Skeptical about Biden’s Electric Ambitions? Here’s 4 reasons to be.
The electrification hype is relentless. Transportation news is flooded with stories about electric vehicles (EVs). Historic investments add to the excitement. Major car companies announced strong commitments to electrification. Ford just revealed an 11.4 billion investment to create new EVs and lithium batteries.
And it’s not just cars. Capital investments to electrify heavy-duty rigs, semi-trucks, box trucks, delivery vans, and more are exploding.
The recent momentum is driven by the Biden administration’s ambition for a clean energy future. The president’s signature infrastructure bill would inject millions into the electric vehicle market, including $7.5 billion for the installment of charging stations across the nation.
Moreover, Biden appears determined to surpass Europe and China’s share of the electric market. He set a national goal that 50% of new car sales by 2030 would be electric vehicles. As the president signed the executive order, he remarked,
“The question is whether we’ll lead or fall behind in the race for the future.”
However, before chasing after Europe and China, it’s prudent to consider several issues that rarely make headlines.
Costs
Most electric vehicles are prohibitively expensive, including semi-trucks.[1] Commenting on the acquisition of electric tractors, Craig Harper, chief sustainability officer and executive vice president at JB Hunt Transport Services, observed “We have a cost penalty of the truck right now. A comparable electric truck costs three times as much. And who can say what the residual is going to be on the backside.”
Harper also noted the lack of charging infrastructure, slow delivery from EV manufacturers, and what he termed the flat-screen TV problem. How many flat screens do people purchase today knowing that next year’s model will be a significant upgrade? A similar dilemma confronts trucking fleet executives considering electric vehicles. The annual updates – especially the range of miles on a battery charge – creates, Harper said, “…a disadvantage if you’ve jumped in, in a huge way. So, we’ve got a lot of evolution to go through on this [EVs].”
The price of EVs is a major hurdle for car buyers as well. A recent study showed that the average buyer of a regular Ford Focus had a household income of $77,000. Compare this to the $199,000 household income for the average buyer of a Ford Focus electric car. Unquestionably, EVs are an up-market product.
Over half of electric cars sold in the United States are in fact Teslas. The baseline 2021 model starts at 41K and access to Tesla’s charging station network is not free – the federal tax credit on Tesla also lapsed. The baseline model’s driving range is 263 miles. For another 11K buyers can extend that range by 90 miles. Mid-level and premium Teslas cost considerably more.
[1] Granted, the cost of operating EVs is less expensive over several years – if certain factors are present such as government subsidies, elevated diesel prices, lower electric prices, and widespread availability of charging stations.
Early and Late Adoption
Like other new and innovative technologies, EVs are adopted first by wealthy consumers. The largest share of the market simply cannot afford early adoption and will postpone purchases until prices decline. A similar dynamic exists within the transportation industry.
Larger, established firms can afford to replace older, gas and diesel vehicles with electric ones. Smaller firms must delay. The capital outlays are unreasonable. And, following the necessary EV regulations, charging routines, and new maintenance practices impose additional costs. Discussions about an electric vehicle tax to support the highway trust fund are also underway.
While president Biden touts the many benefits of EVs, small businesses and low and middle-income families will have to pay a proportionally higher price for a clean energy future than large businesses and wealthy consumers.
This is a growing concern among auto executives. Speaking recently at a Detroit-area event, Ford CEO Jim Farley said he’s “deeply worried about affordability.”Farley observed that “The average person cannot afford these vehicles and we have a lot of work to do to make them affordable…that’s the one that keeps me up at night.”
Finally, consider the effects of the current crisis in semiconductor manufacturing. Chips strongly impact EV production, which relies heavily on technology. For example, a new Ford Focus uses approximately 300 semiconductors. An all-electric Ford Mustang Mach-E employs 10 times that amount at 3,000. The EV boom appears to be on a collision course with the semiconductor supply chain. Get ready for even longer delays and persistent shortages in the automobile and freight transportation markets.
Market penetration and infrastructure
Electric vehicles account for only 1% of all vehicles sales in the United States. Just 7% of U.S. adults say they currently own a hybrid or electric vehicle. About 25% of this group would not consider an EV next time around. Less than 4 in 10 American adults said they would even consider an EV for their next purchase. In addition, nearly 25% believed electric vehicles compared to gas-powered have about the same impact on the environment. Half said the reliability of electric vehicles is the same as gas-powered.
Consumer concerns include charging station availability, range of miles traveled per charge, and time spent charging vehicles. Presently, there are about 42,000 charging stations nationwide. By comparison, the Energy Department estimates about 145,000 to 150,000 gasoline retailers. Moreover, EV charging stations are not distributed equally across the states – notably, 1/3 are in California. Most cluster on the coasts and in the larger cities. Like EV sales, the EV infrastructure is underdeveloped and skewed toward affluent areas.
Impact of production
The Biden administration’s efforts to decarbonize the world should be tempered by several other EV facts. The most important element in the EV is the rechargeable lithium-ion battery. It relies on minerals – cobalt, graphite, lithium, and manganese – that must be extracted from the earth and processed. According to a recent United Nations report, neither extraction nor processing is environmentally friendly. Forbes calls it the Dirty Secrets of ‘Clean” Electric Vehicles.
The raw materials necessary to meet Biden’s EV goals – notwithstanding the global demands – would eclipse known reserves and devastate the environments in the small number of African and Latin American countries that possess the materials. Importantly, these nations have comparatively weak or no environmental and labor regulations. Moreover, about half the carbon-dioxide emissions from an EV originate from the energy used to produce the car – particularly the mining of materials for the battery. A new EV accounts for 30,000 pounds of carbon-dioxide emissions. The manufacturing of a typical car accounts for 14,000 pounds. In other words, EVs are not “zero-emissions”, and they initially contribute more to greenhouse gases – see EPA for information about total lifecycle emissions of gasoline versus electric cars.
Finally, EVs cost approximately 30% less to build than typical combustion-engine vehicles. This means cuts in assembly-line workers. Labor groups like the United Auto Workers are gravely concerned. But, so far, the fervor over electrification has effectively concealed labor issues.
Bottom Line
The costs of electrification are substantial and the transformation to a clean energy future will disproportionately burden small businesses and middle and low-income consumers. Contrary to the enthusiasm drummed up by the Biden administration, only a fraction of new vehicle sales are electric. That’s a very small base from which to construct a thriving market – in just 9-years.
To free ourselves from the foul, smog-producing combustion engine, Biden claims, we must manufacture thousands of electric vehicles. But the president conveniently overlooks the substantial carbon-dioxide emissions spent to produce those vehicles. Also, the extraction and processing of raw materials required for rechargeable lithium batteries represent a genuine threat to the environment and the welfare of the people in countries that possess the materials. Perhaps smaller, developing countries must be sacrificed for the cleaner, zero-emissions goals of larger, prosperous countries.
In addition, an increase in EV production jeopardizes the jobs of countless assembly line workers here in the U.S. And it surely displaces workers in the fossil fuel industries.
All of this, of course, should provoke serious questions about Biden’s target of half of all new vehicles sold in 2030 to be electric. The fact that Detroit’s Big Three made similar announcements just the day before Biden’s declaration should also raise eyebrows. But it didn’t.
The political and economic powers in transportation seem to be in lockstep, which explains why many of the facts outlined here rarely appear in transportation news. Presumably, most in the industry are eager to partner with state and federal regulators to achieve Biden’s objectives.
Arguably, Biden is proposing one of the most consequential changes in transportation history. Yet there is virtually no discussion about the perils of electrification. Rather, the promise of a clean transportation future dominates the discourse.
To be clear, iLevel agrees the future is electric. But we also recognize the path to that future involves painful tradeoffs and certain casualties. Before we pursue Biden’s zero-emissions dreams, let’s scrutinize the facts – all of them, consider the alternatives, and try to minimize the losses.
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