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Are electric vehicles really the future of the automotive industry?

April 2021

In order to run a successful business, there are several things an entrepreneur must learn. One of the most basic things, one that you don’t need a Business Degree in to understand, is that in order for a company to survive and prosper, it has to sell a product or service that people want and will pay the asking price.

Electric vehicles are all the rage amongst those who see them as the solution to man-made climate change. Now, it may sound like I’m completely rejecting the idea of electric cars, but nothing could be further from the truth. I’m open-minded enough to believe they are a viable option for those who still wish to own a personal car/truck, but want to get rid of their gas or diesel vehicle.

Electric vehicles (EV) have many positives over traditional vehicles, but let’s not pretend that they are the perfect solution to our transportation needs. As stated in Newton’s Third Law of Motion, “for every action, there is an equal and opposite reaction.” For all the positives that EVs, there are some serious negatives.

Probably one of the most significant negatives, especially for those who see EVs as emission-free, is the battery.

One inconvenient truth is that the battery is made using cobalt, a rare-earth mineral mainly found in the Congo, which is carbon intensive to mine. Further, will we be able to properly dispose of or recycle these lithium-ion batteries by the time they reach the end of their life-cycle, which are essentially toxic waste at that point? Will this prove to be a problem for their ultimate disposal? Are we just trading one problem (emissions) for another problem?

Further, two researchers from the Fraser Institute, Elmira Aliakbari and Ashley Steadman, wrote, “Building a car battery for a sport-utility vehicle (1,100 lbs) could emit up to 74% more CO2 than producing an efficient conventional gas-powered car if the battery is manufactured in a coal-powered factory.”

On the practical side, the range-limitation issues faced by EV owners is a serious issue for those living outside major urban areas and/or those who routinely drive extended distances over a day.

Also impacting the range-limitation issue that some people forget, is that the cold weather seen in many areas of North America can literally suck the life out of a battery, greatly reducing the miles you can drive.

The Tesla Model S has the longest range of any EV currently being sold, with a range of 379 miles (610 kms), which is great, but at a cost anywhere from $114, 000 to over $130, 000 Canadian, is well beyond the affordability of most Canadians.

On the lower end of cost, a BMW i3 sells for around $45, 000 to over $60, 000 Canadian, but it has a range of around 193 miles (310 kms). That’s still a very expensive car, with a range that may not be suitable for all travellers.

With upfront costs like that, it makes buying a gas-powered car, like a Toyota Corolla that starts at around $19, 000, much more attractive for most consumers.

A Hyundai Kona, the second most popular EV, starts at around $45, 000, compared to a regular Hyundai at around $21, 000.

If you need to replace your battery before you replace your car, it can cost from around $5000-$16,000. For that price range, you could buy a good used gas-powered car, or at worst, it would be a good down-payment on a new car.

Now, obviously you likely wouldn’t pay that cost all at once, but if you lucky enough to be able finance the purchase over 84-month period, that would still mean a monthly payment starting around $1400 a month, on the low end, for the Tesla Model S, not including any interest charges.

The BMWi3 could be a little more affordable, starting at around $540 a month, not including any interest charges, using the $45, 000 purchase price and an 84-month amortization period.

Of course, don’t forget that when a dealer says, “Prices starting at $45, 000,” you never actually pay just $45, 000. When all the options, “additional fees” and applicable taxes are added on, the “Final Sale Price” is much higher, so that example of a $540 monthly payment I use above is just the starting point. The money actually coming out of your bank account will be higher than that.

As around half of the car loans currently offered in Canada fall in the 84-month period, it’s quite possible that you could score such a deal too, but it’s not a guarantee. It would likely depend on your credit rating, as would the applicable interest rate.

For most middle-class people, the average monthly payment would be still be a big chunk out of the monthly budget, on top of things like rent/mortgage, food, utilities, and other monthly costs.

Of course, there are leasing options too, which could reduce your payments as well, but as with leasing gas-powered vehicles, leasing is not always a good option for everyone. There are many extra costs that could end up costing you more in the end than if you bought the car.

Your leasing agreement will have mileage restrictions, with penalties ranging from 10 cents to 50 cents for every additional mile over the limit.

You also have to keep the car in great condition or you’ll be assessed penalties when you return it.

You will also have to pay big time if you have to break a lease before the end of the contract.

Leasing usually ends up costing you more than an equivalent loan, there’s always a buy-out amount owing at the end of a lease period, and then after all that money has gone out of your bank account, you won’t have anything to show for it after the vehicle is returned.

As Consumer Reports points out quite well, “Over the long term, the cheapest way to drive is to buy a car and keep it until the wheels fall off.”

Sure, rebates and tax credits can reduce the “sticker shock,” but many argue that this is a case of the government subsidizing luxury cars for the rich. Some even go on to say that if you can afford to buy a $135, 000 car in the first place, the average taxpayer driving their beat-up, 10-year-old Honda Civic shouldn’t be expected to help you buy it through their tax dollars.

When Ontario Premier Kathleen Wynne was in power, she implemented a rebate program of up to $14, 000 for EVs. Using the example of the Tesla Modle S, the buyer would still be personally paying around $100, 000 for the car. It rightly faced heavy criticism from Ontario taxpayers, who asked why should someone who could afford to pay that kind of money for a car, be getting any taxpayer money to help with the purchase?

That EV rebate program was cancelled when Conservative Premier Doug Ford assumed power in 2018.

The availability of charging stations and the time it takes to fully charge the vehicle is another concern. There are quick chargers available that can re-charge a car in 40 minutes, which for me, is both a positive and a negative.

I occasionally go on long road-trips, and while stopping for 40 minutes to stretch, relax, and use the restroom, may be a good thing, sometimes I have a lot of ground to cover and a 5 minute stop would be more than sufficient. I personally would like a charger that charges up the battery in the same time it takes to pump gas into the tank.

Of course, your “40-minute stop” would be dependent on there being an available quick-charging station.

Another issue related to the charging station situation is who pays for the installation and maintenance of public charging stations: private corporations or the government?

For me, a realistic option would be to buy a hybrid vehicle, one that has both a electric and gas-powered motor that will kick in occasionally to keep the battery at full charge. I’ve driven hybrid vehicles before, and they are quite nice. The one that I drove had a charging button that activate the gas engine occasionally to keep the EV battery fully charged. As long as you remembered to activate this charging feature every time that you drove, you never needed to plug-in to a stationary charger.

On the down side, you have a gas motor that will need occasional maintenance, along with the eventual replacement of the battery if you keep the car past the 8-year life-expectancy of most batteries.

Following Newton’s Third Law on another issue, has anyone thought about what happens when sales of gasoline, diesel, propane and natural gas fall and the government starts missing the gas tax revenue? Will the cost of hydro, and the taxes on hydro, be raised to compensate for the lost revenue?

Well, it appears we already have the answer. Saskatchewan Premier Scott Moe announced in his recent budget that Saskatchewan will institute a $150 yearly tax on electric vehicles. Premier Moe stated this tax will ensure drivers of EVs pay their share to maintain roads, normally funded through gas taxes. Obviously, this the right thing to do, as EV drivers shouldn’t get a free ride, literally and figurately, as the money to build and maintain our roads has to come from somewhere.

It’s also valid to question whether our electrical grid is adequate to handle the increased demand that will result from everyone plugging in their EVs throughout the day, but particularly at night when most people get home from work and plug their car into their 220 volt home charger. Will we have to increase our hydro generation capacity, a lot of which comes from natural gas, a carbon fuel?

Wind and solar can’t provide all our energy needs, let alone base-load needs, as they can’t generate any hydro at night, which is when most households use the bulk of their hydro. The only other option is nuclear, which is zero emitting, but not very appealing to the environmental crowd as it unfortunately does generate toxic waste.

Getting back to the issue of successful businesses needing to make a profit, an analysis by Moody’s found that, “automakers are currently losing about $7,000 to $10,000 per vehicle and they will keep losing some amount on them for the next few years.” So it would seem that electric cars are nothing more than a virtue-signaling exercise for the auto manufacturers. Obviously they hope that some day electric cars will be profitable, but how long are they willing to lose money for their shareholders? Are the auto manufacturers hoping that governments will eventually start covering these losses if electric vehicles never prove to be profitable?

According to Platts Analytics Future Energy Outlooks’ report released on 26 January 2021, “U.S. sales of plug-in light duty electric vehicles in 2020 totaled 296,000 units, which was down significantly from the 331,000 in sales in 2019…” Platts attributes much of the decline to the current Chinese Communist Party Virus pandemic, but sales of EVs are still a very small portion of overall vehicle sales, which are around 2%-3% in America, according to Atlas EV Hub, and worldwide, which is around 4%.

I guess things really are the same all over. Electric vehicles just aren’t as popular as their proponents have hoped. That’s not to say they never will be, but we certainly aren’t there yet.

Proponents of EVs claim that reinstating the government subsidies will boost sales, and they may have that effect. Most people like getting “free” money, but that’s not the point. If people really wanted EVs, they would buy them without being bribed with our own money.

A belief in the future, or just trying to get ahead of climate-conscious governments?

On 22 September 2020, California Governor Gavin Newsom signed an order that will ban the sale of new gasoline and diesel-powered passenger cars in the state by 2035. According to Governor Newsom, “…widespread adoption of zero-emission vehicles will reduce greenhouse-gas emissions and help to combat climate change.” We’ll see if this actually comes to be, or if it’s just another attempt by the eco-warriors to force electric cars on a populace that doesn’t want them.

In the wake of this, the “Big Three” automakers in America made some lofty announcements.

After introducing an electric Hummer in October 2020, General Motors stated it will spend $27 billion and offer 30 electric models globally by 2025, and further announced on 28 January 2021, that they will stop producing gas-powered cars and trucks by 2035.

In February 2021, the Ford Motor Company became the largest auto manufacturer to say that by 2026, it’s European division will produce only electric and plug-in hybrid models, and only EV passenger cars by 2030.

Chrysler previously announced in February 2018 that they will phase out diesel-powered vehicles by 2022, and they are similarly increasing production of EVs in all their products, including popular pick-up trucks like the Dodge Ram.

Is this because they truly believe in electric vehicles, or are they just trying to get ahead of the government-ordered destruction of the oil industry. Bottom line, private businesses will only invest in products that they believe will make them money in the long run.

California Governor Gavin Newsom signed an executive order setting a goal of ending gas-powered light-duty vehicles by 2035. This executive order is more of a plan for the future that an actual law, and even if it was, Governor Newsom likely won’t be the governor in 2035, and his order can easily be overturned by any future governor.

In November 2020, the United Kingdom adjusted their fossil-fuel vehicle ban from 2030 to 2040, meaning there will be gas-powered cars in the UK for at least another 10 years.

Japanese media reported that the Japanese government might ban gas-powered vehicles by 2035.

There’s no reason that EVs and gas cars can’t co-exist. We aren’t talking about the transition form the horse and buggy to the car. I’m willing to concede that EVs have their place, and at the very least, the car-buying public should have the final say on whether they want EVs or not.

It shouldn’t be on the order of the government. That’s not how things work in a capitalist, free-market society.

In the past, auto makers have tried manufacturing vehicles powered by a variety of different fuels, with varied success.

How many remember propane-powered vehicles?

We still see some natural gas-powered vehicles out there, but they are usually commercial or public transit vehicles.

Maybe one day, we will find a environmentally friendly and economically viable fuel to power our industrialized, first-world society, but we aren’t there yet.

Sources: Ford says it will phase out gasoline-powered vehicles in Europe. – The New York Times (nytimes.com), Newton’s Third Law of Motion (physicsclassroom.com), Was 2020 The Year That EVs Hit it Big? Almost, But Not Quite – Inside Climate News, 2021 Nissan LEAF Range & Battery | Nissan Canada, Longest Range Electric Cars 2021 | CAR Magazine, BMW i3 and BMW i3s | Electric cars | BMW Canada, The Basics of Car Loan Amortization | Car Loans Canada, Who killed the electric car? Oh right, the buying public who don’t want them – Canadian Military History (militarybruce.com), Global sales of electric cars accelerate fast in 2020 despite pandemic | Electric, hybrid and low-emission cars | The Guardian, US EV sales tumble in 2020, but EV load increases with more charging stations | S&P Global Platts, 2020 US Electric Vehicle Sales Report (cleantechnica.com), North American EV market poised for growth despite pandemic | Automotive World, GMC Hummer EV: 5 things to know about GM’s first electric ‘supertruck’ (cnbc.com), Fiat Chrysler is reportedly ditching diesel cars by 2022 – The Verge, Federal ministers protest Saskatchewan’s electric vehicle tax – Canadian Manufacturing, What Maintenance Do Electric Vehicles Need? (crsautomotive.com), Pros & Cons of Leasing vs. Buying a New Car or Vehicle | My Money Coach, Pros and Cons of Car Leasing – Consumer Reports, https://www.bbc.com/news/business-56574779.amp?fbclid=IwAR3Nj4_yvnrOzwO1PHfltlYGG9W0WxAdGjNw0UbGhc4uDDkufuwdhvq6bKw.

20 Reasons Electric Cars Aren’t Taking Over Just Yet (motor-junkie.com)

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About the author

Bruce Forsyth

Bruce Forsyth served in the Royal Canadian Navy Reserve for 13 years (1987-2000). He served with units in Toronto, Hamilton & Windsor and worked or trained at CFB Esquimalt, CFB Halifax, CFB Petawawa, CFB Kingston, CFB Toronto, Camp Borden, The Burwash Training Area and LFCA Training Centre Meaford.

Permanent link to this article: https://militarybruce.com/are-electric-vehicles-really-the-future-of-the-automotive-industry/

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