The EV Debacle in a Nutshell

  • February 9, 2024

Ford announced the other day that it earned over $14 billion selling vehicles – and lost $4.7 billion not-selling electric vehicles.

The EV debacle in a nutshell.

Also something else. Evidence – that the free market, what there was of it, is a dead letter. The assertion backed by a telling fact. Ford is not cutting its losses, as it would have when there was some vestige of a free market. Why do you supposed Ford stopped trying to sell Edsels, back in the late ’50s – after just three years of trying and failing to sell what the market didn’t want? The question answers itself. Ford thought the Edsel would sell. It wasn’t just a new model, either. Ford saw Edsel as a new brand for Ford. The initial Edsel car was supposed to be so revolutionary, it would create a whole new market for itself.

Does it have a familiar ring?

Of course, there was a very big difference back in the late ’50s. The free market still existed. Or at least, to some significant extent it existed. Ford was not pressured by the government – via the regulatory regime of the government – to “invest” in the Edsel. Ford management chose to do so because it truly believed there was a market for a car like the Edsel. The latter was not conjured into existence like a mechanical Golem in order to achieve compliance with government rigamarole. Its existence wasn’t premised on the need to find a way to offset the costs of government rigamarole. Ford management thought it had a great idea – the next Big Thing – and hoped it would succeed.

Of course, it didn’t. “Edsel” has become synonymous with flop in business schools as well as popular parlance. But when the Edsel flopped, Ford did what businesses used to do when a new product wasn’t selling.

They stopped trying to sell it. In order to stop losing money trying to sell what the market did not want to buy.

More recently, GM stopped trying to sell their incarnation of the Edsel, which was the Pontiac Aztek. Like Ford, GM management thought the “revolutionary” styling of what became known as one of the weirdest-looking production vehicles ever produced would attract lots of buyers interested in something different.

They weren’t.

When it became clear they weren’t, GM did what Ford did back in the late ’50s – and stopped manufacturing what wasn’t selling. In order to staunch the bleeding.

But that was when the free market was still more-or-less operative and car companies like GM and Ford were free to decide whether to continue the bleed – or apply a tourniquet.

They no longer are.

In effect, GM and Ford – the entire car industry – is being forced to increase the bleed, via federal regulations that all-but-legally require them to continue manufacturing that which doesn’t sell and loses money.

And in two different ways.

The first way is the direct way – via regulations that require each manufacturer to manufacture “zero emissions” electric vehicles. Even though they aren’t “zero emissions.” They cause them rather than “emit” them – which is a distinction that ought to make no difference, if the supposed reason for requiring the manufacture of these vehicles really were to staunch “emissions.” What does it matter – “climate change” wise – whether the dread gas carbon dioxide is emitted at the tailpipe of a vehicle or caused by the generation of power needed by an electric vehicle?

Well, it matters – in terms of compliance. Which has nothing to do, as such, with whether more of the dread gas is generated elsewhere. The regs require it – and so the manufacturers comply with it.

The government has become, for all practical purposes, the main customer of the car companies – though it is a customer that doesn’t buy anything.

Secondarily, the car industry is effectively forced to manufacturer vehicles that don’t sell in order to be able to continue selling those that do. Ford’s electric Edsel, the F-150 Lightning, may not sell but by manufacturing it, Ford is able to continue manufacturing F-150s that do sell – because the government credits the Lightning with averaging “68 MPGe” – which counterbalances the 21 MPG (average) posted by the F-150 equipped with the standard V6 engine and the 19 MPG (average) posted by the F-150 equipped with the available 5.0 liter V8 engine. Add “68 MPGe” and 21 MPG and 19 MPG and divide by three – and you’ll see. You end up with a number that is considerably higher than the one you’d have gotten if you added 21 and 19 and divided by two. Which is a rough-math way to understand how Corporate Average Fuel Economy numbers are calculated.

By adding “68 MPGe,” Ford gets credit for higher averages – and that helps Ford avoid the fines that would otherwise be applied (and transferred to F-150 buyers) for not averaging them.

Now you know why Ford hasn’t pulled the plug on the electric Edsel. Why it is committed to losing even more money than it already has. And the same for the rest of the car industry, which no longer responds to the market but rather, caters to its primary customer – the government – which makes the rest of us pay for what we aren’t interested in buying.

. . .

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