His new car rules are a de facto order to make and buy EVs.
April 12, 2023
The U.S. auto industry is nominally still privately owned, but it is slowly becoming a de facto state-directed utility. That’s the meaning of the Environmental Protection Agency’s proposed new vehicle-emissions standards Wednesday that will force-feed the production of electric vehicles, whether or not consumers want them.
The EPA is using its authority under the Clean Air Act to regulate tailpipe pollutants. But make no mistake this isn’t about clean air. This is about forcing auto makers to produce more EVs that consumers will have no choice but to buy since there will be few gas-powered vehicles left.
The EPA lacks the legal authority to mandate EVs, but it will do so indirectly by setting CO2 emissions standards for 2027 through 2032. The standards are so strict that auto makers must electrify their fleets to meet them. Under the proposed rules, EVs would account for about two-thirds of light-duty vehicle sales in 2032, up from a mere 6 % or so last year.
The EPA mandate is even more aggressive than President Biden’s August 2021 executive order, which set a goal of 50% EV sales in 2030. EPA says at least 20 countries have announced plans to phase out internal-combustion engine cars in the coming decades, so its proposal is no big deal.
“In February 2023 the European Union gave preliminary approval to a measure to phase out sales of ICE passenger vehicles in its 27 member countries by 2035,” EPA says. It conveniently ignores that the European Union last month walked back the ban amid concerns about its enormous costs.
Auto makers such as Ford and Stellantis have recently announced layoffs owing to rising EV costs. They are shifting investment to EVs from internal-combustion engines, meaning fewer gas-powered cars for sale with higher prices. Gas-powered cars are subsidizing EVs, which aren’t profitable though they cost 10% to 40% more than alternatives.
The EPA nonetheless says its rules are feasible because of the Inflation Reduction Act’s (IRA) subsidies. A recent Goldman Sachs report estimates that electric-vehicle consumer and battery-production tax credits alone could cost taxpayers $523 billion over 10 years.
Even with the IRA subsidies, the Energy Information Administration last month forecast that EVs will make up only 15% of sales in 2030 and 19% by 2050. While EVs are becoming more popular in the luxury class, they “remain less competitive against conventional gasoline-powered cars and light trucks serving the mass market,” the report noted.
Reasons include higher prices and insurance costs, a battery range that typically tops off at 250 miles and long charging time. Even rapid chargers take 20 to 30 minutes, which most people don’t want to spend while driving children to soccer or baseball games.
EVs now appeal mainly to the affluent who live in urban areas and don’t travel long distances. Tesla accounted for 64% of the U.S. EV market last year. Traditional car makers can make more EVs to meet the EPA standards, but if consumers don’t buy them, the companies will have to buy compliance credits from Tesla or other luxury EV makers.
Tesla has raked in USD 4.8 billion over the last three years from such credit sales. All this explains why auto companies are kvetching. “EPA’s proposed emissions plan is aggressive by any measure,” the auto maker lobby said. “This requires a massive, 100-year change to the U.S. industrial base and the way Americans drive.” That may be an understatement.
While the rules don’t dictate the specific cars or models that must be made, the Administration is remaking a major industry in a way that is unprecedented in a free-market economy. This is Chinese-style central planning, as auto makers answer first to their political overlords rather than consumers and investors.
The auto companies might deserve sympathy if their executives hadn’t become political supplicants. In addition to lobbying for subsidies, they intervened to defend the Administration’s recent emissions standards against a legal challenge by GOP state attorneys general. They sold themselves out to the government for subsidies, and now they are pleading for more subsidies to meet its mandates.
Democrats and auto makers say EVs are the future, but then why does the government have to subsidize and mandate them? The government didn’t have to force Henry Ford to make his Model T, nor consumers to buy Apple’s iPhone. The left’s problem is that current EV technology and costs limit their appeal.
The Administration’s coercive EV transition is being done in the name of reducing CO2 emissions, but it will have almost no effect on the climate. Climate has become the political cudgel to remake entire industries and coerce Americans to do what progressives want. They don’t believe Americans are enlightened enough to make their own choices.
Appeared in the April 13, 2023, print edition as ‘Biden Remakes the Auto Industry’.