We’ve all been told that electric cars are the way of the future, but are they really? Electric cars have been around as long as reciprocating engine cars have. The technology has been around for 100-years, so this is not a new alternative energy propulsion strategy for the automobile. One thing many people don’t understand is that if everyone was driving an electric car, we’d have a severe shortage of electricity. Interestingly enough, we can’t even build enough solar and wind turbine generation to handle the increase electricity that America needs as it grows already.
So let me ask everyone; where does that leave the country on the supposed mandate for alternative energy vehicles? There were two very interesting articles in the LA times the week following the 2012 LA auto show;
1.) “Electric Vehicle Battery Firm’s Sale Raises Concern – Some Worry That a 123 System’s US Funded Technology Will End up in Chinese Hands,” by Julie Wernau, published on 12-6-2012.
2.) “Electric-car Maker Fisker Combs the World More Investors – barred from drawing down a federal loan it needs funds to launch a second model,” by Jerry Hirsch, published on 12-8-2012.
In the second article there was an interesting quote by an automotive industry analyst, she stated; “Whenever I see stories about private equity investing in auto companies, I cringe, they have no idea about how much capital they need.”
Okay, that’s a fair enough assessment, and she’s probably right. However, may I ask why that is? In other words, exactly why does it cost so much to start and automobile company in the United States? I would submit to you that the game is rigged, and it is filled with protectionism, unions, overregulation, and far too many lawsuits. Now that the United States government is backing General Motors and Chrysler, they have to make sure their investments don’t go South so they have to put up barriers to entry.
In the midst of keeping Indian and Chinese manufacturers out of our markets we are inadvertently making it impossible for us to come up with new technologies in this sector which would definitely help clean up the air with more efficient vehicles. Therefore, we are preventing innovative technologies from coming to market, and when those innovative companies fail, that technology ends up in foreign hands. In the case of the first article the A123 battery company had received huge amounts of DOE grants and guaranteed taxpayer loans to get going. Did they ever have a chance?
The better question would be; are electric cars really the way of the future? Apparently, not yet, and maybe next time we should wait for the free market to decide. At some point we need to learn our lessons and stop intervening in free markets. If something is economically viable and you can make a profit, and the people truly want and desire it therefore willing to pay the price, and if it makes sense, it will be. If not, it won’t, intervening will just prove the latter, sooner or later. Please consider all this and think on it.