Cadillac Dealers & Tesla: Do Customers Want Battery Electric Vehicles & are they Good for the Environment?
Tags: Investing, Toyota, Hybrid Cars, Tesla, Environment

National Renewable Energy Lab, Emissions Associated with Electric Vehicle Charging: Impact of Electricity Generation Mix, Charging Infrastructure Availability, and Vehicle Type, Fig. 18

Marker’s terrific recent article Car Dealers Opting Out of the Electric Revolution is an eye-opening look into an important and oddly untold story about the euphoria over Battery Electric Vehicles (BEVs). Effectively no one really knows if there is anywhere enough demand to absorb the onslaught of BEVs coming from global auto manufacturers. Summarily, while supporters of Battery Electric Vehicles are well-intended individuals, the facts do not suggest the buying public at large, the power grid or the possible environmental benefits of these vehicles validate the oncoming explosion in production of electric only vehicles. Articles by Car & Driver, CNN and numerous others challenge the supposition that the Tesla-driven stock market mania will translate into the demand anticipated by many auto manufacturers.

Tesla’s obscene market cap and valuation has driven the whole auto industry to pile into BEVs with McKinsey data showing 450 new models will be available by 2022. One can see that this is not happening due to regulatory pressure or market forces, but rather the irrational behavior of Tesla’s stock price. Again, while well-intentioned, Tesla enthusiasts’ support for a firm that makes the world’s worst vehicles based on J.D. Powers results found here and the disastrous quality problems documented by Consumer Reports seems misplaced. Despite Tesla’s horrible quality, lethal autopilot problems and endless NHTSA investigations, the firm continues to benefit from die-hard supporters or “Teslerati”.

The enthusiasm for Tesla’s stock has turned the company, a sub-scale, low quality auto manufacturer, into one of the world’s biggest companies measured by market capitalization. Recently the folks who decide what goes into the S&P 500 folded to pressure and, despite the lack of fundamental merit, scheduled to add Tesla to one of America’s most popular indexes. Researchers at Kailash Concepts show that this merely fueled the Tesla bubble further as the market anticipates nearly $70 billion in buy orders from S&P 500 Index Funds — a mainstay of many retirement plans and 401(k) plans.

Looking at Toyota, the disconnect between the price America’s retirees will be unknowingly buying into Tesla and its fundamentals is eye-opening. Toyota sells more Camry’s here in the US than Tesla’s total global auto sales. Yet Tesla is priced at well over 2x the value of Toyota — a company that sells over 10 million cars a year and spends $10 billion annually on Research & Development. Typically reserved in communications, Toyota’s CEO recently compared Tesla to a restaurant lacking the ability to make food; effectively stating that Musk’s firm was little more than a restaurant in possession of a very simple “recipe” but unable to execute and actually deliver the “food” — in this case a reliable electric car. Toyota, like the rest of the automotive world, will soon add a slew of battery electrics to their already formidable lineup of environmentally friendly vehicles — complete with the quality that has made the firm legendary.

This is all happening despite the fact that BEVs are not always good for the environment. The National Renewable Energy Laboratory published an excellent analysis of the topic here that was cited in the Department of Energy’s own research. The article shows that depending on the sources of power, time BEVs charge and the status of the grid, the environmental benefits vary substantially. Aside from the environmental costs associated with battery production and disposal there is also the issue of horrendous slave labor to source the cobalt necessary for these vehicles. Why building incredibly heavy vehicles that need brand new charging infrastructure that relies on a grid already running well past capacity and in need of upgrading became an environmental cause celebre is beyond understanding.

To the degree the US is looking to move towards a lower carbon world using BEVs, that requires massive investment in renewable sources of energy and grid distribution. In the meantime, plug in hybrid electric EVs (PHEVs) routinely get 100mpg++, eliminate the entire range anxiety issue and allow us to vastly reduce gasoline consumption while giving government policy, power generation and the grid time to evolve. They also allow battery technology, which is still very much anchored in the past, to benefit from the recent explosion in R&D. One battery expert I spoke with stated that facilities like Tesla’s “GIGAFACTORY” is similar to Microsoft deciding to bet the farm on 3.5" floppy disks. While it sounds ridiculous, the idea that lithium-ion batteries — much less the ones manufactured using current tech — are a great idea is deeply flawed. The good news is that the Tesla bubble has motivated the world’s auto manufacturers to innovate around efficiency. While the current crop of BEVs leave much to be desired, there is no doubt the Toyotas, Volkswagens and other major auto manufacturers will have new carbon-reducing technologies and fuel efficiency features that benefit society in the near future!