Around North America (and soon the United Kingdom), a growing number of provincial and state governments have started requiring carmakers to meet annually increasing zero-emissions vehicle (ZEV) sales targets.

In Canada, the federal government has indicated it intends to introduce such a regulation – called a Clean Car Standard – with the hope of phasing out the sale of new gasoline cars by 2035. Meanwhile, car industry lobbyists have been pushing back. The auto industry likes to talk a good game about its recent ZEV investments, usually with the implication that regulating them isn’t necessary. Car industry lobbyists argue that, rather than regulating, Canada can achieve the same results by increasing the federal purchase incentive for ZEVs to $15,000 from $5,000. 

We decided to put their proposal to the test in a new report Environmental Defence and Équiterre worked on with the Sustainable Transportation Action Research Team at Simon Fraser University (SFU). The expert team at SFU modelled it, and even when the subsidies were offered all the way up to 2035, ZEVs only reach 65% of new car sales – massively missing the 100% sales target for that year. It’s higher than business as usual, which will only get us to 39% by 2035 – but it just isn’t enough.

The automaker’s recommendation to triple incentives up to 2035 would also cost the federal government more than $54 billion, while the proposed regulation costs virtually nothing. With a Clean Car Standard, the cost of transitioning to electric vehicles is instead shifted onto the auto industry, resulting in a slight decline in profits compared to business as usual.

This should give you a hint as to why automakers are so vocally opposed to this proposal. The auto industry has a financial stake in slowing the transition to electric vehicles, because it makes more money by selling gasoline-fuelled cars.

Our analysis also reveals something far more sinister. Automakers actually capture a significant portion of the value from ZEV purchase incentives by hiking prices. That is, instead of passing the full value of the incentive onto the consumer, they increase the price markup on their electric vehicles to pad profits and slow ZEV adoption.

Furthermore, we found that of the $54 billion cost to taxpayers from a more generous subsidy, automakers would be able to pocket $10 billion through widening their profit margins on these vehicles, a process recently coined as “greedflation.” Here’s the kicker. They actually use a portion of these funds to reduce prices for gasoline-fuelled cars instead, and this is one of the reasons why the incentives approach fails to meet sales targets.

Championing increased incentives is a great way for automakers to appear to be climate champions while lobbying against regulations that would actually make them clean up their act.

The regulation also delivers more affordable electric vehicles – without subsidizing the auto industry. We found that a Clean Car Standard can lead to more than a 20% reduction in electric vehicle prices for the average consumer. This is because automakers would have to bring affordable models to the market and manufacture at scale to meet ZEV sales targets, instead of their current focus on producing a low volume of high-priced luxury models. 

The Clean Car Standard results in Canada hitting every sales target outlined in the federal government’s emissions reduction plan, cumulatively reducing carbon emissions by 135 million tonnes by 2035. To put that into perspective, that is equivalent to 57.5 billion litres of gasoline not burned – enough to fill 23,000 Olympic-sized swimming pools.  

Automakers have a responsibility to address the role they play in contributing to climate disaster. The first step is requiring them to live up to their own green pledges and deliver more affordable electric vehicles to Canadians, even if it means slightly less for their bottom lines. By shaving the price of a ZEV down by 20% while helping Canadians escape from high gas prices, it’s clear that a Clean Car Standard is both a win for the climate and consumers’ pocketbooks.

The post Putting car industry lobbyists’ ZEV claims to the test appeared first on Corporate Knights.

In the 1960s, a scientist named Ruth Reck working at General Motors found in her research that emissions from car tailpipes were causing global heating and would result in dire consequences for the planet. Reck presented her findings on climate change to three top executives at GM’s corporate headquarters, two of whom would later become CEO. 

They ignored her. 

Even after knowing the threat of climate change, they refused to alter their business plans or lobbying strategies – because it could affect their bottom lines. Decades later, it seems that car corporations haven’t changed much. The one difference now is they like to pretend they care about the climate.

Listening to car industry lobbyists these days, you’d think you were listening to electric vehicle evangelists. They’ll say the real reason Canada is lagging behind other countries in EV adoption is a demand deficiency caused by the lack of consumer education, purchase incentives and charging infrastructure.

Please ignore the man behind the curtain. 

If Canada had a lack of consumer demand for EVs, we wouldn’t see buyer waiting lists that are up to three years long. Despite 83% of consumers willing to test drive an EV and 51% willing to buy one, most dealerships (55%) don’t have a single EV in stock. Increasing purchase incentives in this low-supply environment – a demand subsidy – would simply grow these wait lists and potentially inflate prices. 

While the availability of charging is a real problem – and we should be doing more to build out a robust network – it’s wrong to suggest that it’s the primary barrier holding back EV adoption. Studies have shown that boosting public charging to even universally available levels – making charging as convenient as gassing up – would move the dial for EV new market share by only 1.5%. It’s an important part of the policy solution but not an actual replacement for stronger policies – as car companies like to suggest. 

There’s a problem with lack of consumer education on the benefits of EVs? Don’t tell that to the advertising departments of major car companies. Nearly 80% of all car ads are for gas-guzzling SUVs and trucks, which are approximately 20% less fuel efficient than regular cars. Car companies are the second-largest investor in digital advertising in Canada, just behind retail – spending $1.6 billion in 2019. This advertising power is part of the story of why these fuel-inefficient vehicles have risen from half of new car sales to eight out of every 10 new car sales over the last decade. This trend explains why Canada has the most polluting vehicle fleet in the world.

What’s really going on here?

While car companies like to brag about how many new EV models they’re bringing to market, they produce very low volumes of them. That’s because EVs have smaller margins compared to gas guzzlers – so they make less money selling them. Car companies will be able to make a significant amount of money on EVs only if they scale production, achieve lower production costs from “economies of scale” and can offer more competitive prices. But that will cost billions of dollars. 

Why do that, when you can just keep making more money from existing investments in manufacturing gas guzzlers? They’re in the business of making money – and the money is good. North America’s “big three” automakers – Ford, Stellantis and GM – collectively made $41.5 billion (Canadian) in operating profits last year. 

Automakers are trying to fight against the federal government’s plan to bring in regulations that will enforce Canada’s EV sales targets, and effectively ban the sale of gasoline-powered cars by 2035, because they stand to lose money that they’d otherwise make profiting from the pollution. In order to meet sales targets, they’d be forced to reinvest the profits they make from these gas guzzlers into expanding EV production and offer clean cars at more affordable prices.

Which is why they’re spending so much time and effort trying to deflect blame onto Canadian consumers. The auto industry would like us all to think that Canada’s slow EV adoption rate is your fault, rather than how they make, market and price their cars. 

Let’s not fall for it. 

The post Despite what auto industry says, consumers aren’t to blame for poor EV sales appeared first on Corporate Knights.