This article was first published by The McAlvany Intelligence Advisor on Friday, April 24, 2015:
Back before his credibility had been so greatly tarnished along with his confidence in government as a solution to every problem, President Obama made a promise in his 2011 State of the Union speech that realists knew he couldn't keep: he was going to put one million electric and hybrid vehicles (EVs) on the road by 2015:
With more [government funded] research and [tax credit] incentives, we can break our dependence upon oil … and become the first country to have a million electric vehicles on the road by 2015.
The Department of Energy (DOE) called his proclamation a “key milestone toward dramatically reducing dependence on oil and ensuring that America leads in the growing electric vehicle manufacturing industry.” The agency boasted that already those manufacturers were ramping up to produce more than 1.2 million EVs by 2015, thanks to government subsidies, consumer tax credits, federally funded programs to help cities prepare for the growing demand for EV charging stations, as well as continued and increasing “support” [read: grants and loans] for R and D.
It's 2015. The manifesto proclaimed from on high in January 2011 has fallen a little short: about 826,000 EVs short. Original estimates were that people would buy 375,000 Chevy Volts through the end of 2014. They bought just 71,867 of them. The DOE predicted that people would have bought 300,000 Nissan Leafs. They bought fewer than 70,000 of them. The DOE predicted that Fisker Automotive would make and sell 231,000 of their Karmas and Ninas. It managed to make and sell just 2,450 of them before stopping production in November 2012 and declaring bankruptcy a year later, taking with it an estimated $200 million of taxpayer monies.
Edmunds.com, the car-shopping website, reported on Tuesday this week that people who bought these vehicles are now trading them in on SUVs “at a higher rate than ever before.” According to Edmunds.com, the “cachet” of buying green has worn thin:
For better or worse, it looks like many hybrid and EV owners are driven more by financial motives rather than a responsibility for the environment. Three years ago, when gas was at near-record highs, it was a lot easier to rationalize the price premiums on alternative fuel vehicles.
But with today's gas prices as low as they are, the math just doesn't make a very compelling case.
Indeed. In October 2012 it took just five years to break even on the price differential of an EV. Today it takes ten. Edmonds.com continued:
EVs and hybrids accounted for just 2.7 percent of all new car sales in the first quarter of 2015, down from 3.3 percent during that same period last year.
The share of SUVs, meanwhile, has increased from 31.8 percent in Q1 of 2014 to 34.2 percent in Q1 of 2015.
The presidential promise has crashed on the rocks of two realities: the math and the physics. The math never made any sense, even with federal and state subsidies and tax credits rewarding EV purchasers. When the cost of amortizing the hugely expensive lithium-ion batteries was factored in, it cost the owner of an EV about $90 to drive 200 miles. The owner of a normal IC vehicle driving the same distance would pay about $15.
This is now showing up in both the new and the used-EV markets. With the incoming tide of EVs being traded, the price of new EVs is dropping as dealers try to move them out the door. Manufacturers are under pressure to meet gas efficiency mandates, too, relying on EVs to raise their overall company average fuel economy. But new EVs are losing value even more rapidly once driven off the lot than regular IC vehicles (which lose between 30 and 35 percent of their value in the first two years). Estimates are that two-year-old EVs are worth perhaps half their sticker price.
The physics is even more compelling. Even if there were breakthroughs in battery technology (promised by the DOE but not yet achieved), there is a simple immutable law that militates against EVs being competitive with gasoline-powered vehicles. Batteries simply aren't capable of storing energy the way oil and gasoline are. As Mark Mills incisively noted in Real Clear Politics last year,
Pound for pound … the chemicals that comprise gasoline store 40 times more energy than the best chemicals in batteries. Gasoline is not only more dense but also remarkably safe, easy to store, and portable.
Ask a chemist: if you started with a blank slate to design a near-ideal way to store energy for a mobile platform, you'd invent the oil molecule.
None of this is making a dent in the thinking at the DOE. When energy secretary Steven Chu realized that the goal announced by Obama in 2011 had no chance of being achieved, he simply moved the goal posts. In January 2013 he said: “Whether we meet that goal in 2015 or 2016, that's less important than that we're on the right path to get many millions of these vehicles on the road.”
The announcement by Edmunds.com exposes and explodes the myth that government can change society by funding that change with taxpayer dollars. Its announcement has exposed it for what it is: a dream funded with other people's money that once again crashed on the rocks of reality.
The Daily Caller: Record Numbers Of Drivers Trading In Electric Cars For SUVs
Edmunds.com: Hybrid and Electric Vehicles Struggle to Maintain Owner Loyalty, Reports Edmunds.com
Investors.com: Obama Is 826,000 Short of His 1 Million Electric Car Promise
Reuters: U.S. backs off goal of one million electric cars by 2015
Mark Mills at Real Clear Politics: The Future of Cars: Batteries Included?
The Department of Energy's Pronouncement in February 2011: One Million Electric Vehicles By 2015
Detroit News: Electric vehicles lose buzz
Green Car Reports: Plug-In Electric Car Sales In Nov: Leaf Grows, Volt Wanes
Background and end of Fisker Automotive
FISKER AUTOMOTIVE'S ROAD TO RUIN: How a “Billion-Dollar Startup Became a Billion-Dollar Disaster”
The Motley Fool: Don't Do It! (Buy a new car)