Why Our EV Policies Are So Extremely Stupid

Incentive and tradition are against it, but auto executives occasionally blurt out important truths. The now retired Bob Lutz, who served in top roles for Ford, GM and Chrysler, regularly suggested the government should stop its fuel-economy nonsense and impose a gas tax if it wants Americans to buy high-mileage vehicles.

The late Sergio Marchionne of Fiat and Chrysler correctly called the Obama fuel-economy rules an “electric vehicle mandate.” Not for public consumption, a Toyota executive complained the same rules were also a “second bailout for Detroit” due to a carve-out for U.S.-built gasoline-powered pickups and large SUVs.

Last year, a splenetic industry insider emailed me attacking a column by basically repeating my own argument back to me (a typical phenomenon): Americans want big cars. Detroit is incentivized by the so-called chicken tax to wring all its profits from large, gas-fueled pickups and SUVs while making “compliance” vehicles for the government that lose money.

The part of my argument he failed to process: These policies and market realities now cause automakers to churn out exactly the wrong kind of electric vehicles if the goal (as we claim) is carbon reduction.

Jim Farley of Ford doesn’t bid to join the pantheon of truth tellers, though last year he admitted that Ford needed more profits from gas-powered cars to cover losses from electric vehicles. More recently, he conspicuously trimmed back Ford’s commitment to EVs, saying the company was losing too much money on them.

He falls short because he won’t say the full truth. Our fuel-economy regulations are incurably stupid not because our leaders necessarily are stupid, but because an inherited structure of regulation traps us in a stupid policy.

The net result is a convoluted set of impulses that authentically serve no purpose at all, have no net benefits for the American people or climate, as even the U.S. Transportation Department was obliged recently to disclose in the Federal Register.

A Rube Goldberg testimony to path dependency, these rules were created for one reason (gas shortages in the 1970s) and new rationales were periodically adopted in keeping with the shibboleth du jour (air pollution, encouraging small-car production in domestic factories, energy independence, fighting climate change). Yet as our government now admits in official documentation, no matter the declared purpose, the rules achieve more cost than benefit.

Also existing for no good purpose is the 1964 LBJ chicken tax. Enacted to keep a VW pickup out of the U.S. market, this 25% tariff on imported pickups and large SUVs is now the financial concession the U.S. industry revolves around. Like your F-150? Good, because you’re paying for everyone else.

Grafting a new EV priority onto our chicken-tax industry structure is a bit like time-traveling to the 19th century to add an LBGTQ ornament to its Christmas trees. The exercise is absurd. Now excess pickup profits subsidize oversized EVs for the wealthy; previously they subsidized money-losing small sedans for the less-affluent.

The goal of auto companies is unchanged, to lose as little money as possible. So they build giant EVs hauling around giant batteries precisely because, as my irate emailer points out, consumers are willing to spend money on them that they are unwilling to spend on a small, efficient electric runabouts. These plus-sized EVs, though, are self-defeating to the extent carbon reduction remains the gossamer-like justification for subsidizing them. Lo, this truth is revealed even to the Economist magazine, an electric-vehicle cheerleader. It headlined its recent piece: “The EV obesity epidemic.”

Which brings us to a larger problem. After 236 years of continuous existence, which is rare in the world, our government is enshrouded in cobwebs—unchangeable policy structures that no longer serve any intelligent purpose. It makes cynics out of our politicians, albeit with some useful variation between the establishment-style, play-along cynicism of a Barack Obama and the meta, wrecking-ball cynicism of a Donald Trump.

Whatever the stated goal of our fuel-economy regulations this week, this month, this year, GM’s Mr. Lutz remains the clear thinker. Either hit Americans with a stiff gasoline tax or give up and let market forces decide which cars will be offered for sale. As Tesla has shown, electric cars would still be in the mix. Consumers want them. The technology is ripe. Either way, the amount of CO2 emitted globally would be little changed for the price-effect reasons that many columns here have spelled out ad nauseam. Only the amount of hypocrisy and accompanying economic waste would be greatly reduced.