Unsold electric vehicles piling up on dealer lots
Axios reports a rising number of unsold electric vehicles (EVs) are piling up on auto dealer lots throughout the nation as the supply of the vehicles begins to outstrip demand.…
The following article was written by Robert Bryce, and it originally appeared in Forbes.
The puns about the recall of the Chevrolet Bolt EV almost write themselves. Last week’s announcement by General Motors GM+2.4% that it was recalling some 73,000 Bolts at a cost of some $1 billion due to the possibility that the vehicles could catch on fire, is both embarrassing for the iconic automaker, and a warning that its plans to electrify all of the cars it sells by 2035 could, ahem, be going up in flames.
The recall announced last Friday, comes about a month after an earlier recall of some 70,000 Bolts that were made between 2017 and 2019. GM put the cost of that recall at about $800 million. Thus, fixing all of the Bolts being recalled could, as Morningstar analyst David Whiston told the Detroit Free Press, cost GM some $1.8 billion. That’s a staggering amount for any company, but particularly for one that went bankrupt in 2009, and has said it will be spending $27 billion on EVs and autonomous vehicles over the next few years.
But the significance of the recall by GM, the biggest U.S. automaker, goes far beyond Detroit. The costs of the EV push now underway are likely to be borne by all American taxpayers and ratepayers, not just EV buyers. Three weeks ago, President Joe Biden signed an executive order that aims to make half of all new cars sold in the U.S. in 2030 be electric. Making that happen, according to the automakers, will require huge amounts of taxpayer money in the form of subsidies. It will also require about $50 billion to be spent on EV charging stations, according to a recent estimate by AlixPartners. The cost of all those charging stations will likely be passed on to ratepayers in form of higher electric bills. Those higher rates will impose a regressive tax on low- and middle-income Americans, who are unlikely to be able to afford an EV of their own.
As Reuters reported on August 5, the day Biden signed the executive order, “The Detroit 3 automakers said the aggressive EV sales goals “can only be met with billions of dollars in government incentives including consumer subsidies, EV charging networks as well as ‘investments in R&D, and incentives to expand the electric vehicle manufacturing and supply chains in the United States.’”
Before going further, I will put my cards on the hood: I’m a longtime skeptic about EVs and their potential to take over the automobile market. Yes, I know EVs sales are growing. And yes, I know that nearly all of the world’s big automakers have announced aggressive plans to electrify their fleets. But my skepticism is due to the century-long failure of EVs to gain significant market share among consumers. As Pew Research reported in June, “In each of the past three years, EVs accounted for about 2% of the U.S. new-car market.” The reasons why EVs aren’t grabbing consumers by the tailpipe are many, but the main ones are affordability and functionality.
Whatever their benefits, EVs are still a luxury product that attract the Benz and Beemer crowd, not low- and middle-income consumers. The average household income for EV buyers is about $140,000. That’s roughly nearly twice the US median, which is about $63,000.
I saw that myself last month during a visit to Costco. Out front was a light-blue 2021 Chevy Bolt EV Premier that was roughly the size of a Toyota Corolla. The price tag: $46,280. For that much money, a discerning consumer could buy two – yes, two! – brand-new Corollas at Toyota of Cedar Park, a dealership located about 20 miles north of downtown Austin.
For decades, automakers have been claiming that an all-electric car was just around the corner. Some of that hype came from GM. As I pointed out in my fourth book, Power Hungry, (published in 2010) GM was claiming back in 1979 that it had found “a breakthrough in batteries” that “now makes electric cars commercially practical.” That boast was included in a September 26, 1979 article in the Washington Post, headlined “GM Unveils Electric Car, New Battery.” The article explained that the new zinc-nickel oxide batteries will provide the “100-mile range that General Motors executives believe is necessary to successfully sell electric vehicles to the public.”
And yet here we are, 42 years later, and GM is announcing it will “replace defective battery modules in Chevrolet Bolt EVs and EUVs with new modules.” In that same press release, the company said the replacement process for the 73,000 cars being recalled will result in an “additional cost of approximately $1 billion.” Thus, some elementary division shows that GM’s cost to fix each Bolt will be about $13,700.
To be fair, that figure may be too high. Further, the company has said it will try to recoup some of the cost of the recalls from its battery supplier, LG Chem. But as Chris Isidore of CNN Business reported on August 5, replacing the batteries in the Bolt will be an insanely expensive fix for a car that was too expensive to begin with. Isidore wrote about the earlier $800 million recall, saying it “comes out to about $11,650 per vehicle, making it one of the most expensive recalls ever on a per-car basis.” Isidore pointed out that Hyundai was spending some $874 million to replace batteries in “its own EVs (also for fire risk, though these are different battery modules. That comes to just under $11,000 per vehicle.)” Isidore went on, saying that for GM and Hyundai, the costs of the recalls “are staggering – and exponentially higher than the average price tag of an auto recall over the last 10 years, which was only about $500 per vehicle.”
The per-vehicle cost of the recall goes to the heart of the bet now being made on EVs, which have an unfortunate habit of catching on fire. As Isidore noted, the Bolt, the only EV that GM is selling in North America, has been “tied to at least nine fires” since early 2020, and Hyundai’s vehicles were involved in about 15 fires. Meanwhile, three Teslas have burst into flames over the past four months.
In April, in the Houston area, two people died after their Tesla Model S crashed into a tree and caught fire. According to one news report, the batteries on the Tesla “continued to ignite despite efforts to douse the flames.” Firefighters used some 23,000 gallons of water to extinguish the fire.
In June, in the Philadelphia area, a new Tesla S Plaid caught fire while the owner was driving it. Here in Austin, earlier this month, a Tesla Model X crashed into a service station and caught fire. As reported by local news outlet Austonia, the driver, a teenage male, “was able to escape the car before it erupted in flames.” The article quoted Austin Fire Department Chief Thaier Smith, who said, “Normally you can put out a car fire with 500 to 1,000 gallons of water, but Teslas may take up to 30,000-40,000 gallons of water, maybe even more, to extinguish the battery pack once it starts burning.”
This spate of recent EV fires, along with the high cost of buying an EV, and the enormous cost of attempting to upgrade our electric grid to accommodate them, are prime examples of why attempting to “electrify everything,” and in particular, our transportation sector, is fraught with risk. The Bolt recall shows why policymakers should slow down the headlong rush toward EVs lest we burn tens of billions of dollars on a technology that could simply go up in smoke.
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