If 16-year-old Swedish climate activist Greta Thunberg’s predictions had been true, our homes should have been powered by wind farms and our roadways ought to have been filled with electric vehicles by now. As it turns out, phasing out fossil fuels wasn’t so easy.
Even as the current government depletes the U.S. Strategic Petroleum Reserve and sends crucial American oil and gas supplies to Europe, the need for fuel at home is as great as it’s ever been. At the same time, emerging markets like India have growing middle-class populations, and this is bound to stoke global demand for fossil fuel based products.
Meanwhile, conflict in Ukraine and Israel show how fragile the energy supply-and-demand balance really is. Thunberg’s windmill dreams simply didn’t factor in the realities of a world that demands massive quantities of energy inputs. People might support clean energy mandates in theory, but they aren’t willing to give up their modern lifestyle.
And, they aren’t willing to give up their internal combustion engine vehicles. Just a couple of years ago, financial traders bid up the share prices of electric vehicle start-ups with dreams of displacing traditional cars, but that fantasy hasn’t panned out.
Swedish electric vehicle maker Polestar provides textbook example. The company just posted a third-quarter net earnings loss of $155.4 million and is retooling its business plan to accommodate lower electric vehicle sales.
Courtesy: Yahoo Finance
Even the seemingly almighty Tesla is starting to show cracks in the foundation. Even after a series of vehicle price reductions, Tesla’s deliveries aren’t living up to the expectations.
High interest rates have made it much more difficult for electric vehicle start-ups like Polestar to turn a profit, and even for Tesla to sell its vehicles. The plan to eliminate fossil fuel use might have sounded viable during times of easy money policy, but it only took a little bit of tightening to expose the impractical clean-energy business ventures.
One issue is pricing. Tesla attempted to level the playing field with vehicle price reductions, but even with the government’s tax credits, internal combustion engine vehicles are generally more affordable.
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For example, J.D. Power found that the “bulk of mass market compact EV SUV sales are pricing at around $52,000.” Meanwhile, a comparable mass-market internal combustion engine SUV costs $34,000 on average.
Actually, that $52,000 figure might not accurately reflect what a new electric SUV buyer would actually pay. Polestar, Rivian, Lucid, and other Tesla rivals tend to promote their vehicles as powerful and luxurious, not as affordable. So, don’t walk into a dealership and assume that you’ll drive off the lot with a brand-new electric SUV and only pay $52,000.
Courtesy: Yahoo Finance
Other obstacles to widespread electric vehicle adoption include a lack of easily accessible charging stations and concerns about limited driving range. Overall, the clean energy vehicle industry has yet to convince reluctant buyers to make the switch.
Evidently, electric vehicle manufacturers made a crucial mistake in attempting to mass-produce these vehicles before the charging stations were readily available on America’s roadways. As Jessica Caldwell, head of insights at automotive research firm Edmunds, explains, “Infrastructure for charging is the elephant in the room. Augmentation of the charging infrastructure must align with the growing acceptance of EVs, if not precede it.”
Legacy automakers are also hitting the brakes on their vehicle electrification ramp-ups. For instance, Ford recently put $12 billion worth of electric vehicle project investments on hold until “capacity” is needed.
And so, reality has set in and stolen Thunberg’s thunder. In the energy industry and elsewhere, extremist movements might get press coverage from the mainstream media, but practical, realistic principles will prevail every time.
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