The title of this post is rhetorical. Electric vehicles are probably in the future of most drivers in the West (at least the future of those drivers who will be able to afford them) — whether or not they are based on the automotive technology car buyers prefer. Reason being that the choice to opt for ‘traditional’ cars will be more and more constrained. And the reason for that is that Western consumers freely deciding what car they want to buy is not the sort of choice climate policymakers want them to have.
For now, however, car buyers still have that choice and are exercising it.
The global electric vehicle (EV) market is reeling from one of the most dramatic collapses in monthly sales to date, with Rystad Energy research showing that only 672,000 units were sold in January, almost half of December 2022 sales and a mere 3% year-on-year increase over January 2022. The EV market share among all passenger car sales also tumbled to 14% in January, well down on the 23% seen in December.
EV sales have been on a relatively consistent upward trajectory in recent years – aside from periods impacted by Covid-19 pandemic-related supply chain issues – and a significant collapse in sales is worrying news for the industry. Tax credits and government subsidies have propped up the EV market to date as countries identify passenger car fleet electrification as a core tactic for meeting net-zero emissions goals, but the reduction or removal of these subsidies this year has dampened consumer sentiment. Automakers are now scrambling to reverse the downward spiral and salvage the market in 2023.
The automotive market is usually cyclical, with sales taking a hit after new subsidy rules come into effect at the start of each year, followed by a gradual recovery. However, the cuts in January this year hit harder than normal, triggering this dramatic collapse. The ramifications of this will be long-lasting and will impact sales through the first quarter of the year and potentially the rest of 2023.
EV subsidies in many European countries and mainland China were sliced at the start of the year, and a return of any significance is highly unlikely in the immediate future. One ray of hope for the global outlook is the US market, which is just beginning its electrification journey and rolling out tax credits thanks to the Inflation Reduction Act. The US was the only major market that saw an increase in both EV sales and market share year-on-year, although its contribution to the global total is still relatively minimal.
Somehow, sales falling because of a cut in subsidies doesn’t sound like the early history of, say, the Model T. But then again, why would it? Henry Ford was responding to (and anticipating) bottom-up consumer demand. By contrast, EV manufacturers are responding (for the most part) to either government edicts or government edicts to come. In other words, it’s a technology being ‘imposed’ by central planners. And the logic of that imposition (which can include distorting the market through subsidies) is that EVs are not yet at a point where they can (again with exceptions) ‘sell themselves’.
There is nothing wrong, in principle, with EVs. The more this technology improves, and the more the infrastructure to support it develops, the better. Letting markets do their thing (even with a nudge or two: there’s no need to be dogmatic about this) represents the best chance that EVs will have of evolving into an improvement on the cars we have now.
Forcing the pace, however, in the way that policymakers are now doing will have next to no impact on the climate and increases the risk that we will be stuck with an inferior technology that will delight only those now embarked on the broader war against mobility.
‘War against mobility?’ Oh yes, it’s a thing.