His refusal to balance priorities and reliance on government dictates rather than consumer choice make his dreams unrealistic
Late last year, when Environment Minister Steven Guilbeault announced the Liberals’ plan to eliminate the sale of cars with internal combustion engines by 2035, a number of people, myself included, rolled their eyes at the government’s interference in the free market. Little did we know how fast the free market would slap the electric vehicle mandate back to reality, while Canadian taxpayers continue to subsidize green fantasies.
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The signs were already there in late 2023, before our environment minister proudly announced he would jettison capitalist principles and create a dirigiste Canadian automobile economy. First, in September 2023, Volkswagen announced it was cutting EV output due to low demand. Then, in November, Ford announced that it too would be scaling back EV battery production due to lacklustre demand.
The new year has not changed the story. If anything, the pace of automakers turning their backs on EVs has accelerated. General Motors is struggling with production woes, Mercedes Benz has delayed its EV goals and even Tesla has warned that EV sales could be significantly lower than predicted.
In response to sagging demand, automakers like Tesla have cut the price of their vehicles, which in turn has cratered the resale value of their cars. The CEO of Hertz stepped down last Friday, after his bets on EVs went awry when their resale value plummeted. Consumers everywhere have taken note.
While automakers are not totally abandoning their long-term electrification goals, they are all recognizing that the internal combustion engine will not be disappearing overnight. It will be around for a good long while.
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This reality has always been a key sticking point in the energy transition. It was no doubt a dream of Guilbeault’s to stand at a podium and announce his green fantasy to the world. But his refusal to balance priorities and his reliance on government dictates rather than consumer choice to drive the market make his dreams unrealistic.
The inability to understand this has resulted in more waste from the government, which has proven time and again that it is utterly incompetent at picking winners and losers in business. Bad business ideas need money from somewhere, but if, like our government, you don’t particularly care about returns on your investment, the opportunities to throw money around never end.
Cue the Liberals opening the money spigot to help their ideology along. So far, Canada has committed to subsidize EV battery plants to the tune of more than $40 billion over the next decade. And this comes at almost the exact same time as automakers are pulling back from their EV production commitments, due to poor sales and low profitability. Well done, guys. Nice job.
At the time they were announced, the break-even points for the subsidy deals were estimated to be between 11 and 23 years. With the drop in EV production commitments, it would be interesting to see revised timelines for these already long payback periods.
While such deals and the transition to EVs is complex at the best of times, the government always finds ways to make the situation worse. This is mainly because, despite ample evidence to the contrary, it continues to think it knows better than the companies themselves and the market forces to which they are subjected.
Consumers are currently sending a very loud and very clear message to both companies and governments: “We don’t want EVs.” The companies have heard it and adjusted their strategies, because they are responsible to shareholders and care about catering to consumer desires.
They also are exceptionally well placed to respond to the real-time sales data they are receiving. Ford, GM, Mercedes, VW and Tesla all know consumers aren’t adopting EVs quickly and have reacted accordingly.
Yet the government refuses to budge in the face of verifiable consumer data. The result is continuous policy decisions that place politics over productivity, to our collective detriment.
Sadly, our government remains obstinate. Minister Guilbeault and company don’t seem to care. In response to EV reality, they have taken an approach that’s diametrically opposed to market efficiency: sticking their heads in the sand. Perhaps, though, we shouldn’t be surprised — a flightless bird that lays enormous eggs is a decent metaphor for Guilbeault and his party at the moment.
National Post
Adam Pankratz is a lecturer at the University of British Columbia’s Sauder School of Business.
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