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Canada should get out of EVs before bubble bursts

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From the Fraser Institute

By Kenneth P. Green

A recent article in the The Daily Mail asks, “Is the global EV bubble bursting?” The article then answers the question by looking at electric vehicle (EV) sales figures for six major manufacturers. Sales are down across the industry—Tesla, down 20 per cent in the first quarter this year compared to the same time last year; China’s EV manufacturer, BYD, down 43 per cent; GM down 20.5 per cent; and Volkswagen down 3.3 per cent. Honda saw an anemic uptick of 0.2 per cent. Only BMW experienced a substantial increase in EV sales, up 41 per cent. Not surprisingly, share prices have also dropped across the industry.

An Associated Press article shines more light on EV sales, which in the United States grew only 3.3 per cent in the first quarter of this year, a tiny fraction of the 47 per cent growth that fuelled record sales. The EV share of total U.S. sales fell to 7.15 per cent in the first quarter, down from 7.6 per cent last year. The slowdown, led by Tesla, “confirms automakers’ fears that they moved too quickly to pursue EV buyers.”

In other EV news, Ford has announced it will cut back on EV battery orders, signalling that the company anticipates less EV sales in the future. That would seem to be a good thing for Ford shareholders, as the company also admitted it’s lost $100,000 on every EV it sold in the first quarter of 2024. Ford expects to lose some $5.5 billion from EV sales this year.

So what does it all mean?

Countries that adopted EV sales mandates earlier than Canada are already finding their EV sales targets moving out of reach. In the United Kingdom, which has a 2024 EV sales target of 22 per cent, according to the Society of Motor Manufacturers and Traders, the share of the new car market held by pure battery EVs will be only 19.8 per cent by the end of 2024. The U.K.’s EV sales targets, like Canada’s, require 100 per cent of new vehicle sales to be electric by 2035.

And the rest of Europe is also falling short of EV transition mandates. Forbes reports that current sales of EVs in Europe have flattened at just over 2 million a year, essentially because the continent has run out of early adopters and corporate purchases. Forbes also observes that “other leading market forecasters still expect sales to explode and reach close to 9 million in Europe by 2030,” but that this rate of growth won’t be enough to let the EU and Britain reach target goals of EVs achieving close to an 80 per cent market share.

Meanwhile, the Trudeau government clings to its mandated EV transition, gambling with taxpayer money hand over fist as it pours more than $44 billion into various EV and battery manufacturing operations. And as Andrew Coyne observes in the Globe and Mail, it’s worse than that, as “all of that money will be borrowed, interest costs should also be included. The PBO estimates these at $6.6-billion. All told, that’s $50-billion of other people’s money. For three factories.”

Ottawa’s EV transition policy is deeply misguided, and already shows signs of incipient failure. And likely more failed taxpayer “investments” lie ahead. A smart government would tap the brakes on its EV transition policy. The bubble is growing.

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Automotive

Electric cars just another poor climate policy

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From the Fraser Institute

By Bjørn Lomborg

The electric car is widely seen as a symbol of a simple, clean solution to climate change. In reality, it’s inefficient, reliant on massive subsidies, and leaves behind a trail of pollution and death that is seldom acknowledged.

We are constantly reminded by climate activists and politicians that electric cars are cleaner, cheaper, and better. Canada and many other countries have promised to prohibit the sale of new gas and diesel cars within a decade. But if electric cars are really so good, why would we need to ban the alternatives?

And why has Canada needed to subsidize each electric car with a minimum $5,000 from the federal government and more from provincial governments to get them bought? Many people are not sold on the idea of an electric car because they worry about having to plan out where and when to recharge. They don’t want to wait for an uncomfortable amount of time while recharging; they don’t want to pay significantly more for the electric car and then see its used-car value decline much faster. For people not privileged to own their own house, recharging is a real challenge. Surveys show that only 15 per cent of Canadians and 11 per cent of Americans want to buy an electric car.

The main environmental selling point of an electric car is that it doesn’t pollute. It is true that its engine doesn’t produce any CO₂ while driving, but it still emits carbon in other ways. Manufacturing the car generates emissions—especially producing the battery which requires a large amount of energy, mostly achieved with coal in China. So even when an electric car is being recharged with clean power in BC, over its lifetime it will emit about one-third of an equivalent gasoline car. When recharged in Alberta, it will emit almost three-quarters.

In some parts of the world, like India, so much of the power comes from coal that electric cars end up emitting more CO₂ than gasoline cars. Across the world, on average, the International Energy Agency estimates that an electric car using the global average mix of power sources over its lifetime will emit nearly half as much CO₂ as a gasoline-driven car, saving about 22 tonnes of CO₂.

But using an electric car to cut emissions is incredibly ineffective. On America’s longest-established carbon trading system, you could buy 22 tonnes of carbon emission cuts for about $660 (US$460). Yet, Ottawa is subsidizing every electric car to the tune of $5,000 or nearly ten times as much, which increases even more if provincial subsidies are included. And since about half of those electrical vehicles would have been bought anyway, it is likely that Canada has spent nearly twenty-times too much cutting CO₂ with electric cars than it could have. To put it differently, Canada could have cut twenty-times more CO₂ for the same amount of money.

Moreover, all these estimates assume that electric cars are driven as far as gasoline cars. They are not. In the US, nine-in-ten households with an electric car actually have one, two or more non-electric cars, with most including an SUV, truck or minivan. Moreover, the electric car is usually driven less than half as much as the other vehicles, which means the CO₂ emission reduction is much smaller. Subsidized electric cars are typically a ‘second’ car for rich people to show off their environmental credentials.

Electric cars are also 320440 kilograms heavier than equivalent gasoline cars because of their enormous batteries. This means they will wear down roads faster, and cost societies more. They will also cause more air pollution by shredding more particulates from tire and road wear along with their brakes. Now, gasoline cars also pollute through combustion, but electric cars in total pollute more, both from tire and road wear and from forcing more power stations online, often the most polluting ones. The latest meta-study shows that overall electric cars are worse on particulate air pollution. Another study found that in two-thirds of US states, electric cars cause more of the most dangerous particulate air pollution than gasoline-powered cars.

These heavy electric cars are also more dangerous when involved in accidents, because heavy cars more often kill the other party. A study in Nature shows that in total, heavier electric cars will cause so many more deaths that the toll could outweigh the total climate benefits from reduced CO₂ emissions.

Many pundits suggest electric car sales will dominate gasoline cars within a few decades, but the reality is starkly different. A 2023-estimate from the Biden Administration shows that even in 2050, more than two-thirds of all cars globally will still be powered by gas or diesel.

Source: US Energy Information Administration, reference scenario, October 2023
Fossil fuel cars, vast majority is gasoline, also some diesel, all light duty vehicles, the remaining % is mostly LPG.

Electric vehicles will only take over when innovation has made them better and cheaper for real. For now, electric cars run not mostly on electricity but on bad policy and subsidies, costing hundreds of billions of dollars, blocking consumers from choosing the cars they want, and achieving virtually nothing for climate change.

Bjørn Lomborg

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Automotive

Trump warns U.S. automakers: Do not raise prices in response to tariffs

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MXM logo MxM News

Quick Hit:

Former President Donald Trump warned automakers not to raise car prices in response to newly imposed tariffs, arguing that the move would ultimately benefit the industry by strengthening American manufacturing. However, automakers are signaling that price increases may be unavoidable.

Key Details:

  • Trump told auto executives on a recent call that his administration would look unfavorably on price hikes due to tariffs.
  • A 25% tariff on imported vehicles and parts is set to take effect on April 2, likely driving up costs for U.S. automakers.
  • Industry analysts predict vehicle prices could rise 11% to 12% in response, despite Trump’s insistence that tariffs will benefit American manufacturing.

Diving Deeper:

In a conference call with leading automakers earlier this month, former President Donald Trump issued a stern warning: do not use his new tariffs as an excuse to raise car prices. While Trump presented the tariffs as a boon for American manufacturing, industry leaders remain unconvinced, arguing that the financial burden will inevitably lead to higher costs for consumers.

Trump’s administration is pressing ahead with a 25% tariff on all imported vehicles and parts, set to take effect on April 2. The move is aimed at reshaping trade dynamics in the auto industry, encouraging domestic manufacturing, and reversing what Trump calls the damaging effects of President Joe Biden’s electric vehicle mandates. Despite this, automakers say that rising costs on foreign parts—which many depend on—will leave them little choice but to pass expenses onto consumers.

“You’re going to see prices going down, but going to go down specifically because they’re going to buy what we’re doing, incentivizing companies to—and even countries—companies to come into America,” Trump stated at a recent event, reinforcing his stance that the tariffs will ultimately lower costs in the long run.

However, industry insiders are pushing back, warning that a rapid shift to domestic production is unrealistic. “Tariffs, at any level, cannot be offset or absorbed,” said Ray Scott, CEO of Lear, a major automotive parts supplier. His concern reflects broader anxieties within the industry, as automakers calculate the financial strain of the tariffs. Analysts at Morgan Stanley estimate that vehicle prices could increase between 11% and 12% in the coming months as the new tariffs take effect.

Automakers have been bracing for the fallout. Detroit’s major manufacturers and industry suppliers have voiced their concerns, emphasizing that transitioning supply chains and manufacturing operations back to the U.S. will take years. Meanwhile, auto retailers have stocked up on inventory, temporarily shielding consumers from price hikes. But once that supply runs low—likely by May—the full impact of the tariffs could hit.

Within the Trump administration, inflation remains a pressing concern, though Trump himself rarely discusses it publicly. His economic team is aware of the potential for tariffs to drive up costs, yet the administration’s stance remains firm: automakers must adapt without raising prices. It remains unclear, however, what actions Trump might take should automakers defy his warning.

The auto industry isn’t alone in its concerns. Executives across multiple sectors, from oil and gas to food manufacturing, have been lobbying against major tariffs, arguing that they will inevitably result in higher prices for American consumers. While Trump has largely dismissed these warnings, some analysts suggest that public dissatisfaction with rising costs played a key role in shaping the outcome of the 2024 election.

With the tariffs set to take effect in just weeks, automakers are left grappling with a difficult reality: absorb billions in new costs or risk the ire of a White House determined to remake America’s trade policies.

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