Demand Curve? What Demand Curve?

Today's little slice of economic ignorance comes from tech site Engadget, a frequent contributor of such morsels.  Apparently California is considering new penalties on auto makers for not selling enough electric cars, penalties which by their structure will be fed right into the pocket of Tesla, already a gaping maw of government subsidy consumption:

Assemblywoman Autumn Burke tells the Associate Press that she's introducing a bill requiring that car manufacturers sell at least 15 percent zero-emissions free vehicles within a decade. Companies operating in the state already have to hit yearly emissions targets and get credits for sales, but this would require that they embrace electric or hydrogen fuel cell cars in a big way -- not just one or two novelty models. And if they don't sell enough eco-friendly cars, they'd have to either pay a fine to the state or pay rivals that meet the targets. Yes, they might inadvertently help the competition.

If the bill becomes law, it could light a fire under car makers that have so far been slow to adopt emissions-free tech. Only 3 percent of all California car sales are either electric or plug-in hybrids.

The underlying assumption, both by Ms. Burke as well as the article's author, seems to be that lack of electric car sales is entirely a supply-side problem -- low sales are because auto makers don't make enough of them.  While I have no doubt that there would be incrementally more sales if auto makers had a larger variety of models with different combinations of features, all of this seems to ignore the demand side.  Automakers, who are constantly locked in a death struggle over tiny increments of market share, and who already pay penalties for not selling as many electric cars as politicians would wish them to, have every incentive to sell as many as they can.  The issue strikes me as one of demand rather than supply - given current technology limits and costs, and despite large financial incentives from the government in the form of tax subsidies, most buyers have eschewed electric vehicles to date.  Neither Ms. Burke nor the author even pretend that this law will change this demand situation.

Which is why critics rightly argue that this is just another way to funnel other people's money into Elon Musk's pocket, without his actually having to sell any more cars.  Tesla already depends on payments from other auto makers for electric vehicle indulgences for much of its revenue, and this can only go up under this kind of law.

  • DirtyJobsGuy

    It's time to exercise a Commerce Clause case for federal regulations trumping californias. It's not just electric cars, but gas cans, packaging, furniture etc where national costs are raised by some idiots in Sacramento. I'm normally not fond of raising federal power, but the commerce clause is in the constitution just for this issue. Much of the EU's problems that got in the popular press were because of local issues that restrained trade.

  • CC

    These emission-free (not really unless you go nuclear to power them) cars are very expensive. By forcing auto makers to donate to Tesla (since they can't sell enough), the overall prices of cars go up, hurting the poor. I can forsee dealers opening shop across the state lines and people smuggling cars in. Will they try to stop that?

  • Richard Harrington

    The real irony is that these electric vehicles are more about signaling status than actually reducing energy expenditure. Someone who is truly concerned about the environment wants the lightest and most efficient possible. Not the fastest, flashiest, and heavier vehicles.

  • A Scot

    There's no confusion on the assemblywoman's part. If you force the supply-side you can force the demand-side while deflecting the blame. If 100% of cars were all electric, that's what you will be buying, like it or not. Probably CA could not get away with banning gasoline cars but they can make it progressively more difficult to find one for sale.

  • David in Michigan

    Hmmm. I presume that road and bridge construction and repair funding is currently collected at the pump through fuel taxes. So how will the road infrastructure funding fare when 25% or more (it will be a cumulative over the years) of all vehicles pay no road taxes. Tax by the mile perhaps? Self reporting vehicles .... another government mandate coming soon.

    Upon further reflection, I suppose this funding has already taken a hit due to increased efficiency of gasoline and diesel powered vehicles.

    As for Tesla, didn't I just give passing notice maybe a week or two ago where one of his cars spontaneously and for no apparent reason caught fire and burned fiercely? I believe it was in France.

  • SamWah

    But, OF COURSE they will.

  • SamWah

    I am one who will not buy and electric vehicle.

  • Matthew Slyfield

    Build an electric vehicle that will go 3-4 hundred miles on one charge, while towing an 8,000 pound load, and recharge in half an hour that is also price competitive with similarly performing gas powered vehicles and I'd consider it.

    I'm not going to hold my breath waiting though.

  • Matthew Slyfield

    " So how will the road infrastructure funding fare when 25% or more (it
    will be a cumulative over the years) of all vehicles pay no road taxes."

    When EV's gain a significant market share they will start adding road maintenance taxes to your electric bill.

  • HoratiusZappa

    May the politicians get what they wish for. Next up: dealing with the repercussions of whatever easy-to-move crap the automakers come up with to meet quota, and a sudden increase in electricity demand.

  • Joe Mama

    " least 15 percent emissions free vehicles" Presumably the electricity will fall out of the sky? Even solar power impacts the environment, both in the footprint of the cells and in the mining, fabrication, installation and maintenance of the cells.

  • DaveK

    They'll find a way to double-tax them. Once on the purchase price of the vehicle, and again as an "import" tax.

  • DaveK

    Even a 30-minute charge time is going to be a killer for the market. How many folk will want to wait in line for that? It's not like you're going to be guaranteed a place at the front of the line at the recharge station.

  • DaveK

    Zero Emission Vehicle... There's nothing that really meets that specification, and nothing ever will. Somewhere along the line, in manufacturing, operating, or ultimate disposal, there will be emissions and waste.

    But at least they don't use Subaru's stupid tagline... the "Partial-Zero-Emission-Vehicle". That makes almost as much sense as saying that a woman is "partially not-pregnant."

  • Not Sure

    Even if you don't have an electric vehicle. Sucks to be you, eh?

  • Q46

    Ve haff vays to make you buy an electric car.

  • Q46

    Ah - good news then.

    If 100% of cars are Rolls Royce, then, like it or not, that is what we will all be buying.

    I should like that.


  • BobSykes

    Musk must be the most successful rentier of all time. His whole income is rents. He produces nothing.

  • Corky Boyd

    The manufacturers might have a case against this robbery.
    In reality, the manufacturers do not sell cars to the public. Only the dealers can by California law and in all other states. These laws were intended to protect the dealers from on-line direct sales by manufacturers. But it might turn around a bite the dealers back. If the dealers can't sell enough electrics, they should be fined, not the manufacturers. If the public doesn't want to buy, there is no way California can make them. That is unless California passes a law that mandates every fifth car a family buys must be electric. In California that could happen.
    Personally I would like to see one of the manufacturers pull out of the state as a protest. Toyota moved their US headquarters in California and moved it to Texas. Over 4,000 high paying jobs went along with it.

  • Corky Boyd

    In the 1960s, California made you pay California sales tax on cars if you moved into the state. I think the car had to be less than two years old. I'm not sure that is in effect now.

  • DaveK

    California (along with many other states) has a "Use-Tax" that is basically a sales tax on items purchased out-of-state. That's the avenue they use to make sure that they get their take on any newly registered vehicle, if not purchased in-state. In theory, the Use Tax applies to all purchases, including out-of-state internet vendors. Fortunately, they've never really figured out how to enforce the Use Tax, except for large-ticket items that require some kind of government registration.

    They'll just add on some sort of carbon-tax (under another name of course), and tack that on to the registration fee for a non-compliant import vehicle.

    It's really all about the money. In spite of their lip-service to environmental causes, the revenue stream is the most important thing.

  • Blackbeard

    Demand really isn't the issue here as the Progressives couldn't care less what kind of cars people actually want to buy. The essence of Progressivism is that they, the experts, know best and the rest of us should shut up and follow orders. But the problem is that if they just outlawed regular cars tomorrow, which the EPA could easily do under the CAA, the political backlash would be formidable. So they issue regulation after regulation design to make cars more expensive and less useful until they have, in effect, banned them, at least for ordinary people.

    Next up, air travel.

  • Ed

    This what I have sometimes fantasized about. Manufacturers just stop selling in California. Not going to happen, but it would be awesome.

  • Matthew Slyfield

    It can take 10-15 minutes at some stations to fill the 23 gallon tank in my F150. I've had to wait in line at gas stations. Assuming that EVs gain enough market share and their are enough recharging stations, that's not the killer you think it is.

  • Matthew Slyfield


  • Mike Powers

    Vehicles of the sort you're asking for are readily available at the local U-Haul.

  • Mike Powers

    Hey, electric car, sounds good! Looks pretty nice, actually, and I like the idea of not having to buy gas.

    Oh, the electric car costs $35000? And the compact is only $12K? Guess I'm buying a compact, then.

  • DaveK

    You must live where they require vapor recovery and limit the dispenser flow rate severely. Thank your lawmakers for that.

    I have an old F150 with twin tanks, around 35 gallons total, and I've never had to wait more than about 5-6 minutes for them to fill both tanks, even when I roll in practically on fumes. Typical wait-times for me, including the 4 cars ahead of me are around 10 minutes total.

    I suppose they could shorten the wait times for EV's by amping up the charge rate, but that is a huge amount of energy being dumped into a battery-pack in a very short time. Things can go very badly wrong in a hurry.

    EV's are really a niche product, and there are situations where they are appropriate. Let's allow the market to figure out how to make it work, instead of having bureaucrats try to force us to buy them.

  • Matthew Slyfield

    Vapor recovery yes, I don't know about flow rate limits.

    However, I have noticed that flow rate can vary significantly from one station to another and over time at a single station.

  • Matthew Slyfield

    Really, since when does U-Haul have electric trucks?

  • Matthew Slyfield

    I already own an F150 that will tow 9-10 K pounds.

  • Matthew Slyfield

    Just to add, typical is more like 5-8 minutes, for my 23 gallon tank, but some stations seem to run much slower from time to time. It's probably a filtration issue.

  • Mike Powers

    If you want a vehicle that can tow an 8000-pound load three or four hundred miles on a single "charge" (tank of gas) then you can rent one.

    For your daily commute, an electric car is all the capability you need.

  • Matthew Slyfield

    The statement was specifically about an electric vehicle meeting the stated criteria. I already own a gas powered vehicle that meets them.

    I am not interested in owning an electric vehicle that does not meet the stated criteria.

    I am not in any way interested in your opinion of how much capability I need.

  • Mike Powers

    Are you trying to flame me, here? You sure do seem to think you are. Good luck with that! We're all pulling for you.

  • Matthew Slyfield