By: Tim Plouff
For close to a decade, the bureaucrats and transportation optimists have been forecasting the arrival of the electric car as a mainstream vehicle for every consumer market.
Despite generous tax incentives and more media exposure than any automaker could ever pay for, EV sales in America have yet to hit projections, let alone 2% of overall sales. It now appears a larger headwind will further delay the relevance of the electric car.
Advocates can credibly tout the benefits of electric vehicles—up to certain points. Cost comparisons, life-cycle analysis concerns, plus power grid worries remain some of the counterweights to the benefits of gasoline-free motoring.
The cruel irony of the market forces now at play include a Chinese-based pandemic virus that has already decimated all auto sales in that market by 80%. The leading EV market in the world, China’s production and sale of both home-brewed and imported EV’s has effectively cratered.
And we will certainly experience similar pain as more and more governors and mayors dictate forced lock-down, stay-in-place restrictions on the most mobile society in the world. Add up the compounding economic factors, and what looked like another great sales year in January 2020, could now prove to be catastrophic to the American car industry.
Personal consumer debt is at all-time highs, with trillions owed for credit cards, mortgages, as well as educational debt that is soon going to overwhelm a population that is being furloughed and laid-off at a record setting pace. The general driving public is operating a fleet that averages 12-years old, another record. What happens if the Wuhan-flu exacts health care costs that exceed patient’s ability to pay for or seek assistance?
While low gas prices provide economic advantages for those still working, these same smaller threshold numbers cement in consumer’s minds that conventional gas-powered vehicles remain a good value—especially with too many EV’s debuting at luxury-class pricing levels, and not anywhere near the average transaction price from 2019 of $34,000.
Product planners are also seeing increased acceptance for crossover-hybrids. Toyota’s RAV4 Hybrid sold over 90,000 copies in 2019, shocking competitors and sending a strong signal to marketers that this type of motor vehicle is more than a bridge to the expansion of the EV’s. With Honda and Ford now producing hybrid compact crossovers, and Hyundai, Kia, and Nissan poised to debut new models late this year, any growth in
new car sales appears headed in this direction—even if gas prices stay low.
If the government forced stay-in-place mandates expand, and project into late spring, sales of high-margin pickup trucks and SUV’s from GM, Ford, and FCA will dramatically slide and suspend the income necessary for these automakers to pay for the development and production of their planned electric vehicles. A similar scenario will play out with Germany’s luxury marquees.
In just 60-days, a tiny, unseen virus has turned our economics 180-degrees while undermining every perspective about what can and will happen in each segment of the American economy. It would be suspect to think that the roll-out of more EV’s won’t be impacted both long-term and short-term.