“The WSJ Editorial Board writes, politicians hail EVs as the “future,” but their autotopia keeps getting deferred.”
Our Take, With Doug Sheridan
The WSJ Editorial Board writes, politicians hail EVs as the “future,” but their autotopia keeps getting deferred. Ford Motor Company and Stellantis this week joined a conga line of auto makers rolling back EV investments amid flagging consumer demand. Has the gov’t ever subsidized a product that loses this much money?
Ford will now cancel production of an electric SUV and delay an electric pickup truck. As a result, it expects to take a $1.9B write-down. Believe it or not, this may be less costly than producing EVs that Americans don’t want. Ford lost an astonishing $44,000 on each EV it sold in the second quarter and expects to lose $5B on them this year.
Stellantis will delay investments to retool its shuttered plant in Illinois for EV production. The stated reason… “it is critical that the business case for all investments is aligned with market conditions and our ability to accommodate a wide range of consumer demands.” Imagine that—catering to consumer, rather than gov’t, demands.
Auto makers’ problem is that California and the Biden Admin are forcing them to make increasing numbers of EVs that are piling up on dealer lots. Companies are slashing prices to sell them, resulting in hefty losses. Meantime, Americans are balking at paying more for gas-powered cars, making it harder for the car makers to use those profits to subsidize EVs.
Such losses and cross-business subsidies aren’t financially sustainable even with generous gov’t subsidies. The Biden Admin last year awarded Ford’s joint battery venture a $9.2B low-cost loan for three giant EV battery factories and last month announced a $335MM grant for Stellantis to convert the plant to build EVs.
IRA tax credits can offset the cost of battery production by 30%. The law also dangles $7,500 for consumers to buy EVs, on top of thousands of dollars in subsidies by many states. Yet the EV share of auto sales is flagging. One reason may be that climate mandates and regulation have increased electricity prices relative to gasoline.
Anderson Economic Group, LLC Group estimates that mid-sized EVs cost between $12.61 and $16.11 to fuel per 100 miles, compared to $10.71 for gas-powered models. For pickups, the cost differential is larger. CEO Patrick Anderson notes markets signals were telling Ford not to spend on building a big electric SUV.
None of this matters to the Biden Admin… which is hell-bent on forcing an EVs into every garage whether it’s wanted or not. This spring it ramped up GHG emissions standards, which will require companies to produce nearly four electric trucks for each gas-powered model by 2032. The alternative? Buy regulatory credits from the likes of Tesla. Such credit sales have accounted for half of Tesla’s profit this year.
Kamala Harris in 2019 supported banning the sale of new gas-powered cars in 2035. When auto makers bleed red ink trying to comply with the gov’t mandates, will a President Harris force taxpayers to rescue them?