Gerard Scimeca – Chairman, CASE
July 16, 2019
https://bit.ly/2JB88Fc

In an era when electric vehicles (EVs) are shaking up the auto industry, who knew that the plain old gasoline car could still be appealing?

And yet, gasoline cars have turned out to be a surprising bright spot in the auto industry’s universe of late.  Evidence of that came in a recent analysis of vehicle sales in 2018.  In the U.S., combustion vehicles accounted for 97.02% of total vehicle sales of 17.3 million.  Although sales of electric vehicles (EVs) reached 361,307, an increase of 80% over 2017, EVs accounted for only 2.08% of all cars sold in this country last year – and that’s even with a tax credit of up to $7,500 for EVs.

Producing EVs with a smaller carbon footprint than gasoline cars is the easy part.  Getting people to buy them is the hard part.  Despite 10 years of tax-credit subsidies, EVs aren’t exactly achieving the sort of pace needed to replace gasoline cars anytime soon.  John Heywood, a professor of mechanical engineering at MIT, predicts that at mid-century, 60% of light-duty vehicles will still have combustion engines.

The reason? Using batteries as the primary source of a vehicle’s power supply remains far too expensive, especially for middle- and lower-income Americans.

Yet a coalition of automakers, environmental organizations and electric vehicle suppliers has launched a campaign to save the tax credit.  But extending the tax credit would be a mistake.  It would be bad news for taxpayers, shackling our economy with huge, growth-killing costs.  Ending the tax credit, on the other hand,would save taxpayers about $20 billion over the next decade, according to the Manhattan Institute.

Because of battery limitations, most EVs are small to medium-sized sedans.  But consumers want bigger cars.  As recently as 2014, sedans accounted for a majority of personal vehicle sales.  Today, with consumers buying more SUVs and pickups, sedans account for far fewer auto sales.  Relatively inexpensive gasoline, along with the perceived safety of larger and heavier vehicles, is helping spur the move to larger vehicles that are likely to remain well ahead of EVs for the foreseeable future.

As a consequence, there are signs that EVs will move from their present 2% share in the U.S. to claim no more than 9% by 2025.  Globally, EVs currently constitute a minuscule share (less than one-half of one percent) of a global car fleet of approximately 1.2 billion.  By 2040, EVs are expected to represent about 8% of a global car fleet of 2 billion.

Because of their small numbers now and in the near future, the impact of EVs on reducing carbon emissions will be minimal, and the trend is expected to continue.  Mark Mills, a senior fellow at the Manhattan Institute, says that even 100-fold growth in EVs wouldn’t displace more than 5% of global oil demand in 2040.Mills says lower growth in gasoline demand would be offset by growing air travel and increased need for oil and gas in producing manufactured goods.

There is news that EV advocates simply do not want to believe: despite the huge investment, EVs, even though robustly subsidized, remain stubbornly noncompetitive and contribute only marginally to carbon mitigation. The gasoline car will continue to power the lion’s share of American vehicles for the near future.  Improvements in conventional vehicles and the fuels that run them, will do more to improve our economy and environmental well-being.