Automakers’ plans to move heavily into electric vehicle production drew a lot of attention during the 2018 edition of the North American International Auto Show held in Detroit last week. But customer demand and the words of at least one Big Three CEO counsel a more restrained approach to the EV frenzy.
Media reports have rejoiced over plans Ford Motor Co. has to spend $11 billion to develop electric vehicles. Ford executives claim that by 2022, they will release 40 new or redesigned hybrid and EV models — 16 fully electric and 24 plug-in hybrid electric models.
But Ford is not alone. All post-2019 Volvo models will be equipped with electric motors, and Toyota, Volkswagen, and General Motors and others expect to invest heavily in new hybrid and electric-only models. The pressure is on, and everyone is expected to take part.
{mosads}Much of the interest is directly linked to national plans to reduce auto emissions. Governments in the U.K., India, France, Norway and China all plan to reduce or phase out the sales of internal combustion engine vehicles over the next 20 to 30 years as part of their emissions-reduction policies.
But government mandates can’t always keep up with societal evolution. Instead, they often misinterpret cues and end up blocking innovation and increased efficiency with excessive regulation. They also tend to force innovation in directions that the public does not expect or want. The EV market is one of these areas.
For example, one of the challenges that auto manufacturers and governments will face in the transition to EVs was mentioned on Jan. 16 by Henry Payne on the Frank Beckmann Show, aired on Detroit’s WJR-AM. Payne, a columnist for The Detroit News, described how the highlight of the auto show was actually the “truck war” between the Big Three, and their new or updated 2019 pickup models.
Though the media and government fervently push EV tech, most customers, when given the option, select from a mix of luxury, reliability, cost and design, long before they consider what actually powers the motor. When considering these factors, customers, especially those in the U.S., are selecting SUVs and trucks.
Payne also described the on-stage comments of Fiat Chrysler CEO, Sergio Marchionne. Marchionne burst the EV bubble by arguing that, while internal combustion engine-only options are on the way out, fully electric vehicles are unlikely to dominate auto markets. Instead, Marchionne said, hybrid technologies will take a majority of the market share over the next decade.
Never one to openly support the mandates and regulations driving a transition to EVs, Marchionne bluntly stated that the only reason Fiat Chrysler builds EVs right now is to meet government mandates.
When compared with the comments from Bill Ford, CEO of Ford, Marchionne comes across as more grounded and reasonable. Ford was quoted at the auto show, “We’re going to electrify even our most iconic vehicles.” He added, “The only question is, will the customer be there with us?”
Ford’s statement stands in marked contrast to his great-grandfather’s beliefs. As Henry Ford described in the commemorative edition of his 1926 book, “Today and Tomorrow”:
“The point to be remembered about the establishment of industry is that, while all these various new ideas were being developed, the people who paid for them were the people who bought. No tractor, no thresher, no motor car, no locomotive, no new industrial device has ever been developed unless the people paid the expense.
Business grows big by public demand. But it never gets bigger than the demand. I cannot control or force the demand. There is no super-control save that of the people reacting to the service they get.”
Bill Ford might do well to heed the caution of his colleague and of his great-grandfather. Business owners who want to stay in business cannot attempt to force the product they want to sell on consumers. Instead, they should ask the consumer what they want and then provide that product.
Jason Hayes is director of environmental policy at The Mackinac Center for Public Policy, a free-market research and education institute in Midland, Michigan.