Commentary on Political Economy

Saturday 9 March 2024


Opinion | GM Doesn’t Tell the Truth About EVs

March 8, 2024 5:30 pm ET

General Motors chair and CEO Mary Barra participates in an Economic Club of Washington discussion in Washington, Dec. 13, 2023. Photo: elizabeth frantz/Reuters

I didn’t read last weekend’s Barron’s interview with GM’s Mary Barra before starting this column because I knew the question most crucial for shareholders wasn’t going to be asked:

“Ms. Barra, you say GM won’t be selling gas-powered cars by the year 2035. When you say these words, is it part of an unspoken political bargain to protect the trade and fuel-mileage concessions that allow large markups on big SUVs and pickup trucks?”

Normal market logic goes out the window when company leaders are indulged and even required to say fantastical, unrealistic things about the future. I’ve long borrowed the term “sophisticated state failure” for the Western world’s energy policies. Because government must always be seen doing something, nonsense ideologies, even when spoken purely for effect, end up “gamified” (made a game of) in government programs. Thus the Obama auto bailouts: They left Detroit permanently dependent on artificially inflated pickup profits to subsidize loss-making electric vehicles served up as a gesture by the political class.


The resulting program, the Biden Transportation Department was legally obliged last year to admit, fails any cost-benefit test. Climatewise, the truth is even sadder.

Dollar for dollar, subsidizing EVs for Americans is a subsidy to the rest of the world to use more fossil energy and cause more emissions, a reality that can’t escape political notice forever.

Take Norway, portrayed in GM ads as EV heaven. As a

research note first observed two years ago, Norway has seen no decline in oil consumption related to EVs, though users receive thousands of dollars in annually recurring subsidies and EVs accounted at the time for 64% of new-car sales.

The reason is increased use and ownership of gas-powered cars, especially for trips that EVs aren’t suited for.


Now comes an update from the natural-resource consultants Goehring & Rozencwajg that only darkens the picture. Despite some of the greenest electricity on Earth, a Norwegian still needs to get 45 years of use out of his imported EV battery (expected life 15 years) to offset the global CO2 cost of producing it.

As I’ve noted before, secretly even the Biden administration knows the truth about all this. Get ready for a colossal irony. Europe’s emissions peaked in 1979, America’s peaked in 2005, and China’s are expected to peak as soon as next year. The reason wasn’t energy policy. Peak emissions happen because of slowing population and economic growth plus the normal, uninterrupted, market-driven hunt for energy efficiency (which can certainly include cost-effective investment in renewables).

Unfortunately, global energy efficiency, which was improving by 1.9% annually for more than a decade, has been growing at only half that rate since 2021.

The numbers, from the French research firm Enerdata, may be distorted by Covid, but recessions and economic crises usually accelerate growth in energy efficiency. By stimulating more energy consumption overall, by stimulating inefficient solar and wind investments, which occasion large emissions-creating increases in mineral mining for less energy output, it’s distinctly possible our poorly designed green subsidies work just like poorly designed fossil-fuel subsidies. They make emissions worse and slow progress toward a global peak, which I’ve long argued is closer than previously thought.

Well-adjusted humans have an instinct to avoid embarrassing persons in positions of authority, whether it’s Ms. Barra embarrassing the politicians who control her life or journalists embarrassing Ms. Barra. But it’s not like Detroit executives in the past haven’t been successful even when willing to say the U.S. fuel mileage regime is nuts; if the government wants people to buy high-mileage or electric vehicles, it should implement a gas tax.

For now, GM’s stock price isn’t zero for one reason: Ms. Barra has skilfully avoided making progress on eliminating the products that make money in favor of those that don’t. In fact, GM has been enjoying some highly profitable quarters thanks to five-figure markups on pickups.

The stock, though, has remained in the doldrums for 15 years, ever since the Obama bailout. Even GM’s commitment last year to use its giant cash earnings, which come only from gas-powered vehicles, to buy back a quarter of its shares hasn’t changed the trajectory, though this commitment can only be interpreted as a silent contradiction showing that, yes, GM doesn’t plan to stop making money.

Ms. Barra and other CEOs have reasons for a strategic silence on the EV folly. But it comes at a cost. I doubt any president of Eisenhower’s era or earlier could have pictured the misallocation of perhaps ultimately $1 trillion on so deluded an enterprise as our government pretending to convert the nation’s vehicle fleet to electricity to change the planet’s weather.

Review and Outlook: The Democratic pep rally had not a single bipartisan grace note. Images: AFP/Getty Images/Reuters Composite: Mark Kelly


Copyright ©2024 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the March 9, 2024, print edition as 'GM Doesn’t Tell the Truth About Electric Vehicles'.

No comments:

Post a Comment