Veteran auto analyst Karl Brauer likes battery-electric vehicles, lauds their technology and once leased a Fiat 500e.
But he’s no fan of stricter EPA emission standards proposed by the Biden Admin. to spur the sale of battery-electric cars and trucks.
If the stringent standards take effect as proposed, EVs are projected to comprise 60% of new-car sales in seven years, 67% in nine years.
That would transform the auto industry. But Brauer says it also could hobble it, even kill off some manufacturers.
He expresses his concerns in a Wards Q&A. Here’s an edited version of the interview.
Wards: What’s wrong with the EPA setting such targets for battery-electric cars and trucks?
Brauer: It’s the right sentiment, but a bad method to achieve goals. It’s overly aggressive. The Biden Admin.’s aggressive EPA mandates would require an unrealistic level of investment in everything from vehicle production to infrastructure support.
Do you know how long it takes to reorient the whole automotive system? Some car companies could go out of business.
Wards: Do you think that could actually happen?
Brauer: Absolutely. If it’s not profitable, there is no business advantage to produce EVs. And many EVs currently are being sold at a loss.
Wards: Auto companies seem sort of excited about EVs.
Brauer: Auto companies are required to be excited. There is no precedent for the government to get so deeply involved like this. Many people forget the capitalism part of our economy.
Wards: Are you anti-EV?
Brauer: I love them. The auto industry has the ability to ultimately and profitably build affordable EVs that people want. But the rapid rate of change the government is calling for is ridiculous.
There’s no silver bullet. But there are a lot of bronze bullets.
Wards: What’s that mean?
Brauer: That the government should slow down its EV mandates that would result in two-thirds of vehicles sold by 2032 to be EVs. It should be done more incrementally. (EVs’ share of the U.S. market hit 5.8% in 2022.)
If this required rate of EV market share is implemented, it will impact every aspect of the auto industry, including lost jobs and dramatic price hikes for both EVs and gasoline models.
Those increases will either drive the price of new vehicles beyond the average American’s budget or put multiple global automakers in financial peril. Likely both, in that order.
Wards: If things aren’t going as planned, mandates can be amended, right?
Brauer: Yes. Government has a rich history of changing its mind in matters like this. California has backpedaled on a number of its state emission mandates. But that doesn’t mean it’s OK to set unreasonable goals in the first place with an attitude of push, push, push.
Wards: Toyota touts plug-in hybrid vehicles as an environmentally friendly alternative to pure EVs. Toyota’s position is that the goal is to reduce carbon emissions, not to sell EVs.
Brauer: Plug-in hybrids are the real solution for now. If half of the vehicles sold by 2032 were hybrids, we’d achieve huge reductions in carbon emissions. I love the idea of EVs where they make sense, but I hate the idea of the government setting unreasonable goals for the auto industry.
Wards: But there is a place for BEVs going forward, right?
Brauer: They certainly have a role to play in the future of personal transportation. As sales and production rise, costs will drop, ideally at the same rate that our infrastructure evolves to support consumer charging needs.
Wards: Can all this be worked out mutually beneficially?
Brauer: The automotive industry and its customers can manage this transition over a reasonable timeframe, but if the shift toward EVs is mandated at an unrealistic pace it could slow the rate of adoption, causing widespread economic pain.
Wards: What about the prospects of a battery technology breakthrough that would completely alter the situation?
Brauer: Technological breakthroughs can be game changers. But you don’t send a manned rocket ship to Mars with only enough fuel and food to get there while hoping a tech breakthrough in the meantime will allow you to get the crew back.
Wards: What is the attitude of dealers regarding EVs?
Brauer: Dealers want cars they can sell, which means generally attractive vehicles with competitive price points. Dealers do not like seeing cars stack up on their lot because models are arriving faster than they are selling.
This could be a risk as more EVs enter the market over the coming 12 months unless consumer demand is strong enough to absorb their increasing production rate.
With economic headwinds looming, and consumers generally more conservative in their spending when monetary concerns rise, there’s increased potential for unsold EVs accumulating at retail outlets.
