“EV dreams are crashing into reality”, Our Take, with Doug Sheridan

“The transformation is particularly intense in Europe where automakers face significant competitive and economic headwinds while also tackling a misalignment between CO2 regulations…”

The WSJ Editorial Board writes, EV dreams are crashing into reality, and the latest signs come from Europe.EV dreams are crashing into realityWill the Trump Admin learn from Europe’s blunders?

“The global auto industry continues to be in a period of significant disruption as it shifts to electrified mobility,” Ford said. “The transformation is particularly intense in Europe where automakers face significant competitive and economic headwinds while also tackling a misalignment between CO2 regulations and consumer demand for electrified vehicles.”

EV demand is softening in Europe as in the US, despite hefty subsidies and mandates. Europe’s emissions regulations require manufacturers to produce increasing numbers of EVs. Such mandates and Chinese imports have resulted in an EV glut and growing losses for auto makers.

Volkswagen says it plans to close at least three German plants7, cut pay and slash thousands of jobs. Cue the auto-maker pleas for gov't support. Ford says Europe needs more “public investments in charging infrastructure” and “meaningful incentives to help consumers make the shift.”

Public “investments” didn’t much help Northvolt, which Brussels tried to stand up as a homegrown competitor to Tesla, China’s CATL, and South Korea’s LG Chem and Samsung. European gov'ts backed a $5 billion loan for Northvolt to expand a Swedish factory. Northvolt’s CEO at the time called the deal “a milestone for the European energy transition.”

Northvolt has repeatedly run into production problems, which spurred BMW to cancel an order in June. Waning EV demand meant new orders would not be forthcoming. The bankruptcy filing will sting Northvolt’s investors, which include Volkswagen Group, BMW Group, and Danish and Canadian pension funds.

Europe’s auto layoffs and Northvolt’s failure are warnings to the US. The domestic auto industry last week sent a letter to Trump urging him not to scale back EV “incentives,” their euphemism for taxpayer subsidies. Our sources say US auto makers want to keep the Biden mandates with some regulatory flexibility because they have invested heavily in meeting them. Competitors like Toyota have been smarter and invested more in hybrid vehicles that consumers seem to prefer.

To Sum It Up: Green industrial policies are failing in Europe and the US, at tremendous cost to taxpayers and in misallocated investment. The Trump Admin has an opening to correct these mistakes.