Will Trudeau’s EV mandate kill Canada’s auto sector？
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Summary
Justin Trudeau says the polls are wrong, and that the election is a reflection of a "global erosion of democracy." Andrew Yang and Ross McKittrick explain what's really going on with the polls, and why Justin Trudeau thinks it's not about him.
Transcript
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It's not an erosion of democracy when people vote against you, but Justin Trudeau thinks
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And what's fascinating here is that Justin Trudeau is really trying to set the stage
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for explaining and justifying and rationalizing his loss.
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He's trying to make it so that when he loses, which I suspect will happen, the polls are
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What Justin Trudeau is saying here is that the polling, the eventual loss is not his fault.
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Justin Trudeau is going to be Canada's election denier when Pierre Polyev and the Conservatives
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Trudeau is going to say, oh, well, this was part of a global shift.
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It's just like Mark Gerritsen saying, oh, no, I'm not the guy that you need to look at
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People just don't like that Pierre Polyev and the Conservatives have been talking about
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So basically just doing the everything is fine routine when forced with actually, no, we'll
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In the meantime, I want to bring into this discussion here.
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One of Trudeau's environmental policies that, again, is all virtue signaling and very little
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We are supposed to be staring down the barrel of all light duty vehicles.
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So basically consumer cars being electric or hybrid by 2035.
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It may seem like it's a long way away, but that is just about a decade.
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And there is a very stark warning by economist Ross McKittrick in the Financial Post about
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what this mandate is going to mean and is meaning for the auto sector.
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So let's just start with the rationalization for this, because it's based on this idea that
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this is going to solve or at least contribute to the solution to all of these economic and
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But the economic argument we've seen really falls apart on electric vehicles.
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They are not particularly profitable for automakers without massive subsidies.
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Like, where is the rationalization, if not just ideology?
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Everything you said is correct, that consumers don't want them.
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The sales targets, it's not 2035 when the sales targets kick in.
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It's not 100% in 2026, but it begins ramping up at that point.
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British Columbia and Quebec are currently in compliance with the 2026 level, but they spend
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The rest of the country, we're not seeing EVs move off the lot in enough number.
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The other problem, though, and this is a focus of my column and also a paper that is coming
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out in the Canadian Journal of Economics, is that the auto sector itself will lose money
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under any conceivable technology scenario on EVs.
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People just aren't willing to pay the costs that it involves to own and maintain them.
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You can buy some cheap EVs and costs are coming down for some makers.
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But to be really indifferent between a gas-powered car and an EV, there's more to it than that.
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I mean, electricity is a lot more expensive than it used to be, thanks to things like the
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And so Hertz, for example, the big auto rental company, they went big into EVs a couple of
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They're selling on 20,000 EVs because they found they were too expensive to maintain and
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So the economics is not there under current and foreseeable technology.
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And I think here, a good parallel is the switch from LPs and eight-track cassettes to CDs and
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If it's a good technology that saves people money and provides a superior product, they will
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But if we were trying to go the other direction, so if people were currently streaming and using
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electronic devices and we're going to force them to go to LPs and eight-track cassettes,
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And the industry itself would go under because people would just rebel and they wouldn't buy
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And the auto sector itself, I predict, will disappear in Canada as a result.
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And to be fair, the market is trying to do this.
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I commend Tesla in particular for really trying to change the perception of electric vehicles
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and make them a lot cooler, make them a lot trendier.
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I was at a nice wholesome weekend activity on Friday.
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And if you've never been to tractor pulls, they're great fun.
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And they had this electric, this GMC electric Hummer that was participating.
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And I thought they were doing it to mock the thing.
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I thought they were like, this was all some elaborate ruse to make fun of the electric
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So there's an example where they've made a product that some people will like and some
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people want, but the market needs to be the one to cause the surge in support.
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And the other thing is that even support for them right now, it's very false because of
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So it's not an accurate reflection of what consumers are willing to pay for these things.
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They have aimed at the high income market because their products are pretty expensive, but they're
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The Cybertruck is a really impressive looking vehicle, but they're not penetrating the middle
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The other auto companies don't report their EV division separately except Ford.
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Ford is the only company that breaks out their EV division profits, and they are losing money
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They've reported a $67,000 loss per vehicle last year.
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It's up to $100,000 in the first half of this year.
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Even with all the subsidies in the world, a company is just not going to be able to continue
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producing a product where you lose $100,000 per vehicle.
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Now, in the course of doing this research, some of my readers and referees said, yeah, but the
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But a lot of the key ingredients into the motors used in EVs, it's sole sourced from China.
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China has basically a monopoly on some of the key metals that are needed for these high
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Instead, if anything, China is going to exploit its monopoly position to make it even harder
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for Western auto companies to produce these things.
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Well, and we've already seen in the last few weeks, even the flare up on tariffs as people
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try to prevent cheap Chinese EVs from being the ones that flood the market here.
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Let me ask you where you think this is going to go.
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I mean, obviously, bailing out the auto sector is not entirely unprecedented.
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Now, drastically different circumstances to go back to 2008, 2009.
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But if we are seeing this scenario in the auto sector of just a mandate that is going
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to cripple or decimate large parts of their operation, is that not inevitable if the government
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In the paper that I've published, I did computations based first on an assumption, maybe we get
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If it takes till 2050 to get full cost parity between EVs and gas powered cars, it'll take
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more than a trillion dollars in subsidies to keep the auto sector in existence in Canada.
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And if we were to get to full cost parity by 2035, it would cost about 150 billion in addition
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But the thing is, under that scenario, you don't need the mandate.
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If if costs are going to come down so quickly and the products are going to improve so quickly
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that people will happily buy an EV rather than a gas powered car, we don't need the mandate.
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So the key takeaway here is, in any circumstance where we need a mandate to force people to switch
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to EVs, in that scenario, the auto sector disappears, it can't survive.
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If if there's a scenario where the auto sector in Canada can continue to exist and profitably
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produce and sell EVs, we don't need a mandate to get them onto the market.
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Is there not that I want to give anyone ideas, and I know you were mindful of that in your
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column as well. But if if the United States were to adopt a very similar mandate, would that change
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the calculation? Because all of a sudden you have a scale that you don't have when it's just
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the Canadian market? Well, the US right now is pretty much talking along the same lines,
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some states individually, but at the federal level, the Biden administration is putting in
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place regulations for the auto sector that do substantially the same thing. Generally, no,
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there are certain economies of scale that, okay, if the US begins mass producing EVs,
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some aspects of the cost will come down. But remember, they're going to be bidding for all
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those same rare earth minerals that we only get from China and the other really specialized inputs,
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including into battery manufacture. So that could just as easily make it harder, not easier for us
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Well, and when you mentioned the battery production, I mean, we've seen the government go whole hog into
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trying to, you know, do domestic EV battery manufacturing here. And that's another layer
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of subsidies on top of, you know, the subsidies on the purchase of the cars themselves.
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Yeah, it's, it's amazing to listen to them brag about Canada's now this superstar in the supply chain
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for EV batteries were nothing of the sort. It's, they had to pour $15 billion just to get one company
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to open up a plant to make battery systems for EVs. That means that we're not a superpower in this
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field. It means we're singularly unsuited for producing both in terms of the labor and then
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the access to the inputs and the cost of electricity and all the rest of it. If we were a superpower in
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this field, companies would be opening plants on their own, they'd be doing it on their own,
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it would be profitable, but it's not profitable. It's not profitable. Now it's never going to be
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profitable. So all we're doing is, I think it's just, you may not remember the old hydroponic
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greenhouse fiasco in Newfoundland when the government of Newfoundland decided they were going to build a
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whole industry in the province by subsidizing hydroponic greenhouses. And they wasted a ton of
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money and the whole thing fell apart because of course there's no way to do it profitably in the
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province. And at the time, everybody swore up and down, never again. We're not going to fall for
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this. We're not going to do this again. We're doing it again, but on a much, much bigger scale
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and it will come to the same end. Yeah. And you're right to keep pointing out the inputs because even
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if you have all the domestic production and domestic assembly in the world, you still are not doing
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anything about that choke point of the need to have the access to these minerals, which, and then in
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the environmental aspect, that part's often overlooked as well as the environmental cost of
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mining in general, but certainly mining in China. Right. And so with this new push to put big tariffs
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on EVs, and this is kind of one of these ironies about the government. So in one office down the
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corridor, they're putting this rule in that says, everybody's got to buy an EV. And then two doors
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down the corridor, they're alarmed at the fact that there are too many cheap EVs coming from China.
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So we're going to throw on heavy tariffs to try to stop them. The government created that problem
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and they strategically, they did it by saying to China, we're going to give you massive leverage over
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our industrial future. Like I'm sure the Chinese government in Beijing, can't believe their luck
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that Western countries like Canada and the United States are planning to phase out one of our most
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powerful industries and demand that people purchase an alternative product that is primarily sourced in
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China. And it just gives China an enormous amount of power over our economy. And this a little bit of
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recognition at this point that this may not be a good idea, given the fact that China is such an aggressive
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and hostile entity in the world. But that's, that's what the government is doing. And so you're going to
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start seeing all these contradictory policies where on the one hand, yeah, we really want EVs, and they only come from
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China, but we don't want China sending us EVs. Professor Ross McKittrick, piece in the Financial
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Post, EV mandates don't make economic sense. And if you want to dig in in a bit of a less readable,
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but more comprehensive way for, for most folks, you can read his piece coming out in the journal,
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Canadian Journal of Economics. Ross, good to talk to you. Thanks for coming on today and great work on this.
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Thanks, Andrew. My pleasure. Thanks for listening to The Andrew Lawton Show.
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