Tag: Electric vehicles

Let Them Drive Electric

I’m not overly fond of the Tesla automobile. It’s publicly-supported rich man’s toy that hasn’t made huge technological strides but likes to pretend it has. And I’m dubious that it will ever be anything other than a curiosity. The last decade has seen big leaps in fuel efficiency in our automobile fleet. Part of this is because people are demanding and buying more efficient cars. A little bit of it is hybrids. And much more of it just good engineering:

When many people think of fuel economy, they think hybrids or electric cars. But that’s only part of the story. The chart above shows various efficiency technologies that have become more prevalent since 2008.

As it turns out, improvements to the existing combustion engine has been a huge source of innovation over the last five years. There’s gasoline direct injection, which is a more efficient technique for delivering fuel to the engine. Or there’s cylinder deactivation to save fuel. These get less attention than electric cars, but they’re key advances.

I was recently in Montana and my in-laws had an SUV that got as good mileage as my old Ford sedan. Direct injection, a continuously variable transmission, variable valve timing — all of these combined to make it a reasonable vehicle.

But despite my distaste for the Tesla, this is ridiculous. Tesla is being banned in many states from selling cars directly to the consumer.

This week, the Georgia Automobile Dealers Association filed a petition with the state’s Department of Revenue in an attempt to bar further sales of Tesla sedans. Such battles have erupted in numerous states, from Missouri to New Jersey. In the latest issue of Regulation, University of Michigan Law professor Daniel Crane argues that dealer distribution restrictions are based on faulty ideas of consumer protection. Traditional dealers claim that competition among a brand’s dealers prevents the manufacturer from “gouging” consumers and extracting monopoly profits. Crane argues that standard economic theory demonstrates that these claims are nonsense. Firms with market power will be able to claim monopoly profits, regardless of whether middlemen, such as dealerships, are involved.

Moreover, by restricting competition among business models for auto sales, laws such as those in Georgia stifle competition among automakers. When companies such as Tesla seek to lower costs through innovative business designs, they face costly regulatory hurdles and legal challenges such as the sales ban in Georgia. These laws protect existing dealers and hurt consumers.

This is about more than Tesla, which is filling a niche market at best. Indeed, that’s a big reason they want to sell direct instead of through dealers. What this is about is other companies, companies that have not been born yet but could potentially compete with the big automakers. Imagine if, instead of having a handful of huge automakers, you had a hundred Teslas out there, all upending the market in their own way. Won’t someone please think of the unions?

Similar laws protected wine distributors in various states until the Supreme Court struck it down for violating the interstate commerce powers of the federal government. Of course, several states — including my own — have refused to comply with the ruling in the nine years since that decision hoping they can rope in enough Congressmen to re-institute the shipping restrictions. In light of SCOTUS’s precedent, I can’t see that the auto dealer cartels can possibly be legal. But I don’t expect anything to be done.

The Earth Metal Problem

Freakonomics has a great post up that should give the environmentalist weenies fits:

Electric cars are all the rage today, but some of the smartest people I know believe that moving towards electric vehicles is a terrible idea. Looking casually as an outsider at the unappealing economics of electric vehicles (the need for a new and immensely expensive infrastructure, cars that cost much more than either traditional gas engines or hybrids, limited ranges and long recharging times), I find it hard to understand why the Obama administration is pushing electric cars.

One argument I’ve heard is “national security,” the idea being that electric vehicles would make the United States less dependent on imported oil. Be careful what you wish for, however, because if electric cars become a mainstay, we may be trading one dependence for another that is even more troubling. Ninety-five percent of the world’s output of rare-earth metals today comes from one country: China. By some estimates, demand will outstrip supply within five years. At least with oil we know there are fifty years of oil reserves readily available. Moreover, oil is produced all over the world, limiting the monopoly power of any one country.

To be fair, elements like dysprosium and praseodymium — how geeky is it that I can spell those correctly from memory? — are not economically viable to dig up unless you have a steady supply of slave cheap labor, which China has. As demand for these metals surges, the price will go up and domestic mining will become more feasible. Of course, our government is currently subsidizing electric cars and therefore distorting the market. And China’s embargo on Japan has already caused a mad scramble for metals.

What this story really demonstrates the stunning lack of thought that goes into so-called green industries. Rare earth metals are a pretty significant thing to be thinking about when it comes to electric cars. We can’t just wish them out of the ground through the power of positive liberal thinking. At some point, we’re going to have to start mining them — with all the pollution that entails. What will the greens do then?