Energy & Environment

Autos, Engine Bans, and the New Socialism

A Nissan Leaf next to a charging stand at the North American International Auto Show in Detroit, Mich., January 12, 2016. (Mark Blinch/Reuters)
Government mandates for electric propulsion are wreaking havoc on the auto industry.

‘I don’t know of a [business] that is making money selling electric vehicles unless you are selling them at the very, very high end of the spectrum,” said Fiat Chrysler Automobiles CEO Sergio Marchionne at a Detroit Auto Show press conference this January. One reason EVs are money losers is that consumers don’t want them. Battery-powered chariots make up just 1 percent of the U.S. market.

Yet automakers are overhauling their business models to make EVs. Why?

Because for the first time, governments are mandating how automakers power their vehicles. Just as unelected bureaucrats are outlawing coal power, so are they outlawing the gasoline engine. Welcome to the new socialism.

The government rush to dictate auto powertrains drives against market demand, forcing car companies to make two classes of cars: one for customers and one for their government masters. The companies are also investing in EVs as a hedge against the threat of massive, tobacco-suit-inspired government lawsuits alleging that gas engines are harming the planet.

As socialist governments from Europe to China to California force the adoption of battery power, all companies are feeling the pain. And for smaller, less-capitalized carmakers, the squeeze is particularly acute. Big government favors big business. Junior automakers such as Marchionne’s FCA, Subaru, and Mazda are openly courting giants such as Toyota to share electric powertrains.

“This idea that the government knows better what vehicles buyers should have is really a threat to people’s freedom,” says Myron Ebell, the director of the Center for Energy and Environment at the Competitive Enterprise Institute, who managed President Trump’s EPA transition team.

In a glimpse of the green future, California-based EV maker Tesla — which has failed to turn a profit despite average vehicle-transaction prices of $100,000 — has made money only by selling carbon credits to companies that can’t meet government EV-sales mandates.

Volvo is creating a separate EV brand called Polestar. “Regulatory pressure is driving everything to electric vehicles,” says a Polestar spokesperson. A Center for Automotive Research Center study finds just 18 percent of Americans have a favorable view of EVs.

Subaru, despite 74 straight months of increasing U.S. sales for its popular all-wheel-drive, gas-powered lineup, announced its partnership with Toyota because it can’t afford the investment required to make unpopular plug-ins.

“Partnerships are crucial as the automaker moves to comply with emissions regulations,” Subaru told Automotive News.

Volkswagen, which ill-advisedly tried to end-run costly diesel-pollution rules by cheating on emissions tests, agreed in a court settlement with the EPA and California’s Air Resources Board to build a national charging network to fund their EV-topia.

Ironically, the green/socialist push comes despite the environmental movement’s own cheating scandals, which have discredited climate alarmism. The Climategate and NOAA scandals revealed that top climatologists, such as Al Gore ally Michael Mann of Penn State University, had misleadingly presented scientific data in order to maintain the carbon-crisis narrative.

Ironically, the green/socialist push comes despite the environmental movement’s own cheating scandals, which have discredited climate alarmism.

Yet while reporters rightly and relentlessly pursued VW over Dieselgate, they have covered up the warming-science scandals in order to perpetuate international regulatory frameworks such as the Paris climate accords. If government can regulate carbon, it can control modern industrial economies built on carbon-fuel sources.

“The problem with greenhouse-gas emissions standards is that once you set off down that path, there is no end to it,” says Ebell. “The Paris climate treaty requires every five years a new commitment — eliminating coal and natural gas now won’t be enough. In terms of destroying the economy and limiting human freedom, this is the greatest threat the world faces.”

After Climategate and discredited green-apocalypse predictions — more hurricanes, snowless winters, mass starvation from droughts — polls show Americans have dismissed global warming as a public concern. But, threatened by government mandates and litigation, automakers still prioritize climate-change mitigation.

Although Gore lost the 2000 election battle, he won the policy war. Today, carbon emissions dictate the decisions of car companies, from their engine choices to the kinds of energy their manufacturing plants use.

“We’re a company that believes climate change is an issue, and it needs to be addressed,” Honda’s vice president for environmental affairs, Steve Center, said last year on the “Autoline After Hours” auto program. “The Wall Street guys are asking those questions. [Ten years] ago the fund managers that own the company and make the investments starting asking — ‘What are you guys doing about carbon dioxide?’”

“You guys don’t get it,” the fund managers told Center. “You guys are tobacco.”

A tobacco-like government/media crucifixion of automakers (New York City has already filed suit against oil companies) would be a financial and PR disaster. “We consider that to be a true business risk,” said Honda’s Center.

So Honda is investing billions, he says, “creating [EVs] that people want on their own merit. We’re working very hard not to be part of the problem but to be part of the solution.”

Honda will electrify two-thirds of its global fleet by 2030. Ford will commit $11 billion to produce 40 EVs by 2022. GM is spending billions on electrics (analysts estimate a battery powertrain costs $16,000, compared to a $6,000 gas engine) such as the $37,500 Chevy Bolt in the hopes that it will kill two birds with one stone: satisfy the ride-share industry’s thirst for self-driving cars while also meeting government EV-production diktats.

“Our journey to zero crashes, zero emissions and zero congestion has already begun, through innovations that make our vehicles safer, lighter and smarter,” GM CEO May Barra said in a report last fall. “We will introduce . . . at least 20 new all-electric vehicles to global markets by 2023.”

The industry paradox was on full display at this year’s Detroit Auto Show. GM introduced an all-new version of its Chevy Silverado pickup truck — a V-8-powered behemoth that sold over 585,000 units last year with profit margins of a reported $8,000-plus per vehicle. The Silverado’s profitability is the key to subsidizing GM’s EV investments.

FCA’s own truck division, RAM, also rolled out a new pickup. CEO Marchionne, however, does not have GM’s resources to pour into a separate line of costly EVs, so RAM has “electrified” its pickup with a 48-volt battery assisting the primary gas engine in hopes of temporarily satisfying EV requirements. California is considering a ban on gas engines by 2040.

Even Germany’s Daimler-Benz introduced an all-new, truck-based Mercedes G-wagen SUV — key to making North American profits as the company struggles to meet EU electric mandates.

Promises of an alternative-propulsion future have been no more accurate than predictions of warming Armageddon. Fifteen years ago, the media declared a hybrid-electric revolution amid soaring gas prices. Yet combined EV and hybrid sales have stalled at just 3 percent market share amid range concerns and low gas prices. Ethanol-powered cars, the alternative du jour of the 2008 Detroit Auto Show, also failed to ignite.

Frustrated by consumers’ failure to adopt their preferred technologies, governments are turning to prohibition.

Frustrated by consumers’ failure to adopt their preferred technologies, governments are turning to prohibition.

With annual auto sales of 29 million in 2017 — roughly 30 percent of the globe’s production — communist China is the world’s largest auto market and the best hope for socialists’ EV paradise. “The government has announced a strategic pivot toward vehicle electrification,” reported the Wall Street Journal, “culminating in an effective ban on internal-combustion vehicles by 2040.”

“If only America could be China for a day,” wrote the New York Times’ Thomas Friedman in his 2008 book Hot, Flat, and Crowded. Chinese authoritarianism is an “asset when it comes to trying to engineer a sweeping change, like the green revolution.”

British Labour-party chief Jeremy Corbyn has followed England’s 2040 ban on gas engines with a call to nationalize England’s energy sector.

“The challenge of climate change requires us to radically shift the way we organize our economy,” Corbyn said this month. “In 1945 [government] knew that the only way to rebuild our economy was through a decisive turn to collective action. Necessary action to help avert climate catastrophe requires us to be at least as radical.”

Corbyn did not call for the nationalization of Britain’s auto sector, because that sector failed after government nationalization in the 1970s. Its remnants — Mini Cooper, Jaguar, Land Rover, Rolls-Royce, Bentley — are all owned today by foreign companies.

CEI’s Ebell doesn’t think government social engineering will be any more successful in the 21st century than it was in the 20th. The Trump administration’s withdrawal from the Paris accords, he says, was an important step.

“The big difference is that when we sign something like the Paris Climate Accords, [our courts] enforce it,” he says. “If it doesn’t work out with EVs, Germany is simply going to say they aren’t going to do it. There’s a big difference between China, France, and Germany saying they are going to do something and the U.S. doing something.”

The greater threat to U.S. automakers is California. Ebell says the Trump administration appears interested in easing federal mileage requirements to 35.7 miles per gallon by 2026 — down from the 46.6 mpg imposed by Obama’s EPA. But he thinks repealing a federal waiver that allows California to set its own mpg limits is where the Trump administration should be focused.

“Get rid of it, and we will be free of the tyranny that California is exercising over the rest of the country,” Ebell says. “If we let California dictate our auto policy, it will cause a huge car wreck.”

Henry Payne — Henry Payne is the auto critic for the Detroit News.

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