cars have been touted by presidents, governors, IRSs and technology experts. But people don't listen to them. President Dwight Eisenhower, looking great in a 60-horsepower Jeep, warned, "You can't be a leader by hitting people over the head: that's violence, not leadership." In the automotive market, therefore, the leader remains - the internal combustion engine.
The author is a former White House director of economic policy under President George W. Bush and managing director of Tiger Hedge Fund; he is the recipient of the Allyn Young Teaching Award of the Harvard Department of Economics
Copyright: Project Syndicate, 2024. (translation: NR)
Bonus video:
