Juno News - July 06, 2024


Will Trudeau’s EV mandate kill Canada’s auto sector？


Episode Stats

Length

15 minutes

Words per Minute

165.20741

Word Count

2,497

Sentence Count

166

Hate Speech Sentences

2


Summary


Transcript

00:00:00.000 It's not an erosion of democracy when people vote against you, but Justin Trudeau thinks
00:00:14.760 it is.
00:00:15.400 And what's fascinating here is that Justin Trudeau is really trying to set the stage
00:00:21.160 for explaining and justifying and rationalizing his loss.
00:00:25.400 That's what he's doing here.
00:00:26.420 He's trying to make it so that when he loses, which I suspect will happen, the polls are
00:00:31.240 showing what they show.
00:00:32.720 What Justin Trudeau is saying here is that the polling, the eventual loss is not his fault.
00:00:39.600 It's part of a global erosion of democracy.
00:00:42.240 That's what he's going to say.
00:00:43.440 Justin Trudeau is going to be Canada's election denier when Pierre Polyev and the Conservatives
00:00:48.540 likely win a massive majority.
00:00:50.320 That's what the polls are suggesting.
00:00:52.140 Trudeau is going to say, oh, well, this was part of a global shift.
00:00:54.740 This was part of a global shift.
00:00:56.420 It had nothing to do with me.
00:00:57.620 I'm not the unpopular one.
00:00:59.060 It's just like Mark Gerritsen saying, oh, no, I'm not the guy that you need to look at
00:01:03.500 here.
00:01:03.740 Don't worry.
00:01:04.160 The carbon tax.
00:01:05.200 No one dislikes the policy.
00:01:07.040 People just don't like that Pierre Polyev and the Conservatives have been talking about
00:01:11.180 it.
00:01:11.360 That's where this is all coming from.
00:01:13.580 This is another clip from Justin Trudeau.
00:01:15.580 So basically just doing the everything is fine routine when forced with actually, no, we'll
00:01:21.480 get to that clip later.
00:01:22.280 In the meantime, I want to bring into this discussion here.
00:01:25.140 One of Trudeau's environmental policies that, again, is all virtue signaling and very little
00:01:30.300 in the way of substance behind it.
00:01:32.320 The electric vehicle mandate.
00:01:34.920 We are supposed to be staring down the barrel of all light duty vehicles.
00:01:38.640 So basically consumer cars being electric or hybrid by 2035.
00:01:44.020 It may seem like it's a long way away, but that is just about a decade.
00:01:48.180 And there is a very stark warning by economist Ross McKittrick in the Financial Post about
00:01:52.960 what this mandate is going to mean and is meaning for the auto sector.
00:01:56.940 Professor Ross McKittrick joins us once again.
00:01:59.940 Always good to see you, Ross.
00:02:00.880 Thanks for coming on today.
00:02:02.600 Hi, Andrew.
00:02:03.340 Always a pleasure.
00:02:04.420 So let's just start with the rationalization for this, because it's based on this idea that
00:02:10.740 this is going to solve or at least contribute to the solution to all of these economic and
00:02:15.800 environmental woes.
00:02:16.900 But the economic argument we've seen really falls apart on electric vehicles.
00:02:21.800 They are not desirable by consumers.
00:02:24.160 They are not particularly profitable for automakers without massive subsidies.
00:02:28.960 Like, where is the rationalization, if not just ideology?
00:02:32.780 Well, at this point, it is just ideology.
00:02:35.200 Everything you said is correct, that consumers don't want them.
00:02:39.240 The sales targets, it's not 2035 when the sales targets kick in.
00:02:44.560 They start in 2026.
00:02:46.240 It's not 100% in 2026, but it begins ramping up at that point.
00:02:51.020 British Columbia and Quebec are currently in compliance with the 2026 level, but they spend
00:02:57.160 a fortune on subsidies for their consumers.
00:03:00.640 The rest of the country, we're not seeing EVs move off the lot in enough number.
00:03:06.600 The other problem, though, and this is a focus of my column and also a paper that is coming
00:03:11.740 out in the Canadian Journal of Economics, is that the auto sector itself will lose money
00:03:18.020 under any conceivable technology scenario on EVs.
00:03:21.920 People just aren't willing to pay the costs that it involves to own and maintain them.
00:03:28.160 Yes, there are some cheap EVs.
00:03:29.740 You can buy some cheap EVs and costs are coming down for some makers.
00:03:33.900 But to be really indifferent between a gas-powered car and an EV, there's more to it than that.
00:03:40.840 The maintenance costs are higher for EVs.
00:03:44.100 The charging times, the cost of electricity.
00:03:46.340 I mean, electricity is a lot more expensive than it used to be, thanks to things like the
00:03:49.640 Green Energy Act.
00:03:51.400 And so Hertz, for example, the big auto rental company, they went big into EVs a couple of
00:03:58.040 years ago.
00:03:58.560 And they've reversed course.
00:04:00.540 They're selling on 20,000 EVs because they found they were too expensive to maintain and
00:04:05.700 customers didn't want them.
00:04:07.740 So the economics is not there under current and foreseeable technology.
00:04:14.880 And I think here, a good parallel is the switch from LPs and eight-track cassettes to CDs and
00:04:22.460 then music streaming.
00:04:23.700 If it's a good technology that saves people money and provides a superior product, they will
00:04:28.420 make the switch.
00:04:29.160 You don't have to force them.
00:04:30.920 But if we were trying to go the other direction, so if people were currently streaming and using
00:04:36.860 electronic devices and we're going to force them to go to LPs and eight-track cassettes,
00:04:42.500 obviously you'd need to bring it into law.
00:04:46.220 You'd need expensive penalties for people.
00:04:48.100 You'd need massive subsidies.
00:04:49.760 And the industry itself would go under because people would just rebel and they wouldn't buy
00:04:54.540 the product.
00:04:55.120 And that's what's going to happen with EVs.
00:04:57.680 Consumers are rebelling.
00:04:58.940 They're not buying the product.
00:05:00.540 And the auto sector itself, I predict, will disappear in Canada as a result.
00:05:05.880 Yeah.
00:05:06.160 And to be fair, the market is trying to do this.
00:05:09.360 I commend Tesla in particular for really trying to change the perception of electric vehicles
00:05:14.040 and make them a lot cooler, make them a lot trendier.
00:05:16.700 I was at a nice wholesome weekend activity on Friday.
00:05:20.100 I was at the tractor pull in Elmer, Ontario.
00:05:22.380 And if you've never been to tractor pulls, they're great fun.
00:05:25.140 And they had this electric, this GMC electric Hummer that was participating.
00:05:30.400 And I thought they were doing it to mock the thing.
00:05:32.420 I thought they were like, this was all some elaborate ruse to make fun of the electric
00:05:35.400 vehicle.
00:05:36.080 Man, that thing had some power.
00:05:37.660 It just absolutely motored.
00:05:39.240 It cleared everything else in that category.
00:05:41.920 So there's an example where they've made a product that some people will like and some
00:05:45.080 people want, but the market needs to be the one to cause the surge in support.
00:05:50.920 And the other thing is that even support for them right now, it's very false because of
00:05:55.480 those subsidies you mentioned.
00:05:56.780 So it's not an accurate reflection of what consumers are willing to pay for these things.
00:06:01.640 Right.
00:06:02.200 It's not an organic consumer led transition.
00:06:04.960 It's entirely dependent on policy measures.
00:06:07.340 Now, Tesla reports making profits on EVs.
00:06:12.020 They have aimed at the high income market because their products are pretty expensive, but they're
00:06:17.940 good cars.
00:06:18.800 I mean, people obviously like them.
00:06:20.580 The Cybertruck is a really impressive looking vehicle, but they're not penetrating the middle
00:06:28.280 income and lower income end of the market.
00:06:31.540 Tesla is also unique.
00:06:32.960 The other auto companies don't report their EV division separately except Ford.
00:06:38.500 Ford is the only company that breaks out their EV division profits, and they are losing money
00:06:43.640 massively.
00:06:44.400 They've reported a $67,000 loss per vehicle last year.
00:06:49.680 It's up to $100,000 in the first half of this year.
00:06:53.160 So that's obviously unsustainable.
00:06:55.840 Even with all the subsidies in the world, a company is just not going to be able to continue
00:07:00.200 producing a product where you lose $100,000 per vehicle.
00:07:04.200 Now, in the course of doing this research, some of my readers and referees said, yeah, but the
00:07:10.940 costs of producing them will come down.
00:07:12.640 But that's actually not the case.
00:07:14.580 Some elements are coming down.
00:07:16.840 But a lot of the key ingredients into the motors used in EVs, it's sole sourced from China.
00:07:22.460 China has basically a monopoly on some of the key metals that are needed for these high
00:07:27.040 performance motors.
00:07:27.900 And those costs are not going to come down.
00:07:30.300 Instead, if anything, China is going to exploit its monopoly position to make it even harder
00:07:35.540 for Western auto companies to produce these things.
00:07:38.780 Well, and we've already seen in the last few weeks, even the flare up on tariffs as people
00:07:43.320 try to prevent cheap Chinese EVs from being the ones that flood the market here.
00:07:48.680 Let me ask you where you think this is going to go.
00:07:51.240 I mean, obviously, bailing out the auto sector is not entirely unprecedented.
00:07:54.620 Now, drastically different circumstances to go back to 2008, 2009.
00:07:59.600 But if we are seeing this scenario in the auto sector of just a mandate that is going
00:08:04.860 to cripple or decimate large parts of their operation, is that not inevitable if the government
00:08:10.400 wants to fully commit to this mandate?
00:08:12.400 Yeah.
00:08:13.400 In the paper that I've published, I did computations based first on an assumption, maybe we get
00:08:22.940 to full cost parity by 2035.
00:08:24.940 And but if not, maybe we'll get there by 2050.
00:08:29.920 If it takes till 2050 to get full cost parity between EVs and gas powered cars, it'll take
00:08:37.040 more than a trillion dollars in subsidies to keep the auto sector in existence in Canada.
00:08:42.820 And if we were to get to full cost parity by 2035, it would cost about 150 billion in addition
00:08:51.920 to everything that we've already spent.
00:08:53.760 But the thing is, under that scenario, you don't need the mandate.
00:08:57.300 If if costs are going to come down so quickly and the products are going to improve so quickly
00:09:02.620 that people will happily buy an EV rather than a gas powered car, we don't need the mandate.
00:09:07.280 So the key takeaway here is, in any circumstance where we need a mandate to force people to switch
00:09:14.520 to EVs, in that scenario, the auto sector disappears, it can't survive.
00:09:20.120 If if there's a scenario where the auto sector in Canada can continue to exist and profitably
00:09:25.980 produce and sell EVs, we don't need a mandate to get them onto the market.
00:09:31.280 Is there not that I want to give anyone ideas, and I know you were mindful of that in your
00:09:35.820 column as well. But if if the United States were to adopt a very similar mandate, would that change
00:09:42.000 the calculation? Because all of a sudden you have a scale that you don't have when it's just
00:09:46.020 the Canadian market? Well, the US right now is pretty much talking along the same lines,
00:09:53.260 some states individually, but at the federal level, the Biden administration is putting in
00:09:59.120 place regulations for the auto sector that do substantially the same thing. Generally, no,
00:10:05.180 there are certain economies of scale that, okay, if the US begins mass producing EVs,
00:10:12.680 some aspects of the cost will come down. But remember, they're going to be bidding for all
00:10:17.100 those same rare earth minerals that we only get from China and the other really specialized inputs,
00:10:25.240 including into battery manufacture. So that could just as easily make it harder, not easier for us
00:10:31.080 to make affordable EVs.
00:10:34.540 Well, and when you mentioned the battery production, I mean, we've seen the government go whole hog into
00:10:38.440 trying to, you know, do domestic EV battery manufacturing here. And that's another layer
00:10:43.800 of subsidies on top of, you know, the subsidies on the purchase of the cars themselves.
00:10:48.640 Yeah, it's, it's amazing to listen to them brag about Canada's now this superstar in the supply chain
00:11:00.900 for EV batteries were nothing of the sort. It's, they had to pour $15 billion just to get one company
00:11:09.160 to open up a plant to make battery systems for EVs. That means that we're not a superpower in this
00:11:19.040 field. It means we're singularly unsuited for producing both in terms of the labor and then
00:11:26.060 the access to the inputs and the cost of electricity and all the rest of it. If we were a superpower in
00:11:31.840 this field, companies would be opening plants on their own, they'd be doing it on their own,
00:11:36.400 it would be profitable, but it's not profitable. It's not profitable. Now it's never going to be
00:11:40.180 profitable. So all we're doing is, I think it's just, you may not remember the old hydroponic
00:11:47.240 greenhouse fiasco in Newfoundland when the government of Newfoundland decided they were going to build a
00:11:53.620 whole industry in the province by subsidizing hydroponic greenhouses. And they wasted a ton of
00:12:00.280 money and the whole thing fell apart because of course there's no way to do it profitably in the
00:12:04.440 province. And at the time, everybody swore up and down, never again. We're not going to fall for
00:12:10.460 this. We're not going to do this again. We're doing it again, but on a much, much bigger scale
00:12:15.560 and it will come to the same end. Yeah. And you're right to keep pointing out the inputs because even
00:12:20.860 if you have all the domestic production and domestic assembly in the world, you still are not doing
00:12:25.920 anything about that choke point of the need to have the access to these minerals, which, and then in
00:12:30.400 the environmental aspect, that part's often overlooked as well as the environmental cost of
00:12:34.580 mining in general, but certainly mining in China. Right. And so with this new push to put big tariffs
00:12:45.480 on EVs, and this is kind of one of these ironies about the government. So in one office down the
00:12:54.700 corridor, they're putting this rule in that says, everybody's got to buy an EV. And then two doors
00:13:00.180 down the corridor, they're alarmed at the fact that there are too many cheap EVs coming from China.
00:13:05.080 So we're going to throw on heavy tariffs to try to stop them. The government created that problem
00:13:11.460 and they strategically, they did it by saying to China, we're going to give you massive leverage over
00:13:18.520 our industrial future. Like I'm sure the Chinese government in Beijing, can't believe their luck
00:13:25.960 that Western countries like Canada and the United States are planning to phase out one of our most
00:13:32.840 powerful industries and demand that people purchase an alternative product that is primarily sourced in
00:13:41.720 China. And it just gives China an enormous amount of power over our economy. And this a little bit of
00:13:50.760 recognition at this point that this may not be a good idea, given the fact that China is such an aggressive
00:13:56.900 and hostile entity in the world. But that's, that's what the government is doing. And so you're going to
00:14:05.280 start seeing all these contradictory policies where on the one hand, yeah, we really want EVs, and they only come from
00:14:10.440 China, but we don't want China sending us EVs. Professor Ross McKittrick, piece in the Financial
00:14:16.040 Post, EV mandates don't make economic sense. And if you want to dig in in a bit of a less readable,
00:14:21.480 but more comprehensive way for, for most folks, you can read his piece coming out in the journal,
00:14:26.840 Canadian Journal of Economics. Ross, good to talk to you. Thanks for coming on today and great work on this.
00:14:31.680 Thanks, Andrew. My pleasure. Thanks for listening to The Andrew Lawton Show.
00:14:35.080 Support the program by donating to True North at www.tnc.news.
00:14:40.440 www.tnc.news.at.gov
00:14:43.240 .
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