Head-on Collision: Electric Cars, Government Mandates, and Prices
I work in the auto industry. I have for the past 25 years: mechanical engineering to new program management.
Dr. North's article on new car loans is timely. I work for a major supplier. I communicate with many suppliers. They have all gone through layoffs recently. Those who haven't been laid off have received more tasks to complete every week for the same pay. Budgets are being cut across the board.
There are some major headwinds -- and some major cognitive dissonance in the high ranks of the industry.
Eric Peters has written a lot about this, but I have this to add from an "insider" perspective.
TRUE BELIEVERS
Many of the engineers, especially the younger ones, truly believe that 100% electric cars will be here in just a few short years. I have no problem with electric cars. They make sense in a lot of circumstances. Short trips and close to major power distribution centers with excess capacity -- they make sense.
Refueling (recharging) time is a major disadvantage. The amount of power required at "refueling stations" could be problematic -- especially given high demand days like when everyone has their A/C on. Swappable battery packs could make sense if standardized sizes could be agreed upon. Doing this would force designers into making cars look even more alike than they do today.
Their almost universally overlooked handicap is this: You're not going much of anywhere when it's very cold outside. When it's -10 degrees outside, I hope your drive is not far. If you leave your electric car cold soaking in the boonies overnight and it's not plugged in, you're not going anywhere the next morning, even if you had "half a tank" of juice when you parked it. Also, your range even on a room temperature fully charged battery will quickly plummet once it acclimates to the outside temp. Your range will plummet even faster when your heater is also sucking power from your battery. But you're not planning to actually use your heater when it's -10 degrees are you?
At -20 degrees or colder, you may risk permanently damaging your battery pack. Don't worry, it only costs about as much as an entire gasoline engine or more to replace.
So now not only does your modest house in a cold climate need a fast charger, but a heated garage as well. How much does it cost to upgrade to 200A service? How is this green? Heating your car to keep your battery comfortable in the 23+ hours a day you're not driving it seems like a ludicrous concept to me, but what the heck do I know?
My gas tank never complained about the weather.
So as long as you don't live in a climate too cold -- where your battery can't take you anywhere, or a climate too hot, where your battery can't be fast charged because the grid can't support it -- you'll be just fine.
Depreciation on electric cars is awe-inspiring -- check it out.
We are selling our first switch to an all-electric (“BEV” for Battery Electric Vehicle in industry speak) car for the European market. They project they'll sell 80,000 per year. I'll let you know next year just how far short of this projection they fall.
CAR OBESITY EPIDEMIC
1990 Ford Escort: 2242 lbs
2017 Ford Focus: 2974 lbs (+33%)
1990 Toyota Camry: 2811 lbs
2017 Toyota Camry: 3340 lbs (+19%)
1990 Honda Civic: 2165 lbs
2017 Honda Civic: 2751 lbs (+27%)
1990 Ford Fiesta: 1713 lbs
2017 Ford Fiesta: 2537 lbs (+48%)
1990 Ford Taurus: 2956 lbs
2017 Ford Taurus: 3969 lbs (+34%)
1990 Chevy Cavalier: 2436 lbs
2017 Chevy Cruz: 2932 lbs (+20%)
1990 Ford Mustang GT: 2827 lbs
2017 Ford Mustang GT: 3705 lbs (+31%)
1990 Chevy Camaro IROC-Z: 3107 lbs
2017 Chevy Camaro SS: 3685 lbs (+19%)
1990 Dodge Caravan: 2910 lbs
2017 Dodge Caravan: 4510 lbs (+55%)
1990 Jeep Grand Cherokee 4WD: 3076 lbs
2017 Jeep Grand Cherokee 4WD: 4677 lbs (+52%)
GOVERNMENT MANDATES: WINNERS AND LOSERS
I've been in the industry long enough to remember when the executives used to fight expensive government mandates. Not only do they not fight new mandates today, they actually get huffy when anyone even suggests repealing them. There is marginal profit, after all, attached to each mandate -– or so they think.
These come from 2 directions: FMVSS (Federal Motor Vehicles Safety Standards) generated by the scaredy-cat busybodies at NHTSA (National Highway Traffic Safety Administration). The conflicting mandates come from the EPA.
You can thank FMVSS for the abhorrent obesity demonstrated above. Sure, some of it was consumer driven, but the vast majority of that blubber was added to meet FMVSS crashworthiness mandates.
Ever increasing number of standard airbags
“Smart” airbags
Rear view camera systems
Tire Pressure Monitoring
Enlarged A-Pillars, B, Pillars, C Pillars, D-Pillars, higher door lines, deck heights, front and rear “crumple zones”
Above point reduces overall glass-to-steel ratio, increasing blind spots.
Not only does this drive up cost, but also mass.
This added mass works in direct opposition to CAFE mandates below.
As mass increases, fuel economy decreases.
When outward visibility decreases, probability of a collision increases.
If drivers can't see as much around them, they are more likely to crash into things hiding in their car's blind spots. These unsafe blind spots are, in no uncertain terms, mandated by NHTSA.
These mandates create a positive feedback loop: unintended consequences of the original mandate leading to ever-more mandates.
As more mandated blind spots lead to more collisions, this drives the next mandate: Rear view cameras mandated for every car.
As more mandated airbags lead to some deaths from airbags, this drives the next mandate: smart airbags for every car.
Ask me why I cringe after I learn about the next “safety” feature. I cringe because I know it will be made mandatory in a few years – leading to ever-higher new car prices and ever-fatter new cars.
“Blind Spot Monitoring” will become mandatory in a few years (since NHTSA has defacto mandated the blind spots)
In the “good old days” – when an American automotive consumer's top priority was safety – they'd buy a Volvo. If priority was fuel economy, they'd buy a Honda. NHTSA now mandates that every car be a Volvo while the EPA now mandates every car be a Honda.
Americans are forbidden by law to buy a new car that isn't “safe enough,” yet we can buy all the new 200 mph capable motorcycles we want and ride them on the same roads.
In competition with FMVSS is the EPA, who claim to care about fuel economy. Here's just a partial list of tech recently introduced to help Fatty McFatcar get comparable fuel economy to “ancient” cars of decades ago:
Turbo or twin turbo small displacement engines instead of larger naturally aspirated engines
Cylinder deactivation
Hybrid Gas/Electric powertrains
Active grille shutters
Variable duration valve trains
“Stop/Start” technology
9+ speed automatic transmissions
Underbelly pans, etc.
Please remember: American consumers did not drive this “demand” for fuel economy; the EPA did. Fuel economy of a carbureted 1985 Honda CR-X was nearly identical (40 City / 48 Highway) to a 2015 Honda Civic Hybrid (44 City / 47 Highway). This is 30 years, one computer revolution, plus a complex hybrid powertrain later.
The low hanging fruit for fuel efficiency was picked over a quarter century ago when electronic fuel injection and overdrive transmissions were standard on nearly every car.
Yet they still love the mandates.
AFFORDABILITY ISSUES
The chart Dr. North shared about new car loans outstanding is telling. What's even more telling is the average new car transaction price when compared to median household income:
2001 Average new car transaction price / median household income: 50%
2019 Average new car transaction price / median household income: 60%
Note: I can find no data on median new car prices or I would have used that instead. I'm not trying to mislead.
This explains why we have 7-year new car loans on cars that depreciate even faster than cars of yesteryear, thanks to all the high-tech gadgets on them. “Connectivity” is marketed as the must have feature in new cars. That same “connectivity” is completely obsolete in 5 years.
There is a mandate for 54.5 mpg Corporate Average Fuel Economy (CAFE) by 2025. The industry is nowhere near ready to meet this. When Trump promised (threatened?) to repeal this, more than 3 OEMs went berserk (don't mess with my marginal profit).
Don't worry, BEVs will save the day. BEVs are also known as “ZEVs” -- Zero Emissions Vehicles, according to the EPA. A more accurate term would be EEVs: Elsewhere Emissions Vehicles. BEVs juice the CAFE numbers for the OEMs, since apparently all electricity comes from unicorns (at least according to the EPA). See “True Believers” for the many challenges BEVs face.
Now you understand why electric cars are being force fed to an unwilling public despite their many challenges.
CONCLUSIONS
Conclusion #1: Cognitive dissonance at the top levels of the industry. Even the newer engineers don't escape the indoctrination.
Conclusion #2: Glad I have no debt and a sizeable nest egg. This can't go on.