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Canada should get out of EVs before bubble bursts

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From the Fraser Institute

By Kenneth P. Green

A recent article in the The Daily Mail asks, “Is the global EV bubble bursting?” The article then answers the question by looking at electric vehicle (EV) sales figures for six major manufacturers. Sales are down across the industry—Tesla, down 20 per cent in the first quarter this year compared to the same time last year; China’s EV manufacturer, BYD, down 43 per cent; GM down 20.5 per cent; and Volkswagen down 3.3 per cent. Honda saw an anemic uptick of 0.2 per cent. Only BMW experienced a substantial increase in EV sales, up 41 per cent. Not surprisingly, share prices have also dropped across the industry.

An Associated Press article shines more light on EV sales, which in the United States grew only 3.3 per cent in the first quarter of this year, a tiny fraction of the 47 per cent growth that fuelled record sales. The EV share of total U.S. sales fell to 7.15 per cent in the first quarter, down from 7.6 per cent last year. The slowdown, led by Tesla, “confirms automakers’ fears that they moved too quickly to pursue EV buyers.”

In other EV news, Ford has announced it will cut back on EV battery orders, signalling that the company anticipates less EV sales in the future. That would seem to be a good thing for Ford shareholders, as the company also admitted it’s lost $100,000 on every EV it sold in the first quarter of 2024. Ford expects to lose some $5.5 billion from EV sales this year.

So what does it all mean?

Countries that adopted EV sales mandates earlier than Canada are already finding their EV sales targets moving out of reach. In the United Kingdom, which has a 2024 EV sales target of 22 per cent, according to the Society of Motor Manufacturers and Traders, the share of the new car market held by pure battery EVs will be only 19.8 per cent by the end of 2024. The U.K.’s EV sales targets, like Canada’s, require 100 per cent of new vehicle sales to be electric by 2035.

And the rest of Europe is also falling short of EV transition mandates. Forbes reports that current sales of EVs in Europe have flattened at just over 2 million a year, essentially because the continent has run out of early adopters and corporate purchases. Forbes also observes that “other leading market forecasters still expect sales to explode and reach close to 9 million in Europe by 2030,” but that this rate of growth won’t be enough to let the EU and Britain reach target goals of EVs achieving close to an 80 per cent market share.

Meanwhile, the Trudeau government clings to its mandated EV transition, gambling with taxpayer money hand over fist as it pours more than $44 billion into various EV and battery manufacturing operations. And as Andrew Coyne observes in the Globe and Mail, it’s worse than that, as “all of that money will be borrowed, interest costs should also be included. The PBO estimates these at $6.6-billion. All told, that’s $50-billion of other people’s money. For three factories.”

Ottawa’s EV transition policy is deeply misguided, and already shows signs of incipient failure. And likely more failed taxpayer “investments” lie ahead. A smart government would tap the brakes on its EV transition policy. The bubble is growing.

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It’s Time To Abandon Reckless EV Mandates

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From Canadians for Affordable Energy

Dan McTeague

Written By Dan McTeague

Already, billions of tax dollars have been handed out in subsidies to companies that have no accountability to the Canadian taxpayer. This experiment in societal re-engineering will disproportionately harm Canadian workers and families, especially those who live in rural communities.

And it will surely fail

Canada is not nearly ready for the wholesale adoption of electric vehicles (EVs).

That was the message of the letter I sent to every member of Parliament recently, urging them to drop the “Electric Vehicle Availability Standard” introduced by the Trudeau government late last year. That’s the policy that mandates that all new vehicles sold in Canada must be electric by 2035. There is no way, considering the economic, technological and infrastructural realities of our country — and our world — where this is possible.

Stubbornly attempting to achieve this goal would do serious damage to our economy, leaving Canadian taxpayers on the hook for generations to come. Already, billions of tax dollars have been handed out in subsidies to companies that have no accountability to the Canadian taxpayer. This experiment in societal re-engineering will disproportionately harm Canadian workers and families, especially those who live in rural communities.

And it will surely fail. In my letter I highlight a few of the central reasons why staying the course on EV mandates by 2035 is extremely reckless. Right off the bat, the technology is simply not there for electric vehicles to be a reliable source of transportation in Canada’s climate. The batteries cannot hold their charge in frigid temperatures. Forcing Canadians to rely on vehicles that can’t handle our winters is irresponsible and dangerous.

Electric vehicles’ cost is another issue. Right now, the EV market relies heavily on government subsidies. These subsidies can’t last forever. But without them EVs are prohibitively expensive. Even with them, the costs of maintaining an EV are high. Replacing a damaged battery, for example, can cost upwards of $20,000. Mandating that people buy vehicles they can’t afford to either purchase in the first place or maintain if they do buy them is political malpractice.

A fact long ignored by decision-makers in Ottawa is that our electrical grid isn’t ready for the excess demand that would come with widespread EV adoption. These mandates, paired with the government’s goal of fully decarbonizing the grid by 2035, put us on a collision course with the reality of unreliable power. A grid powered, not by reliable fossil fuels, but by spotty wind and solar energy would be further burdened with millions of cars relying exclusively on electricity.

Beyond the electricity itself, the EV mandates will require additional transmission and distribution capacity. But there are no signs any plan is in place to expand our transmission capacity to meet the 2035 target.

The sheer number of new charging stations required by wholesale adoption of EVs will strain our distribution networks. Natural Resources Canada projections show that Canada will need between 442,000 and 469,000 public charging ports by 2035. At the moment, we have roughly 28,000. And that doesn’t include the private charging stations people will need to install at home. Closing that gap in such a tight time frame is almost certainly impossible.

All of those considerations aside, at a fundamental level the government’s push for electric vehicles encroaches on the operation of the free market, all in the name of emissions reductions. The Canadian economy is founded on the market principle that the consumer drives the economy (no pun intended). Thousands of times over, it has been shown that if there is enough demand for a product, supply soon follows. In the case of EVs, however, the federal government is operating under the assumption that if you somehow create a supply, that will inspire a demand.

This hasn’t worked in any of the countries where it’s been attempted, which is why nations around the world have started to tap the brakes on EV mandates. Decision-makers in Ottawa need to follow suit and abandon these reckless and costly mandates. Let the market decide when EVs are ready for prime time. In other words, let Canadians decide.

Dan McTeague is President of Canadians for Affordable Energy

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Many Gen Z and millennial Canadians don’t believe in EV corporate welfare

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From the Fraser Institute

By Tegan Hill and Jake Fuss

The Parliamentary Budget Officer recently estimated federal government support for EV initiatives will cost Canadian taxpayers $31.4 billion, which represents roughly $1,043 per tax filer.

According to a new Leger poll, a significant percentage of Gen Z and millennial Canadians don’t believe that billions of dollars in government subsidies to build electric vehicle (EV) plants—including $5 billion to Honda, $13.2 billion to Volkswagen and $15 billion to Stellantis—will benefit them. And based on a large body of research, they’re right.

The poll, which surveyed Canadians aged 18 to 39 who are eligible to vote, found that only 32 per cent of respondents believe these subsidies (a.k.a. corporate welfare) will be of “significant benefit to your generation” while 28 per cent disagree and 25 per cent are on the fence.

Unfortunately, this type of taxpayer-funded corporate welfare isn’t new. The federal government spent an estimated $84.6 billion (adjusted for inflation) on business subsidies from 2007 to 2019, the last pre-COVID year of data. Over the same period, provincial and local governments spent another $302.9 billion on business subsidies for their favoured firms and industries. And these figures exclude other forms of government support such as loan guarantees, direct investments and regulatory privileges, so the actual cost of corporate welfare during this period was much higher.

The Trudeau government has shown a particular proclivity for corporate welfare. According to a recent study, federal subsidies have increased by 140 per cent from 2014/15 to 2023/24. But again, the money used to fund these subsidies isn’t free—its funded by taxpayers. The Parliamentary Budget Officer recently estimated federal government support for EV initiatives will cost Canadian taxpayers $31.4 billion, which represents roughly $1,043 per tax filer.

And Canadians are right to be skeptical. Despite what the Trudeau or provincial governments claim, there’s little to no evidence that corporate welfare creates jobs (on net) or produces widespread economic benefits.

Instead, by giving money to select firms, the government simply shifts jobs and investment away from other firms and industries—which are likely more productive, as they don’t require government funding to be economically viable—to the government’s preferred industries and firms, circumventing the preferences of consumers and investors. If Honda, Volkswagen and Stellantis are unwilling to build their EV battery plants in Canada without corporate welfare, that sends a strong signal that those projects make little economic sense.

Finally, higher taxes (or lower government spending in other areas) ultimately fund corporate welfare. And higher taxes depress economic activity—the higher the rates, the more economic activity is discouraged.

Unfortunately, the Trudeau government believes it knows better than investors and entrepreneurs, so it continues to use taxpayer money to allocate scarce resources—including labour—to their favoured projects and industries. And since politicians spend other people’s money, they have little incentive to be careful investors.

Canadians, including young Canadians, are right to be skeptical of corporate welfare. As the evidence suggests, there’s little reason to think it will lead to any economic benefit for them.

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