I have long been skeptical about the prospects of electric vehicles being able to broadly replace gasoline-powered vehicles in the foreseeable future.
I am all for cleaner, more efficient and cost-effective forms of energy or transportation.
EV's may be able to fully replace gas-powered vehicles at some point if we see further advances in battery technology, enhancements in the electric generation grid and a way around the current reliance these vehicles have on rare earth minerals.
For example, here is a used Tesla battery pack for sale on eBay for the Model 3. The battery required to power an EV takes a lot more than a few Duracells. The battery for a Tesla spans the entire under carriage of the vehicle. $7,000 for a four year old battery that has been used for 39,000 miles.
The Model 3 has generally been Tesla's most popular nameplate because its price point appeals to more buyers. It currently lists for $42,000-$55,000 depending on trim.
Electric vehicles may someday be proven to be superior to internal combustion powered vehicles.
However, that is not where we are today. They simply are not ready for prime time right now. All of this was put into great focus for me recently when I read a report by Unicus Research on the current market for electric vehicles and what they foresee for the future of EV's.
Unicus Research is a stock market equity research firm that uses an investigate approach to its investment recommendations. They look for ideas on both the long and short side (stocks that will decline in value) of the market but they appear to have built their reputation more on short side recommendations.
I particularly like how Unicus promotes their approach.
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| Source: https://www.unicusresearch.com |
The conclusion of their investiative report on electric vehicles is simple.
Short the hype.
In other words, as I stated above, the era of the EV is not close to being here.
Unicus backs up that conclusion with a lot of facts.
1. EV's are only driven about 62% of the miles annually that a gas-powered vehicle is. 7,175 miles for the EV compared to 11, 642 for gas-powered vehicles.
This indicates that most EV owners are not relying on that vehicle as the primary vehicle in the household. It is a second car used for commuting and around town but not considered practical for longer trips.
2. A major limitation with EV's is that you may own the vehicle but the manufacturer owns the software that makes the vehicle go. EV makers have started charging for software updates to increase acceleration and other options for their cars.. BMW recently tried to charge EV owners a monthly fee for heated seats that was met with a lot of anger. Will you eventually need to pay a monthly fee to operate the radio or the heater?
What unknown costs lie ahead for EV owners for "updates"?
This leads to the question of what happens if an EV maker goes bankrupt? Could you be stuck with a vehicle that you cannot unlock, start or drive because the software is no longer supported?
A Ford EV owner recently saw this message on his dashboard.
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| Source: https://twitter.com/GuyDealership/status/1739735289403203908 |
3. Used EV's are generally not holding their value in the used car market. The average three-year used car held on to 66% of its value as of October, 2023 according to Black Book data. A 3-year old EV only retained 49% of its value.
4. What market there is for EV's right now is largely supported by government subsidies.
The US government has doled out over $22 billion in subsidies and assistance to EV manufacturers and EV buyers. While EV advocates claim charging costs are equivalent to $1.21 per gallon of gasoline, the actual amount is an order of magnitude higher.
“Including the charging equipment, subsidies from governments and utilities, and other frequently excluded expenses, the true cost of charging an EV is equivalent to $17.33-per-gallon gasoline—but the EV owner pays less than 7% of that.
Over 10 years, almost $12,000 of costs per EV are transferred to utility ratepayers and taxpayers, effectively socializing the price of recharging an EV while keeping the benefits private.”
5. To manufacture the batteries for EV's requires rare earth minerals such as lithium and cobalt. For example, 165 pounds of lithium are necessary in each Tesla battery.
The International Energy Agency (IEA) showed that an electrified economy in 2030 will likely need anywhere from 250,000 to 450,000 tonnes of lithium. In 2021, the world produced only 105 tonnes. Despite all the harping about “improved technology,” if we find more lithium, copper, nickel, graphite, and rare earths – don’t worry about it. I smell a “hype trap”.
6. Unless you can generate electricity in the power grid from clean sources (wind, solar, nuclear) the conversion to EV's actually will result in more carbon emissions. It is 40% more efficient to continue to distill fossil fuels and burn the gasoline and diesel distillates in vehicles than to burn fossil fuel at a power plan that will then power the EV.
7. The entire electric vehicle future that most leftist politicians are betting on for the future is based on a bunch of IF's.
-We can gain consumer acceptance IF we can continue to provide large government subsidies.
-We can make masses of EV's IF we can source the needed earth minerals and raw materials.
-We can reduce total emissions IF we can produce enough clean energy in the power grid
8. The EV “if” chain is very fragile. In time, one of the fragilities will break. There will be one or more fatal flaws that will occur. My instinct from conversations with politicians and other analysts is that the financial subsidies will falter first with the reduction or elimination of the handouts.
As the subsidies are cut, and owners bear the total cost, EV adoption will stall or falter.
Watch the shadows dancing on the wall, but soon the shadows will vanish. The EV lights will go out, and there will be no more dancing EV shadows.
9. EVs will have a place for upper-income commuters as delivery and possible vehicles. Over 75% of the individual drivers will not be able to afford an EV. EV charging is already challenging in Central Business Districts due to the value of the land, bringing electricity to the site, and the cost of permitting and construction. Charging in rural areas has similar problems, and while the land and permits are less expensive, bringing the electricity to a site, because of the longer distances, is more costly.
10. Short the hype. The only sectors with “longs” are the makers of electric cable and transmission equipment—or private investment in those types of companies or the local installers.
When considering all of the current limitations, uncertainties and fragilities in the electric vehicle chain why would any government consider mandating the sale of EV's and ban on sale of gas-powered engines?
Take all the above into account and then try to understand why California has mandated that all new cars sold in the state must be zero emissions by 2035. 35% must be zero emissions in 2026 which is now just two years away.
California is at around 25% in 2023 but that represents what Unicus believes is the low hanging fruit in EV sales. Their report suggests that getting a higher percentage will be increasingly more difficult because of affordability.
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| Source: https://insideevs.com/news/680900/california-plugin-car-sales-2023q2-share/ |
17 states in the United States have indicated they will follow California with these mandates.
The Biden Administration is intent on doing the same on a national basis if they get their way.
Canada has recently announced that it is following the lead of California and mandating all new cars and light trucks sold in Canada must be zero emissions by 2035,
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| Source: https://www.reuters.com/sustainability/climate-energy/canada-says-all-cars-trucks-must-be-zero-emission-by-2035-industry-unhappy-2023-12-19/ |
Canada on Tuesday released final regulations mandating that all passenger cars, SUVs, crossovers and light trucks sold by 2035 must be zero-emission vehicles (ZEVs), part of the government's overall plan to combat climate change.
ZEVs must make up at least 20% of all cars sold by 2026 and at least 60% by 2030. Industry officials say electric vehicles (EVs) represented 12.1% of new vehicle sales in the third quarter of 2023.
In the United States, EV's accounted for 8% of all vehicle sales in the third quarter, 2023. Tesla has 50% of the total EV market segment. Tesla is also the only automaker that appears to be making a profit on EV's.
This is the share of EV sales that each major auto manufacturer had in the third quarter, 2023.
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| Credit: https://www.coxautoinc.com/market-insights/q3-2023-ev-sales/ |
Of course, as the Unicus Research report indicates, setting mandates on the number of EV's that must be sold makes no sense given the current limitations with respect to technology, resources and the electric grid.
How does it end in anything other than catastrophe, chaos or a change in policies when the obvious becomes inescapable to ignore.
What the "Progressive Liberals" want us to do would be akin to banning horses and mandating the purchase of automobiles in the early 20th century because horse manure was polluting all of the country's roads.
Did we mandate gas stoves in the late 19th to limit the use of firewood to heat people's homes because of smoke pollution in the late 19th century?
Or electricity to insure that we did not continue to kill whales for the oil that was used in lamps of the day?
Technology advances solved these problems but we did not ban what worked to keep the world going in the meantime.
The new technology was adopted naturally by consumers when it made economic and commercial sense as it became apparent the new alternatives were demonstrably better.
I have no doubt the same will be true with electric vehicles at some point if the IF's can be resolved favorably over time.
In the meantime, SHORT THE HYPE.
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