Automotive
Electric vehicle mandates mean misery all around
From the Fraser Institute
By Matthew Lau
The latest news of slowing demand for electric vehicles highlight the profound hazards of the federal government’s Soviet-style mandate that 100 per cent of new light-duty vehicles sold must be electric or plug-in hybrid by 2035 (with interim targets of 20 per cent by 2026 and 60 per cent by 2030, with steep penalties for dealers missing these targets).
The targets were wild to begin with—as Manhattan Institute senior fellow Mark P. Mills observed, bans on conventional vehicles and mandated switches to electric mean, in jurisdictions such as Canada, “consumers will need to adopt EVs at a scale and velocity 10 times greater and faster than the introduction of any new model of car in history.”
Indeed, when the Trudeau government announced its mandate last December, conventional vehicles accounted for 87 per cent of the market, and today the mandated switch to electric looks even more at odds with actual consumer preferences. According to reports, Tesla will cut its global workforce by more than 10 per cent (or more than 14,000 employees) due to slowing electric vehicle demand.
In Canada, a Financial Post headline reads, “‘Tall order to ask the average Canadian’: EVs are twice as hard to sell today.” Not only has Tesla’s quarterly sales declined, Ford Motor Co. announced in April it will delay the start of electric vehicle production at its Oakville plant by two years, from 2025 to 2027.
According to research from global data and analytics firm J.D. Power, it now takes 55 days to sell an electric vehicle in Canada, up from 22 days in the first quarter of 2023 and longer than the 51 days it takes a gasoline-powered car to sell. This is the result, some analysts suggest, of a lack of desirable models and high consumer prices—and despite federal subsidies to car buyers of up to $5,000 per electric vehicle and additional government subsidies in six provinces, as high as $7,000 in Quebec.
Similarly in the United States, the Wall Street Journal reports that on average, electric vehicles and plug-in hybrids sit in dealer lots longer than gasoline-powered cars and hybrids. Again, that’s despite heavy government pressure to switch to electric—the Biden administration mandated two-thirds of new vehicles sold must be electric by 2032.
In both Canada and the U.S., politicians banning consumers from buying vehicles they want and instead forcing them to buy the types of vehicles that run contrary to their preferences, call to mind famed philosopher Adam Smith’s “man of system,” described in his 1759 book, The Theory of Moral Sentiments.
The man of system, Smith explained, “is apt to be very wise in his own conceit” and “seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess–board.” But people are not chess pieces to be moved around by a hand from above; they have their own agency and if pushed by the “man of system” in a direction opposite to where they want to go, the result will be misery and “society must be at all times in the highest degree of disorder.”
That nicely sums up the current government effort to mandate electric vehicles contrary to consumer preferences. The vehicle market is in a state of disorder as the government tries to force people to buy the types of cars many of them do not want, and the outcomes are miserable all around.
Author:
From Canadians for Affordable Energy
Already, billions of tax dollars have been handed out in subsidies to companies that have no accountability to the Canadian taxpayer. This experiment in societal re-engineering will disproportionately harm Canadian workers and families, especially those who live in rural communities.
And it will surely fail
Canada is not nearly ready for the wholesale adoption of electric vehicles (EVs).
That was the message of the letter I sent to every member of Parliament recently, urging them to drop the “Electric Vehicle Availability Standard” introduced by the Trudeau government late last year. That’s the policy that mandates that all new vehicles sold in Canada must be electric by 2035. There is no way, considering the economic, technological and infrastructural realities of our country — and our world — where this is possible.
Stubbornly attempting to achieve this goal would do serious damage to our economy, leaving Canadian taxpayers on the hook for generations to come. Already, billions of tax dollars have been handed out in subsidies to companies that have no accountability to the Canadian taxpayer. This experiment in societal re-engineering will disproportionately harm Canadian workers and families, especially those who live in rural communities.
And it will surely fail. In my letter I highlight a few of the central reasons why staying the course on EV mandates by 2035 is extremely reckless. Right off the bat, the technology is simply not there for electric vehicles to be a reliable source of transportation in Canada’s climate. The batteries cannot hold their charge in frigid temperatures. Forcing Canadians to rely on vehicles that can’t handle our winters is irresponsible and dangerous.
Electric vehicles’ cost is another issue. Right now, the EV market relies heavily on government subsidies. These subsidies can’t last forever. But without them EVs are prohibitively expensive. Even with them, the costs of maintaining an EV are high. Replacing a damaged battery, for example, can cost upwards of $20,000. Mandating that people buy vehicles they can’t afford to either purchase in the first place or maintain if they do buy them is political malpractice.
A fact long ignored by decision-makers in Ottawa is that our electrical grid isn’t ready for the excess demand that would come with widespread EV adoption. These mandates, paired with the government’s goal of fully decarbonizing the grid by 2035, put us on a collision course with the reality of unreliable power. A grid powered, not by reliable fossil fuels, but by spotty wind and solar energy would be further burdened with millions of cars relying exclusively on electricity.
Beyond the electricity itself, the EV mandates will require additional transmission and distribution capacity. But there are no signs any plan is in place to expand our transmission capacity to meet the 2035 target.
The sheer number of new charging stations required by wholesale adoption of EVs will strain our distribution networks. Natural Resources Canada projections show that Canada will need between 442,000 and 469,000 public charging ports by 2035. At the moment, we have roughly 28,000. And that doesn’t include the private charging stations people will need to install at home. Closing that gap in such a tight time frame is almost certainly impossible.
All of those considerations aside, at a fundamental level the government’s push for electric vehicles encroaches on the operation of the free market, all in the name of emissions reductions. The Canadian economy is founded on the market principle that the consumer drives the economy (no pun intended). Thousands of times over, it has been shown that if there is enough demand for a product, supply soon follows. In the case of EVs, however, the federal government is operating under the assumption that if you somehow create a supply, that will inspire a demand.
This hasn’t worked in any of the countries where it’s been attempted, which is why nations around the world have started to tap the brakes on EV mandates. Decision-makers in Ottawa need to follow suit and abandon these reckless and costly mandates. Let the market decide when EVs are ready for prime time. In other words, let Canadians decide.
Dan McTeague is President of Canadians for Affordable Energy
From the Fraser Institute
By Tegan Hill and Jake Fuss
The Parliamentary Budget Officer recently estimated federal government support for EV initiatives will cost Canadian taxpayers $31.4 billion, which represents roughly $1,043 per tax filer.
According to a new Leger poll, a significant percentage of Gen Z and millennial Canadians don’t believe that billions of dollars in government subsidies to build electric vehicle (EV) plants—including $5 billion to Honda, $13.2 billion to Volkswagen and $15 billion to Stellantis—will benefit them. And based on a large body of research, they’re right.
The poll, which surveyed Canadians aged 18 to 39 who are eligible to vote, found that only 32 per cent of respondents believe these subsidies (a.k.a. corporate welfare) will be of “significant benefit to your generation” while 28 per cent disagree and 25 per cent are on the fence.
Unfortunately, this type of taxpayer-funded corporate welfare isn’t new. The federal government spent an estimated $84.6 billion (adjusted for inflation) on business subsidies from 2007 to 2019, the last pre-COVID year of data. Over the same period, provincial and local governments spent another $302.9 billion on business subsidies for their favoured firms and industries. And these figures exclude other forms of government support such as loan guarantees, direct investments and regulatory privileges, so the actual cost of corporate welfare during this period was much higher.
The Trudeau government has shown a particular proclivity for corporate welfare. According to a recent study, federal subsidies have increased by 140 per cent from 2014/15 to 2023/24. But again, the money used to fund these subsidies isn’t free—its funded by taxpayers. The Parliamentary Budget Officer recently estimated federal government support for EV initiatives will cost Canadian taxpayers $31.4 billion, which represents roughly $1,043 per tax filer.
And Canadians are right to be skeptical. Despite what the Trudeau or provincial governments claim, there’s little to no evidence that corporate welfare creates jobs (on net) or produces widespread economic benefits.
Instead, by giving money to select firms, the government simply shifts jobs and investment away from other firms and industries—which are likely more productive, as they don’t require government funding to be economically viable—to the government’s preferred industries and firms, circumventing the preferences of consumers and investors. If Honda, Volkswagen and Stellantis are unwilling to build their EV battery plants in Canada without corporate welfare, that sends a strong signal that those projects make little economic sense.
Finally, higher taxes (or lower government spending in other areas) ultimately fund corporate welfare. And higher taxes depress economic activity—the higher the rates, the more economic activity is discouraged.
Unfortunately, the Trudeau government believes it knows better than investors and entrepreneurs, so it continues to use taxpayer money to allocate scarce resources—including labour—to their favoured projects and industries. And since politicians spend other people’s money, they have little incentive to be careful investors.
Canadians, including young Canadians, are right to be skeptical of corporate welfare. As the evidence suggests, there’s little reason to think it will lead to any economic benefit for them.
Authors:
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