Peter DeLorenzo (2023) recently raised a useful point: Too many of today’s auto industry executives “have no concept of historical perspective at all.” His full column is worth a read, but here’s a key passage:
“Some automotive participants are constantly talking about ‘reinventing’ the auto business. Some of these companies – one right here in southeast Michigan, in fact – are beating this drum emphatically, insisting that whatever the ‘old’ automobile business was needs to be quickly buried in the past. And that is, to be blunt, a fool’s errand, because ignoring history is never a good idea, especially in the auto business. The history of this business is marked by remarkable thinking and at times, visionary brilliance. It has also suffered from flat-out misguided thinking and major miscalculations. It’s pretty simple actually – when humans are involved, soaring triumphs are often counteracted by debilitating mistakes. And sure-fire strategies are often combined with a calculated arrogance and a large dollop of delusional thinking, inevitably yielding disastrous results.”
This is all true — as far as it goes. However, the problem with historical analysis is that the devil is in the details. What lessons from the past are relevant to current conditions? DeLorenzo’s answer to that question is muddled.
How does history tell us that a rapid EV shift is hype?
DeLorenzo uses the above-rhetoric as prelude to his argument is that automakers who still heavily invest in ICE-powered vehicles are “being reverential of history” because they know the “’Grand Transition’ to mainstream EVs is going to take a while. A long while” (2023, original italics). In the meantime, cars with internal-combustion engines will “pay the bills.”
This makes a certain amount of sense. As DeLorenzo points out, there are many unknowns about an EV transition. Even so, he doesn’t offer specific historical examples of the industry trying to embrace a new technology too quickly. Nor does he address a key historical fact — the U.S. shifted from horses to automobiles in a remarkably short amount of time.
According to Scientific American, in 1907 only 140,300 cars were registered in the United States, but 10 years later there were almost 5 million. “Horses were now an imperiled minority on the roads; bicycles were in decline in the U.S., although still popular in Europe,” noted Daniel C. Schlenoff (2017).
Think about all of the infrastructure that needed to be created in order for that shift to occur — from gas stations and trained mechanics to new rules of the road. The hurdles were high enough that one could have easily argued in 1907 that horses would continue to dominate the country’s transportation system for a long while.
Also see ‘Peter DeLorenzo continues to continue with his usual swagger’
The shift away from ICE-powered vehicles will arguably require less change than from horses. Why then does DeLorenzo apparently think it will take longer? He doesn’t say.
What about all of those government mandates?
DeLorenzo (2023) also completely ignores a crucial question: How could ICE-powered vehicles continue to be the primary source of revenue for automakers “for years to come” in the face of a growing number of mandates against them?
For example, this week the European Parliament approved legislation that effectively bans the sale of new gasoline- and diesel-powered cars in the European Union beginning in 2035 (Abnett, 2023). The law also calls for a 55-percent reduction in CO2 emissions for new cars sold in 2030 compared to those sold in 2021.
The EU has one of the world’s biggest automotive markets, so this mandate can’t help but impact the lineups of automakers with a significant presence in the 27 nations that make up the bloc.
In addition, a handful of other nations have proposed or are implementing 100-percent bans, such as Japan, China, South Korea and Canada (Wikipedia, 2023). Together they represent a significant portion of global automobile production. And within the U.S., California, Oregon and Washington have thus far adopted bans (Steves, 2022).
Also see ‘Popularity of SUVs could offset climate advantages of EVs’
Does DeLorenzo assume that the industry will get around those mandates even though it been operating on an increasingly integrated global scale? If he thinks mandate timelines will be relaxed, how does he see that happening by enough nations and states that it doesn’t just add confusion? He doesn’t say.
It’s time for DeLorenzo to flesh out the facts of his case
The point of my essay isn’t to defend the EV “reinvention” hype swirling around the auto industry. Rather, it is to suggest that DeLorenzo has done a better job of framing his argument than in presenting evidence to back it up.
Also see ‘Does Rivian lose more than $100,000 on every vehicle it sells?’
Instead of showcasing the value of historical analysis, he makes it look like a weak way to justify a nostalgic view of the automobile industry’s future.
That said, DeLorenzo (2023) deserves credit for continuing to point out that the auto industry is navigating such a change-filled and volatile time period that “(n)othing is given or preordained and certainly nothing is guaranteed.”
Share your reactions to this post with a comment below or a note to the editor.
RE:SOURCES
- Abnett, Kate; 2023. “EU lawmaker approve effective ban on new fossil fuel cars.” Reuters. Posted Feb. 13.
- DeLorenzo, Peter; 2023. “The Road to Reinvention.” The Auto Extremist. Posted Feb. 13.
- Steves, David; 2022. “Oregon, Washington join California in banning gas-powered new vehicles starting in 2035.” Oregon Public Broadcasting. Posted Dec. 20.
- Schlenoff, Daniel C.; 2017. “The Motor Vehicle, 1917.” Scientific American. Posted Jan. 1; accessed Feb. 24, 2021.
- Wikipedia; 2023. “Phase-out of fossil fuel vehicles.” Page last edited Feb. 16.
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- oldcaradvertising.com: Marmon (1907); Overland (1912, 1917); Pierce-Arrow (1917); Reo (1907)
I do generally agree with Peter DeL on most of this. The manufacturers are constantly blathering about their EV while what is really selling to most of the buying public are the ICE vehicles. It is foolish to consider that there is going to be a very near-term point where this changes in most US markets; maybe it could happen in some (a few?) regional markets. Huge swaths of the US lack the infrastructure to support the grand transition even if there is a change in buying habits.
EVs still have problems that are not going to get solved anytime soon. ICE in 5 minutes of a gas stop is at full capability to make a max range trip. Out in the middle of the plains states where the towns may not be so close to each other, how comfortable would one be that there is a charging station. Getting over the perception on the issues may be more work than the technical solutions are. Because of this dual track is the only viable future for a good period of time. I would not count upon Washington actually imposing a real mandate to switch; too many of the politicians will realize their re-election prospects will go dim trying to do that (unless in one of those few regional support areas).
As for Peter’s point about Detroit “reinventing” management, when one reads him long enough one grasps what, and in many cases exactly who, he is pointing at. Some of this current rant is about management pitching the big glorious future so they can switch the focus away from piss poor execution of what they are actually trying to make and sell today.
Of course there are going to be many bumps in the road. I would also agree with you that it seems unlikely that the U.S. will institute a national ban on gas-powered cars anytime soon. More likely is that the next time the Republicans control the federal government, they will work hard to remove the right of states to deviate from federal climate change policy. That could unplug state-level bans.
That said, the auto industry has “globalized” to the point where what the U.S. does may no longer be a pivotal factor. It is looking increasingly likely that a critical mass of other major auto-producing nations will ban gas cars by 2035. DeLorenzo doesn’t address how that could impact the speed of EV adoption.
So let’s speculate: What if the difficulties of the shift become so challenging that ban deadlines are pushed back? That’s certainly a possibility, but as more countries commit to a 2035 ban, the harder it could be to get them all to push back their timelines in unison (herding cats syndrome). And in the absence of that level of coordination, automakers will be left with a hodgepodge of perhaps shifting mandates that could become more difficult to manage than a uniform 2035 deadline. Due to the lead times for product development, predictability could become more important than squeezing out some extra time for many manufacturers.
I would imagine that the bans will generate considerable political conflict as they approach. Nevertheless, the pressure on governments to do something about climate change will only increase. My guess is that enough nations will heavily invest in the infrastructure to make electrification work manageably well that it puts at least some pressure on the laggards to catch up.
Here in the U.S. we could end up seeing a big split between blue states that invest in EV infrastructure and red states that don’t. Perhaps that split will be enough to, for example, maintain a decent level of production for ICE-powered trucks.
None of this is a sure thing. Maybe DeLorenzo proves to be “right.” I use quote marks because he’s so vague that he could claim prescience for any number of scenarios. For example, he says that mainstream EV usage won’t happen for a “long while.” What does that mean? For example, 2035 is 12 years away — does that count?
Steve,
You do make an interesting argument about how some countries are likely to be greater advocates of the transition than others (most of the EU being a good example) but at the other end of the discussion is how much of a market in sales volume will there be for those that have the choice to stay ICE? A Republican win in the next presidential cycle could do exactly what you think – eliminate the state exemptions and then roll back any EV mandates. One should also consider the possibility that when the implementation date appears to be far enough out no one gets too excited about what it will do to them personally. But, get closer to the date and, other than the zealots, how many of the general public will want to push back the date? The politicians from those areas not overrun with the zealots will be looking at their reelection prospects. Yes, red and blue states get into the political dynamics of this but even the Dems in states with significant oil operations (Texas, Oklahoma, Louisiana and all the fracking areas) may start considering their local economies more than their party’s agenda.
I do also want to make note that you did not respond to the other part of understanding Peter’s swipe at the “sleight of hand” specialists that talk future to obscure current unresolved, and continuing, daily problems.
Jeff, I’m not contesting Peter’s swipe at the “sleight of hand” specialists. That seems to be par for the course in this industry. My sense is that his analysis is strongest when it comes to assessing the internal dynamics of an automaker. He’s not as good when it comes to issues that have major public-policy aspects. That may partly reflect his ideological predilections, but he also strikes me as being more of a marketing guy than an analyst. That shows in how he construct arguments, where he seems to gravitate toward story telling and colorful rhetoric rather than building a factual case.
I suspect that it’s too early to tell how the bans will play out politically even in the blue states. A lot may depend upon practical stuff. For example, how quickly will a charging network be built out? How long will we be reading in the newspapers about EVs that catch fire in someone’s garage? There ARE a lot of unknowns. At the same time, they could sometimes push toward faster EV adoption, e.g., if climate change gets so “real” that more people are motivated to change their energy-consumption patterns. That’s already happening to a degree out here on the west coast.
To offer a personal example, the “heat dome” we experienced in the Pacific Northwest two years ago was so intense that I finally bought a heat pump for my house. That gave us air conditioning for the first time while also reducing our energy bills. And if I had an electric car, its battery could be used as a source of electricity when our house’s power goes out (a historically regular occurrence in the winter that is likely to increase as weather patterns become more erratic and intense).
First, the automobile industry is indeed changing, not in revolutionary ways, but shall we say in evolutionary ways. Not so long ago In the 1970’s I was beating the drums of change to the Wankel rotary engine, along with EVs. The Wankel proved problematic and went nowhere as an automotive power plant. Those early EVs were nothing more than fancy golf carts until the Saturn EV1 came along, but alas that proved to be nothing more than a very expensive marketing experiment by GM. Tesla however, has proven that a market exists for the EV, at least at the high end of the daily-driver market, and usually with folks who have secondary long-range vehicles.
Second, the vast majority of automobiles serve as basic point to point transportation for the masses. The EV has one major problem that in the near term isn’t easily solved – range anxiety. For high income individuals having a secondary vehicle for extended trips or installation of a home charger isn’t a big deal, but not so for the masses. Also, the cold weather performance of batteries remains problematic. Besides price and driving range, the infrastructure for electric cars simply isn’t there yet, be it the demand on the grid, or the charging station on just about every corner to make the masses comfortable with EVs as daily drivers.
Third, the evolutionary change that likely works best in today’s less connected driving world is the Hybrid. While I like the tech, at this stage I can neither afford the cost or accept the range risks associated with an EV. I am (and believe most) can accept the cost premium of a hybrid in exchange for their higher fuel economy. I believe that Toyota has the correct near, and perhaps intermediate term market perspective here (pushing hybrids across its lineup) while GM sadly missed its opportunity by canceling the Volt hybrid.
I gave up reading DeLorenzo’s posts many years ago. He does have some knowledge of the auto industry, but he’s too much of a blowhard for me to stomach.
It is an eye opener to see how quickly EVs seem to have taken off, without mandates.
Elephant in the room: Where’s the electricity to charge all those EVs coming from? Is there enough generation capacity? Probably not, at the moment. Fixing that will cost money, and take time.
Here in Australia we face a very real problem of insufficient environmentally-friendly electricity generation infrastructure already. It’s maybe okay for those states that have hydro, but with the closure of those awfully-polluting (and they were awful) old-tech coal-fired power stations, we have rolling power cuts on hot summer days already, without widespread adoption of EVs. We all have solar panels, they’re mandated, with various government-assistance schemes, and scams. The greenies won’t let us use nuclear (maybe fair enough), and despite all the wind turbines springing up all over farmland, we still don’t have enough electricity. Governments always seem to cry poor when it comes to essential capital works.
Might be different in your country.
Peter, there’s no question that our power-generation and distribution system needs major modernization in the United States. That’s a goal of some recent federal legislation. That said, even when an EV is charged by coal-based electricity it is still more efficient than an internal-combustion engine. In addition, in everyday use EVs tend to be charged at night, when power demands are lowest. That doesn’t get rid of the problem of increased electricity demands, but it illustrates how there are ways to nuance the situation.
Our situation today has meaningful similarities to the dawn of the 20th Century, when the United States was going through a series of dramatic transformations. One of them was a shift from an agrarian economy to an industrialized urban economy. Simultaneously the U.S. experienced a technological explosion. Within the space of only a few decades the country was transformed by innovations such as the automobile, electricity and new media such radio and movies. Today we have become so accustomed to rapid technological development that we may take for granted how radical of a change our ancestors went through. That’s why I think a historical perspective can be helpful when looking at EVs. Right now we may not have all of the technical and political answers to how to electrify our transportation system, but we know in our bones how to go through great transformations. We’ve done this before.
Good point, Steve. Yes, when you look at how quickly oil companies set up the infrastructure to enable the widespread fuelling of gasoline-powered vehicles over a decade or so, there is precedent. With all today’s environmental concerns and red tape, I’m just not sure we as a society have that same can-do attitude as a hundred years ago. No doubt we’re in the middle of a great societal change, a seismic shift in energy sources and demands. I just hope the governments of the world can keep up – and I say that thinking of my own country primarily.
Peter, I appreciate your perspective about how things are going in Australia. The U.S. has some meaningful similarities with your country, so comparisons can be helpful.
Not that familiar with Oz. Sounds like you are doing a good job on solar. There is a bit of NIMBY going on with solar, a local vinyard that made truly horseshit wine sold to a solar outfit to much wailing and gnashing of teeth. While Europe west of the Oder is densely populated we have the Great Plains like your Outback, where range anxiety could be real. Considering the obesity problem in the US, and most gas stations at least in our area also being snack shops, what are the people going to do to kill 15 minutes? Grab a smooshie and a bag of cheezy poofs.
The public policy issues will affect the vehicle industry, regardless of those who want to undo the trend to electric vehicles. The E.-V. problem is still the undiscovered breakthrough in battery technology. We were told in the late 2000-oughts that the battery discovery was just around the corner, yet after billions of dollars invested, while range has been extended, the miracle lightweight all-weather battery eludes the most brilliant minds worldwide.
Without going off into a political rant, our planet earth is always experiencing climate change, given the wobble in the earth’s axis and the variables in the amount of radiation from the sun. Additionally public policy is changing concerning the real estate requirements necessary for motor vehicles. The cost of adding lanes to highways and other transportation infrastructure has become prohibitive. As a country, we are lucky if we can keep the infrastructure we have in reasonable repair. Some manufacturers see the future where Joe and Molly Sixpack will rent their vehicles as needed. Apparently, the future for vehicles is NOT hydrogen for a power source, as our leaders are pushing electric charging stations, even though electric grid power generation still largely depends on fossil fuels. The more things change, the more things stay the same. I think I shall be driving and riding in I.C.E. vehicles for the rest of my life.
James, the scientific research is pretty conclusive that human activity is the primary driver of climate change. For example, The Royal Society of Great Britain stated, “Rigorous analysis of all data and lines of evidence shows that most of the observed global warming over the past 50 years or so cannot be explained by natural causes and instead requires a significant role for the influence of human activities.”
You mention the earth’s axis tilting; a recent study found that climate change is melting ice to the degree that it is causing the poles to move (go here).
Electric vehicles are almost always a cleaner alternative to those that are gas-powered because they are much more efficient. Whereas only around 20 percent of gasoline’s energy ends up at a car’s wheels, that figure is around 87 percent for electric vehicles (go here). This helps to explain why even an EV whose electricity comes from a coal-fired plant can result in less greenhouse gas production than that of a gas-powered car.
An MIT report stated that “when the researchers used the average carbon intensity of America’s power grid, they found that a fully electric vehicle emits about 25 percent less carbon than a comparable hybrid car. But if they ran the numbers assuming the EV would charge up in hydropower-heavy Washington State, they found it would emit 61 percent less carbon than the hybrid. When they did the math for coal-heavy West Virginia, the EV actually created more carbon emissions than the hybrid, but still less than the gasoline car.”
As the nation’s energy-production and distribution systems are updated, EVs will have an increasing advantage over gas-powered cars. This shift is inevitable because renewable energy sources such as solar and wind are now cheaper than coal, natural gas, geothermal and nuclear. In the last decade the cost of solar fell by 90 percent (go here). While these energy sources aren’t a complete solution, they can still reduce the country’s carbon footprint where and when their use is appropriate.
Hydrogen? Batteries? AFAIK they have energy density about 1/10 of gasoline, either by volume or weight. Public transportation has been gutted in the US. This is getting OTS, but perhaps a combination of semi autonomous people movers with rentals of specialized vehicles as needed.
Steve,
I respectfully submit that some of your viewpoint about the EV transition being more on the sooner range than the later range is because of where you live. The West Coast is far more activist on the topic than other vast portions of the country.
Although folks can, and the proponents ;ove to, point to the Tesla as “proof” of EV market acceptance it is essentially the only true success story. I talked to the owner of a Chevrolet dealer and they nearly could not sell the Bolt. They gave up their Cadillac franchise because the GM demanded EV investment was going to have no return in their market. A lot of Cadillac dealers made that same calculation about 2 years ago.
If you have access to it (I do not anymore) show the US sales figures for the EV models versus the ICE for Ford and GM. Include the hybrids if those are broken out. My expectation is that this is a truer reflection of market acceptance far more than whatever numbers Tesla has. [Do remember that for a good period of time Tesla’s actual financial success was not on the sale of the cars but the sale of the emission credits to others, including Chrysler.]
Jeff, I suspect that the west coast will continue to lead the country in shifting to EVs. In 2022 almost 19 percent of new cars sold in California were ZEVs. That represented 40 percent of all ZEVs sold in the entry country (go here).
In my essay I included data on how the U.S. shifted from a horse-dominated to an auto-dominated transportation system in only a decade. I mentioned this partly to push back against the idea that consumer behavior is somehow static.
The bottom line is that if even a few major automotive markets impose a ban on gas-powered cars by 2035, that will inevitably impact what globally focused automakers offer here in the U.S. Even without mandates we are going to see pretty much every automaker offer multiple EVs — and sometimes even eliminate ICE-powered vehicles from their lineup. For example, Mercedes-Benz recently announced that all of its vehicle architectures developed after 2025 will be electric only (go here).
Once automakers have committed billions of dollars to the production of EVs, they will aggressively market their wares. Let’s see what happens to public attitudes at that point.
You may be more correct with the Europeans. There the Green Party, especially in Germany, has political clout.
The US on the other hand can be a different animal with the huge size of our market. Our market’s size has the potential to justify building what may not be saleable in other parts of the world. The foreign companies with US plants can do this too. If MB decides that ICE is what sells in the US they can just continue that in the US plant while it does different in Germany.
I would also point to how from your link on the California ZEV sales it says that ZEV total is at only 5.8% for nationwide ZEV sales. Look at the up to $9,500 grant (free money) available that is distorting the natural market. A local anomaly for California versus the rest of the country are their uniquely exorbitant gasoline prices.
I don’t think that the Green Party is the key reason why the EU is banning gas-powered cars. This has become a pretty mainstream idea across the continent. The climate change policy discussion can be substantially different in other industrialized nations versus here in the United States.
Certainly Mercedes can continue to build gas-powered vehicles in the U.S., but if it is not going to further develop ICE architecture after 2025 then their products are going to become increasingly dated over time. The lack of technological development could become problematic if federal standards are tightened over the next decade — which strikes me as a plausible scenario.
You seem to want to make a big deal about the current status of the EV market. That’s a data point worth looking at but has limited utility in helping us establish a trend line. It’s akin to predicting the future of the compact car market based on 1959 sales, when only Rambler and Studebaker had entries. Over the next few years pretty much everyone is going to launch one or more EVs. I would suggest that we’ll have a much better sense of where the market is going by the end of 2025.
This is a very interesting subject to me as we’re looking at replacing our 2009-era car sometime this year. One of the important questions is: ICE or EV? We are looking at everything in the market but there are no clear winners for us. We’re both approaching retirement age and trying to peer into the future that’s hazy at best. As we generally keep our new cars for a long time, our next choice will be rather significant.
I think Steve is right about consulting history for an idea of how soon we will see “critical mass” for adoption to EVs. I feel that EVs will become the norm for new cars, either due to governmental fiat (not that Fiat!) or market pressure.
Back in the mid-1970’s a computer corporation executive thought there was absolutely no reason to have a home computer. Fast forward to all of us now carrying a tiny one in our pockets. While that time span is almost 50 years, the home computer revolution was already taking place. It was commonplace to have a home computer by the early 90’s; and about another 10 years to get to the smartphone phase. Will the same apply to EVs?
However, I do see issues with implementation; this will not be a uniform transition. There are use cases that will not be possible with the current technology. Citing PCs as an example again, there were fits and starts with the technology. The differences in platforms, hardware and software in the consumer market are less noticeable and interoperability is better than it ever has been. However, not everything works as well as we would like. I believe there will be similar issues with the transitions to EV platforms.
We’re all so familiar with the current idioms of transportation that imagining a different one has folks suspicious. I think it’s normal to be suspicious, as I have my reservations also. It’s part of the reason why I’m leaning heavily toward an ICE vehicle for our next one. If you would have asked me five years ago, I would have been leaning heavily to EV.
The infrastructure for ICE vehicles will be around for quite a while and won’t disappear soon. Maybe synthetic eco fuels will become viable for the average person, extending the lifespan of ICE vehicles.
Probably by the time this new car wears out, I’ll be too old to drive safely and it won’t be an issue, LOL.
Diesel and gasoline will be with us for quite some time.
Battery charge range, battery materials sourcing, ability for EV trucks to haul loads a reasonable distance with reasonable recharge time are the big challenges I see. The railroads depend on diesel…electrified railways are localized, not wide spread. The cross country rail engines are diesel fueled generators for electric motors running the wheels. Recharge times and few and far between stations are impediments for cross country driving. The hybrids and range extended EVs like the dear departed Volt made cross country travel workable in the USA. I think they will be the transitional vehicles for a few decades.
Towing RVs and hauling freight are big challenges for EVs as well.