The chairman of Toyota Motor Company is having an “I told you so” moment. Mr. Akio Toyoda was gloating Wednesday, October 25, in Japan at an automakers conference. About a year ago, Mr. Toyoda warned the world’s governments and auto companies were rushing into the adoption of Electric Vehicles when doing so just wasn’t smart, and he explained why.
Poor countries around the world don’t have reliable electricity to charge those EVs, nor charging stations to deliver the electricity, even if it existed. The world does not have enough production capacity for minerals like lithium, cobalt, or nickel to build all the required batteries. EVs were much too expensive for many markets. Poor countries, working-class people, and people in rural areas cannot afford EVs.
He explained that if the world were serious about climate change or reducing car emissions, we’d adopt hybrids instead. Hybrids are cars with both gas and electric engines. One of the things that he loved to say was that Toyota could make eight hybrids with the minerals required for one Electric Car.
Mr. Toyoda was roundly criticized for saying these things. Media outlets and environmental groups blasted him, saying neither he nor Toyota were sufficiently committed to stopping climate change. The Sierra Club and Greenpeace ranked the Japanese automaker at the bottom of the latter’s decarbonization ranking for years, actually.
But Mr. Toyoda is not wrong in his assessment. Yesterday, he was asked: Why are the car lots of dealerships in the US filling up with EVs? Car buyers increasingly don’t want them. Mr. Toyoda said, “People [in the auto industry] are finally seeing reality.”
GM last week said they were canceling plans to launch an EV truck production line. Ford is considering canceling plans for their F-150 Lightning pickup. Honda is ending its partnership with GM to build EVs.
It’s not that no one is buying EVs; some are. It’s just that demand is slowing. And that’s in no small part because of what Mr. Toyoda outlined. They are very expensive, there are too few charging stations, and buyers have range anxiety.
Something he didn’t mention is that buying an EV in the US has become an expression of politics. Mostly, you’re a Democrat. We know that because of a study out this week from UC Berkeley. Their examination of car registrations nationwide confirms EV ownership is concentrated in cities run by Democrats. More specifically, those districts that are most heavily Democratic.
Or, as Ford’s CEO recently put it, “[Electric Vehicles] have become a political football.” For what it’s worth, Tesla’s CEO Elon Musk attributes part of the flatling in sales to increased interest rates. With new EVs running more than $50K on average, financing becomes more expensive with a $50K car and average rates of about 6.5% for prime borrowers.
Mr. Toyoda said that Americans, like many around the world, are better suited for hybrid cars. Given our wide open spaces and lack of charging stations, hybrids make more sense. Ford Motor Company reported three weeks ago that sales of hybrids last quarter were up 41%; they’re up 48% industry-wide.
The market is a wonderful thing… when it’s allowed to speak. Politicians with an agenda are usually dangerous. You deny what the market tells you at your own risk.