Our Take, with Doug Sheridan
In all likelihood, companies like Ford Motor Company, GM and Stellantis would otherwise continue to focus on conventional vehicles, because demand for them remains strong.
Our Take, with Doug Sheridan
Holman Jenkins writes in the WSJ, between panic and glee has been the tone of reporting about a nifty new $11,000 Chinese electric car that is supposedly going to “hit Detroit like a wrecking ball,” in the words of the NYT.
The car is a plug-in hybrid by China’s BYD. While it may be a fine car, the alarums strategically leave out an important point. A cheap and desirable Chinese EV would be a threat to Detroit only because, under our easily satirized fuel mileage rules, the US requires its automakers to sell EVs they wouldn’t otherwise make, which customers don’t want, and which can’t command a profit.
In all likelihood, companies like Ford Motor Company, GM and Stellantis would otherwise continue to focus on conventional vehicles, because demand for them remains strong. But the moment is interesting for another reason—green energy use is rising, and fossil-fuel use is rising even faster.
The amount of energy consumed per unit of global GDP was falling at a rate of almost 2% a year for two decades. Now it’s falling at barely 1%. Though it’s early days, this is exactly what one would expect if green-energy subsidies mainly subsidize more energy consumption overall—rather than emissions reductions. It turns out, fossil fuels don’t stop being useful just because green energy is subsidized. If you want to curb emissions, you have to impose a carbon tax.
This is well understood by wonks, by John Kerry, even by Paul Krugman when he isn’t pretending otherwise. NYT itself belatedly woke up last week to what it calls the “green energy paradox,” though it lapsed back into unreality by concluding that energy use, rather than ineffectual climate policy, therefore is the enemy.
For the time being, the discovery of this truth is likely to lead to a perverse doubling down on green subsidies. In fact, the most interesting thing to observe will be how long and restlessly govt tries to persist in a policy it knows is self-defeating.
If Americans wanted cheap transportation, they’d buy mopeds and 50cc scooters the way people in other countries do. Americans want a lot more from their vehicles, they tell us with their pocketbooks—roominess, luxury, technological refinement, amenities. This turns out to be especially true of the EVs they buy, which tend to be large, powerful and luxurious, and therefore notoriously climate-unfriendly.
So the threat of the supercheap Chinese plug-in vehicle is exaggerated. Besides, in a further perversity, our climate-warrior government already has a 25% tariff to protect Americans from affordable and attractive Chinese EVs and is contemplating greater restrictions on national-security grounds.
The real menace to Detroit is the obvious one. It has nothing to do with China and everything to do with a US government requirement that US companies build money-losing cars that Americans don’t want and that politicians lack the will to make them buy.