Are Bad Americans Buying Electric Cars? Well yes. But no more. Between electric car superusers and electric vehicle hoarders, some households that have more than one electric car in the driveway can drive up the price of electric vehicles for the average Joe, while keeping electric-only miles lower. what they could be.
In a recent article on Bloomberg, the author informs us that bad Americans are buying electric cars (paywall). I think he makes some great points and points to some real issues, but some of the points are a bit wrong and this is a situation that will likely correct itself over the next few years.
The main argument is very valid. For an electric vehicle to have a real impact, it must replace gasoline miles. The sooner it can rack up those miles, the sooner it will have saved more emissions than the extra emissions it took to build the EV compared to gasoline-powered alternatives. But, when people buy additional EVs to pick up, the second, third, and fourth (or more) EVs don’t replace as many gas miles as the first car.
They also have the numbers to back that up. From the article:
“In a recent Bloomberg survey of EV drivers, 14% of respondents said they owned more than one battery-powered vehicle, and 6% of respondents owned three or more. This doubling dynamic is also clear in the sales data. According to Edmunds, some 26% of EV buyers in the second quarter either traded in their used electric car for a new one or simply added another to their garage. Another 9% of recent EV buyers were already driving a hybrid.
The end result is that super users and hoarders end up buying EVs that ideally would have gone to another household that didn’t yet have EVs. This both increases the environmental impact of individual electric vehicles and keeps more miles powered by gas. They point out that the more vehicles a household owns, the more the third vehicle drives much less than the second, and so on. So a household with three or more EVs probably has a lot of “parked carbon” that isn’t doing the global economy it was supposed to.
The article is not completely catastrophic for the environment. They point out that price is a big factor in getting more cars into wealthier American lanes, and prices are slowly coming down. They also point out that households where the first and second electric vehicle make all motor and gas-powered cars have been replaced eventually reach this environmental break-even point. This happens even faster if you can charge the EV from home solar power.
At the end, they give some pretty solid advice in a quote from an expert, explaining that EVs have the most impact on the environment when driven “in the ground.”
Where the article is insufficient
One thing I think the article missed is its treatment of exchanges. Their theory is that if an EV driver trades one EV for another EV, they are not replacing gas miles at this point. But, I think that’s too individualistic a perspective.
If swaps were crushed and melted, this idea would hold up, but the life of a swapped car goes on. The dealership then sells the car to someone else, and the vehicle is very likely to replace someone else’s gas miles. Under normal market conditions (not used car prices due to the 2021-22 chip shortage), the first vehicle owner consumes a lot of depreciation, resulting in a much more affordable car for the second owner.
So, swapping out EVs every 2-3 years may be a bad call for one’s finances, but as long as the car continues to serve people who would otherwise burn gas, it doesn’t matter who owns the thing. In fact, bringing more used EVs to market may be better for overall EV adoption (when used car prices return to normal).
One thing that may be worse than they think
Anyone who has taken any economics course, even in high school, knows that prices are determined by supply and demand. If there is a lot of demand with a low supply, prices will go up. If there is ample supply and little demand, prices go down.
The problem here arises when demand remains high (especially earlier this year when gas prices were at record highs), while a few people continue to buy EVs to fill their driveways and perhaps in put some in the street. Buying by wealthier people not only keeps expensive EVs priced high, it has also driven up the price of theoretically affordable EVs in 2022.
On the expensive luxury side, it doesn’t take much knowledge of Tesla to understand why prices not only remain high, but have risen. After all, why would a company with an order book of months or even years consider lowering its prices? Model 3 at $35,000? It came, but it sure went in a hurry. There’s supposedly a $25,000 robotaxi coming, but that’s kind of hard to believe when nothing is happening from the company even in the $30 range.
Other manufacturers (especially GM) are getting better at filling in below Tesla, but that’s even more problematic. With “accumulators” collecting a significant share of the new car market in the $40,000-60,000 range, people who would normally buy these vehicles were happy to find cars with an MSRP of around $30,000 (like the Bolt EV, EUV). But, dealers have raised prices to take advantage of shortages, leaving prices unaffordable for people who usually buy between $20 and $30.
So weird nerds who collect Teslas don’t just drive up the price of Teslas, and other mid- to high-market EVs don’t just affect other relatively wealthy people. The effects ripple through the market, driving up the price of electric vehicles for everyone.
The wrong approach to solve this problem
While it might be tempting to think that calling on the government to ration EVs or asking automakers to only sell EVs to people who don’t already have one would solve all of this, there are always unintended consequences. Limiting EV purchases could end up driving people away from EVs, for example. Or, people who have a good reason for that third or fourth EV, like buying one for a kid going to college, would find themselves out in the cold.
The article suggests encouraging people to drive electric vehicles instead of only encouraging people to buy them. Rationing electric vehicles doesn’t make sense, but just providing tax credits to vehicles that are going to be driven would improve the situation. But, how this could be done will have to wait for another article.
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