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November 17, 2023

A Rough Road Ahead for EVs

Despite an abundance of hype and massive government subsidies, the news keeps getting worse for electric vehicles.

There’s a lot of talk these days about electric vehicles. People say EVs are good for the environment. They’re breaking our dependence on fossil fuels. They’re fast and cool. But they’re also expensive — so expensive, in fact, that EV automakers are worried about the massive amount of money they’re losing.

“Ford lost an estimated $36,000 on each of the 36,000 electric vehicles it delivered to dealers in the quarter — even more than its estimated $32,350 loss per EV in the second quarter,” according to Reuters. “During Ford’s second-quarter earnings briefing in July, Chief Executive Officer Jim Farley said the company would slow the ramp-up of money-losing EVs, shifting investment to Ford’s commercial vehicle unit and citing plans to quadruple sales of gas-electric hybrids over the next five years.”

Losing that much money on every EV is bad news for Ford, but it’s even worse for General Motors, which postponed the construction of a $4 billion electric vehicle plant in Michigan. “GM now plans to begin construction of its next-generation EVs at Orion Assembly in suburban Detroit by late 2025 instead of next year,” reports CNBC. “The factory currently produces Chevrolet Bolt EVs, which GM will cease producing at the end of this year. The delay is the latest sign of potential trouble for the ambitious multi-billion-dollar plans of traditional automakers to move to electric vehicles.”

GM remains committed to producing EVs exclusively by 2035, but that seems like a pipe dream the way the EV market is trending.

The big automakers didn’t pledge to go electric because they care about saving the planet. It’s all about government regulations and mandates. If they can make money off the latest fad, they’ll jump on board regardless of its impact on Mother Earth. Now that it’s not turning out to be profitable, well…

It’s not only the Big Three that are taking a financial hit. The sophisticated guy sipping a caramel latte and plugging his Tesla into an EV station at the local convenience store looks like he’s on the cutting edge of a technological and social revolution. But there’s a higher overall cost than the construction worker pumping gallons of 89 octane into his 2015 Ford F-150.

In a report titled “Overcharged Expectations: Masking the True Costs of Electric Vehicles,” the Texas Public Policy Foundation found that it costs the equivalent of roughly $17 per gallon to charge an electric car due to pressure on the energy grid caused by charging stations and the large federal subsidies helping to lower vehicle costs.

“The cost of electricity for EV owners is equal to $1.21 per gallon of gasoline,” the report says, “but the cost of charging equipment and charging losses, averaged out over 10 years and 120,000 miles, is $1.38 per gallon equivalent on top of that.” That’s where government steps in to hide the true cost, but the Texas Public Policy Foundation pulls back the curtain: “Adding the costs of the subsidies to the true cost of fueling an EV would equate to an EV owner paying $17.33 per gallon of gasoline. And these estimates do not include the hundreds of billions more in subsidies in the Inflation Reduction Act (2022) for various aspects of the EV supply chain, particularly for battery manufacturing.”

As for the batteries, the report also discovered that the decade-long downward price trend of lithium-ion battery costs “has largely ended.” That’s bad news, too. EV drivers who need to replace their car battery will get a rude awakening. “Electric car batteries degrade over time,” reports automotive writer Madison Cates, “and while gas-powered car batteries can easily be replaced for $100-$200, it’s not that simple for electric cars. A Swedish car owner experienced this the hard way this week when they received a repair bill for $21,000 for their Tesla battery. Electric car batteries are not built to last; when they go out, you can expect a hefty repair bill.”

But wait — there’s more. Buyers willing to fork over the extra money for an EV will indeed have something of a novelty, but perhaps not for long. As a study by ISeeCars found, “While the average 5-year depreciation for all vehicles is 38.8 percent, electric vehicles are more than 10 percentage points worse at 49.1 percent.”

According to iSeeCars executive analyst Karl Brauer, “Between incentives that effectively lower an EV’s price before it’s even purchased and concerns about battery replacement costs, used electric vehicles have always suffered higher depreciation than equivalent gasoline cars,” and “this pattern will continue until electric vehicles don’t require heavy incentives to sell and consumers gain confidence in their long-term ownership costs.”

It’s no surprise, then, that EV sales are slumping. Consumers were understandably caught up in the hype, but hype isn’t enough when reality sets in.

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