Americans would never have adopted the iPhone if the government hadn’t forced manufacturers and phone dealers to make them available, right?
Wrong. The government never had to mandate the availability of the smartphone. As those devices matured, they found their place in the market with millions upon millions of people who wanted them.
Why can’t we let electric vehicles find their own place in the market?
Electric vehicles have a bright future. I hope to own one someday when the cost/benefit matrix makes sense for me. But it’s a grievous mistake for state governments to mandate their availability.
That’s what Minnesota has just done, becoming the first midwestern state to join 14 other states with a supply mandate.
“Incentives and infrastructure are the proven way to get more electric vehicles on the road,” Scott Lambert, president of the Minnesota Auto Dealers Association, said in a news release about the move, per reporter Dana Ferguson. “But the governor has done nothing regarding infrastructure, and the California Rule is a pure supply mandate that does not address how to increase demand.”
“[Gov. Tim] Walz said claims about requiring a certain stock of electric or hybrid vehicles at Minnesota dealers were inaccurate,” Ferguson reports, but how are they inaccurate?
The government can force manufacturers and retailers to make more electric vehicles available, but the only way that policy will be successful is if there is some demand for electric vehicles among the public that’s not being met.
While many Americans are buying and enjoying electric cars, for many more (like me), electric vehicles don’t make sense yet. They’re expensive. The models available currently tend to be focused on smaller cars and not the SUVs or trucks many Americans prefer. They also take a long time to charge even under optimal conditions, and depending on which model you purchase, the range can be problematic. Concerns about finding mechanics who can repair and maintain them for a reasonable price are valid, too, particularly in more rural areas.
I believe these issues will be addressed one day, but in the here and now, even as states like Minnesota try to force the vehicle market toward electric cars, they persist.
There’s also evidence that these mandates create a financial bubble that could pop and hurt the very electric car industry they’re aimed at helping.
A charging station for Tesla vehicles is set up on the north end of the Buffalo Mall parking lot near the Home of Economy store in Jamestown. John M. Steiner / The Sun
Tesla, which is Elon Musk’s company, is widely acknowledged as the great success story of the emerging electric vehicle industry, but we should remember that his company is only profitable because of these state-level mandates. In April, Tesla reported a record net income of $438 million for the quarter. But $518 million of the company’s revenues from that quarter were from the sale of regulatory credits.
What are regulatory credits?
“In the U.S., California and at least 13 other states have rules surrounding regulatory credits,” CNBC reports (Minnesota is now among those states). “They require auto manufacturers to produce a certain number of so-called zero-emission vehicles (ZEVs) based on the total number of cars sold in that particular state.”
“Because Tesla only sells electric cars which come under the ZEV category, the company always has excess regulatory credits and can effectively sell them at a 100% profit,” CNBC continues.
Minnesota’s regulations are based on California’s, remember, meaning Minnesota’s new mandate will be contributing to this market for credits without which Tesla would not be profitable.
These state government mandates have created a situation where the largest electric vehicle manufacturer in the world owes its profitability, not to manufacturing electric vehicles for less than they’re sold for, but to the sale of figments of the government’s imagination.
How is that helping electric vehicles makes sense for Minnesotans, specifically, and Americans, generally?
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Rob Port, founder of SayAnythingBlog.com, is a Forum Communications commentator. Reach him on Twitter at @robport or via email at email@example.com.