International Man: Outside of Tesla, fewer and fewer people want electric vehicles (EVs). Other car companies have spent billions producing EVs that buyers don’t trust. Why are they developing products their customers clearly don’t want?
Doug Casey: Perhaps they thought that if Tesla, an undercapitalized start-up run by an eccentric with no auto manufacturing experience, could become a trillion-dollar company, then how hard could it be? They forgot that Tesla is run by a genius who designed an electric car from the ground up with lots of technical innovations. GM, Ford, and the other legacy companies are run by ESG-oriented suits whose first consideration is kowtowing to their HR and compliance departments.
Apple was working on an EV, but they just pulled the plug on it after dropping US $10 billion. Building a good EV isn’t as easy as Elon made it look.
There’s nothing wrong with the concept of electric vehicles. The problem—as with most economic problems in today’s world—is the State. The government has basically decided that fossil fuels are evil, and so are the vehicles that burn them. They hate fossil fuels for all kinds of specious and hysterical reasons that mostly revolve around “saving” the planet. Most of which are nonsensical, at least if you want to have an industrial civilization.
The kind of people who go into government hate cars and the freedom that they give the common man.
That’s why they want to put everybody in 15-minute cities, where you presumably won’t need real cars, just EV golf carts.
The federal government has lots of legal mandates designating what kind of cars manufacturers can and cannot make. Average fleet mileage specifications are a major factor in determining what kind of cars we have. But governments are going farther, essentially trying to ban most conventional ICE (internal combustion engine) cars by 2035 or even 2030. Their mandates against ICEs have skewed production towards electronic vehicles.
At the same time, they’ve offered large tax advantages to consumers, getting them to buy EVs that they’d otherwise avoid. So, although EVs have merit for certain places and conditions and have a place in the automotive world, government pushing and pulling creates huge distortions in how people act.
International Man: Last year, Ford lost $4.7 billion on its EV models, and it’s projected that this year, it could lose up to $5.5 billion.
The Wall Street Journal estimates that Ford could actually boost its profits by 50% by ditching EVs altogether. It seems Ford and other companies could care less about serving their shareholders or their customers.
What is really going on here?
Doug Casey: The shareholders and customers take a back seat to legislators and regulators. It’s perverse.
Cars have been with us for well over 100 years and have created a longstanding subculture. All the car companies’ founders were what we call “car guys.” They loved cars, they loved racing, and they liked the idea of freedom that they promoted. They were a special breed. But the car guys no longer run car companies. They’ve been replaced by suits.
Today’s car companies are run by bean-counting accountants and, increasingly, by the ESG designates who control their boards. A lot of women (GM is run by Mary Barra, and six of its 13 directors are women) are involved in the big car companies today. Nothing against women, but the fact is that women have never been more than a tiny part of car culture, mainly in Beach Boys songs.
If you look at their corporate websites, you’ll see that they emphasize how green and PC they are. Not how great their products are. The people running these giant car companies appear much more interested in phony environmental objectives and promoting ESG than they are in making technologically advanced and interesting cars. Their legal and regulatory compliance departments greatly outnumber their engineering departments. It’s an industry in decline.
Even the name of what used to be Chrysler has changed to Stellantis, a word that stands for nothing. Who, whether an employee or a customer, can have loyalty to an artificial financial construct? No wonder their stocks sell for four or five times earnings.
International Man: Amid many billions in losses, sunk costs, and underwhelming consumer demand, car companies are finally reevaluating their EV strategies.
Many are pulling back or ending them.
Do you think the EV craze is on its way out? Where is this trend headed?
Doug Casey: I’m not against EVs, per se. They have their pros and cons. It’s still early days of technological development for electric cars.
Speaking as a car guy myself, one thing I like about EVs is their very low centers of gravity due to where the batteries are placed. Everything else being equal, they should handle better than ICE cars. Although they also weigh 500-1000 pounds more than they should, because of the batteries, and that’s bad for both handling and tire wear. On the other hand, they have many fewer moving parts than ICEs and should be low maintenance—until the battery gives out after x number of miles. Then you might as well junk the car.
EVs brake well because the brakes don’t just rely on friction to burn off speed; they recapture energy, which serves to recharge the battery. I like the fact that they’re quiet and they’re lightning-fast in acceleration, far faster than comparable ICE cars. They can be great enthusiast cars for certain applications.
But they have some real problems. They make no sense in very cold or very hot climates, which make batteries underperform, on top of additional drains from heating or air conditioning. Because chargers are few and can take a lot of time, EVs are really only practical if you commute in a city and have a garage where you can plug it in overnight. Of course, lithium batteries catch fire occasionally, and when they do, they’re impossible to extinguish. That’s a real risk.
The bottom line is that they make little sense if you’re an apartment dweller without a garage, go on long trips, or live in an intemperate climate zone.
They have a definite value in the automotive ecosystem, but they’re being promoted as a panacea. They’re not. With present technology, hybrids using small but powerful internal combustion engines supplemented by batteries are probably the best way to go between the horns of the dilemma.
Who can accurately predict what will work or not? Politicians and bureaucrats, not engineers and designers, are making all the rules. But on the bright side, battery technology is always improving, so things will almost inevitably get better, despite the best efforts of Greens and bureaucrats.
International Man: Could EVs compete in a free market without government subsidies, tax credits, or other special benefits?
How long can governments continue to artificially prop up EVs?
Doug Casey: We don’t really know the true economics of EVs because they’re buried under a ton of subsidies, tax credits, and other benefits, like free parking in some jurisdictions.
The answer is to get government 100% out of cars. In fact, get government 100% out of absolutely all areas of the economy so we can see what’s really efficient and desirable. We’ll never know the answer until we live in a free market society. Which I pretty much despair of, since the government is becoming more powerful all the time.
How long can they artificially prop up EVs? Not long, I think.
Here’s something that most people don’t consider. The real problem with EVs lies not so much with the cars themselves—which we’ve just discussed. It’s the national electric grid.
The amount of electrical power generation in the US has been flat for the last 20 years. We haven’t grown the amount of electrical power at all, even though the population has grown from 290 million to 340 million in that time. That’s because there have been great gains in efficiency and conservation. But the amount of gross power that will be needed if EVs continue to be promoted is going to be huge. Charging all these EVs could bring down the grid and cause blackouts.
If EVs are ever going to work, the only answer is to build lots of the latest-generation nuclear power plants. That’s a whole different subject, of course, but unless nuclear power has a renaissance, EVs will fail simply because there won’t be enough power on the grid for them. They’ll cause wholesale blackouts.
International Man: What are the implications for lithium, carbon credits, and other hyped-up investments that benefited from the EV craze?
Doug Casey: Once again, political intervention has caused people to do stupid things that they wouldn’t have done otherwise.
EVs are just the most egregious current example of state intervention causing huge misallocations of capital and generally reducing the world’s standard of living. Most government economic “planning” is about as smart as having half the people dig ditches during the day and the other half fill them at night in order to create 100% employment. Most of the current nonsense with lithium, carbon credits, wind, solar, and EVs amounts to the same thing.
As for the implications for lithium, the current generation of batteries requires a lot of lithium. But future generations of batteries may use different materials. Lithium went from about $8,000 a tonne in 2020 to $65,000 in 2023; now it’s dropped to about $12,000. That’s truly spectacular volatility. My guess is that most of the billions of dollars being put into lithium mining will turn out to be another giant misallocation.
In conclusion, the big takeaway on electronic vehicles is that innovations in technology are good, and that includes EVs. But once the State and the kind of people who work for it get involved, they’ll screw things up and create chaos.
My advice is to stick with ICE cars and stay away from EVs until the technology is sorted over the next few years.
Reprinted with permission from International Man.
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