#EV

Greatest Corporate Showman on Earth

Tesla’s 1Q 2019 results were dreadful. CM has long held that Tesla is a basket case. The ever charismatic Elon Musk is trying to fan the flames of his company with dying embers. The question is where do we start on this diabolical 1Q report?

1. Musk started off with cash to speak to solvency. Tesla talks to $2.2bn in cash and equivalents. Down $1.5b, partly due to a $920m convertible repayment. Don’t forget Tesla has $6.5bn in recourse debt and $3.5bn in non-recourse debt. It has payables and accrued liabilities of another $5.5bn offset with receivables of just over $1bn.

2. Model S/X deliveries fell from 21,067 in 1Q 2018 to 12,091 in 1Q 2019. That’s -56% at the high margin premium car end. Musk claimed it was due to demand pull forward with a reduction in tax credits. Well he just proved that without credits, demand suffers appreciably.

Model 3 production was 3% higher on the quarter but deliveries were 20% lower. Note customer deposits total $768m, marginally down on the previous quarter. If Tesla starts to implode, customers have a right to get those credits back. Residual values aren’t holding as we discuss in pt.5.

3. Solar deployed -38% year on year

4. (Battery) Storage deployed -39%YoY

5. CM made it clear in point 11 of the 30 reasons why Tesla will be a bug on a windshield report,

The Tesla Residual Value Guarantee, while well intentioned carried risks that crucified the leasing arms of the Big 3. After the tech bubble collapsed at the turn of the century, do you remember the ‘Keep America Rolling’ programme, which was all about free financing for five years? While sales were helped along nicely, the reality was it stored up pain…Goldberg & Hegde’s Residual Value Risk and Insurance study in 2009 suggested on average 92% of cars returned to leasing companies recorded losses on return of up to 12%. Any company can guarantee the price of its used product in theory, the question is whether used car buyers will be willing to pay for it. Sadly Tesla does not get a say in what the consumer will be willing to pay.”

In the 1Q 2019 result, Musk admits that Tesla suffered $121m impairment on residual value guarantees (RVG). Is it any wonder they stopped this scheme. Now it’s payback time. There are $480mn worth of RVGs still on the balance sheet that are unlikely to have been marked to market values.

6. Level 5 autonomous driving is a pipe dream in the near term. 20+ years away. A fleet of Tesla taxis is an even bigger thought bubble. Regulation will put that on the back burner. The current level 2 systems have already shown significant short comings given the numerous beta testing deaths at the wheel of the Tesla auto pilot.

7. Musk is doing a stealth cash raise by putting a time limit on auto pilot upgrades. The question is when will the next cap raise come. His noise around Tesla taxis, Level 5 autonomous systems, Model Y all speak to the snake oil promises that he needs to distract investors from what is clearly going on.

8. His public spat with his biggest supplier, Panasonic, will not end well. Suppliers have to be on board with production expansion. Panasonic is cooling off its relationship. Musk publicly slapped the Japanese battery maker. It doesn’t augur well for the rest of the supply chain either to see these ructions

Peter DeLorenzo wrote the following with respect to Musk,

That this latest charade from Musk is yet another desperate act in an attempt at saving his floundering company is obvious. Where it differs from other Muskian braggadocio is the fact that he is insisting that his AV technology is safe for mass application and consumption. Sorry to disappoint all of the St. Elon acolytes out there, but this is the insane part…

…Unleashing a fleet of zombie Teslas on the streets of America curated by a notorious nanosecond-attention-span personality such as Musk is the quintessential definition of flat-out crazy. You can’t even squint hard enough to suggest that this is, in some way, shape, or form, rational thought. It’s a case of an intermittently brilliant mind that has wandered over the line into the Abyss of Darkness. A dangerous mind that is so obsessed with pushing his perpetually sinking car company into some sort of elevated stratosphere that he is willing to treat real people as so much collateral damage...

This country is 25 years away – at least – from widespread adoption of autonomous vehicles. Yes, there will be scaled deployment in limited, commercial applications primarily in urban centers over the next two decades, but driverless Teslas careening around less than two years from now? It is a recipe for disaster the likes of which simply defies calculation.”

All the reasons CM has disliked Tesla remain. It is so chronically overvalued. This stock will be lucky to be $100 by year end. Sadly the economy is slowing meaning it will be tougher to compete with more competition launching this year. China may give cause for some future hope but don’t bet on it.

The more Musk talks, the more desperate he is. Don’t forget he is not learning from SEC requests to lay off Twitter. His guidance in 1Q is lower than recent tweets suggesting appreciably higher targets. Tesla is a time bomb.

Canadians petrified by climate change – apparently

We keep getting told that climate change is the biggest threat to our civilization. Canadian PM Justin Trudeau is big on a carbon tax to fix it. Yet in the last two provincial elections, Ontario and Alberta, the parties that have pushed to repeal the carbon tax have both won in landslides. So maybe Canadians aren’t scared of global warming?

In Ontario, Doug Ford’s Progressive Conservatives surged from 28 seats to 76. His main rival, incumbent Kathleen Wynne of the Liberals fell from 58 to 7.

In Alberta, Jason Kenney of the United Conservatives gained 63 seats from 25 at the last election handing victory over incumbent Rachel Notley of the New Democrats which fell to 24 seats from 52.

We’re told by politicians, the Extinction Rebellion and the school climate strike that climate change is one of the greatest moral challenges of our lives. We’re asked to panic. Yet we must consider the hypocrisy of the 22,000 climate disciples and 7,331 observers that flew into the Katowice COP summit. The laugh was that all the recommended airport transfer choices were diesel powered. Or the 1,500 private jets carrying elites who flew into Davos to debate climate change.

Yet these election results show that more people are interested in economic security than virtue signaling through carbon taxes. Notley was a one term wonder. The way the polls look for Trudeau, it seems he will follow her lead in elections this year.

We shouldn’t forget that French President Emmanuel Macron repealed his petrol excise hikes after the yellow vest protests which are still ongoing. Yes, human nature is sadly driven by self-preservation.

CM has said the same thing repeatedly to alarmists. If you want to convince skeptics, stop being children. Whether it is the chanting and laughter brigades deployed to disrupt forums on coal or the “Fossil of the Day Awards” where the host brazenly shames representatives who don’t conform to the realpolitik of the climate alarmists, it is juvenile. There are even fossil fuel derived signs and a T-Rex suited sidekick to add to the childish antics of slagging off the Polish hosts at Katowice for promoting clean coal. Perhaps 16yo Greta Thunberg is the perfect poster child for such activists as she is more mature than the rest combined.

Panasonic pulls the plug on further Tesla capex

What a surprise? Panasonic is the main supplier of Tesla batteries. The Japanese tech giant is pulling the plug on further investment as it cites “financial problems” according to the Nikkei.

Panasonic had planned to ramp up production to 54GW by 2020 but it seems likely to stick to 35GW.

CM made the stance clear in the 30 reasons why Tesla will be a bug on a windshield report with respect to growth being at the mercy of suppliers willingness to co-invest.

Japanese suppliers are among some of the most tolerant around. For them to get pangs of concern should speak volumes about the real underlying conditions at Tesla. So much for a vote of confidence.

Swedish study on EV CO2 footprint will surprise

The IVL Swedish Environmental Research Institute was commissioned by the Swedish Transport Administration and the Swedish Energy Agency to investigate lithium-ion batteries climate impact from a life cycle perspective. Let’s not forget the left leaning pro-climate change Swedish government promoted the study.

The 2017 report showed that battery manufacturing leads to high emissions. For every kilowatt hour of storage capacity in the battery generated extra emissions of 150 to 200 kilos of carbon dioxide already in the factory. Regular EV batteries with 25–30 kWh of capacity will result in 5 metric tonnes CO2, which is equivalent to 50,000 km driving in a regular, fuel-efficient diesel vehicle.

If we use those IVL metrics on the Tesla Type S 100D battery pack of 100kWh, the car has done 167,000km worth of CO2 before its left the factory. So that would mean 20 metric tons of CO2 per car without taking into account any charging from the grid which is largely fossil fuel derived in most countries.

A 2019 model year BMW 530d diesel emits 138g of C02/km. So it can travel 145,000km just to match a car with a 100kWh battery pack before it leaves the dealership floor.

Does Australia really want 50% sales in EVs if the metrics are this bad?

The irony is that despite the evidence provided by the study, PM Stefan Löfven wrote on a Swedish Government website, “No new petrol and diesel powered cars will be sold after 2030. So we reduce the large climate emissions from the transport sector.

So in order to stay aligned with the Paris Accord, promoted by a U.N. body that has been caught out in numerous climate data manipulation scandals and climb downs from countless hysterical claims, Sweden’s left-leaning government skips over reality.

Where have we heard this before? Martin Kinnunen, climate policy spokesperson for the Swedish Democrats said,

It is a very radical proposal and I think you should be careful about predicting technology development in this way. It is simply unrealistic to have a ban in place already in eleven yearsIt can be difficult for many people who live in some parts of the country to have a car, and it can be very costly for those who must have a car

Only goes to prove that virtue signaling ignores facts. Never mind that the industry can’t adapt that fast. Never mind the environmental footprint on a life cycle basis. Just change the starting point then promote themselves as one of the good guys saving the planet when all that is happened is to set in motion actions that will damage her more than they would have otherwise by allowing the industry to set the technological benchmarks instead.

The fallacy of the 8 minute charge

ABB is claiming that it’s top of the line EV charger can juice 200kms in 8 minutes. Theoretically 100kms takes 4 minutes. It’s fast. However a Tesla Model S 100D has a theoretical full charge range of c. 540km. So to charge from empty using the top of the line ABB charger systems will still take 22 minutes, not 8. If an EV, fully loaded with fat people, luggage and the aircon set to maximum, is stuck in heavy city traffic (think of watching numerous video feeds on your iPhone), it’s theoretical range could drop like a stone. So if the same car only manages a real world 200km off a charge because of hideous traffic conditions the charge time is still 22 minutes for that 200km, not 8 minutes.

Full marks to ABB’s marketing department. But what it fails to take into account is the faster a battery is charged the quicker it’s quality deteriorates, meaning replacements would be required earlier and the global CO2 footprint goes up and poor Congolese children are sent to mine more cobalt.

Note the IVL Swedish Environmental Research Institute was commissioned by the Swedish Transport Administration and the Swedish Energy Agency to investigate lithium-ion batteries climate impact from a life cycle perspective.

The report showed that battery manufacturing leads to high emissions. For every kilowatt hour of storage capacity in the battery generated emissions of 150 to 200 kilos of carbon dioxide already in the factory. Regular EV batteries with 25–30 kWh of capacity will result in 5 metric tonnes CO2, which is equivalent to 50,000 km driving in a regular, fuel-efficient diesel vehicle.

If we use those Swedish metrics on the Tesla Type S 100D battery pack of 100kWh, the car has done 167,000km worth of CO2 before its left the factory. So that would mean 20 metric tons of CO2 per car without taking into account any charging from the grid which is largely fossil fuel derived in most countries.

A 2019 model year BMW 530d diesel emits 138g of C02/km. So it can travel 145,000km just to match a car with a 100kWh battery pack before it leaves the dealership floor.

Do we really want 50% sales in EVs if the metrics are this bad? Don’t forget car emissions continue to drop. Diesel emission standards today are 97% lower than Euro 1 levels set in 1992.

If current fast chargers cost $60,000 a pop, one imagines the super chargers from ABB will be in the vicinity of $80,000+. Multiply by the number of stations and chargers we’re well above $15bn in Australia if we match Norway’s statistics scaled to our market.

That’s the problem with green mathematics. They only look at selective statistics, not the whole. 99.8% of Australians seem to get the maths based on the fact EVs make up only 0.2% of total new car sales.

$14bn shock for Shorten. Not $100m

Image result for bill shorten ev

Let’s face it, pre-election budget boasting is a beauty contest we can do without. Fanciful promises guarantee we will not end up in surplus. Shorten’s speech was loaded with mistakes. Let’s cut through some numbers.

The Coalition put forward the following on Tuesday.

What escaped many in the Frydenberg budget of Tuesday is that to fund the 16.8% jump in tax receipts on 2018/19, individual taxpayers will still see their pockets hit +18.4% in aggregate even after including the ‘generous’ rebates. Superannuation tax collections will jump 43% in 4 years time.

NDIS spending is targeted to be 92% higher by 2022/23 than last year. Medicare +24%, public hospital assistance to the states +21%, aged care services +27%. For all the celebrations of lowering pharmaceutical rebates for one wonder drug from $120,000 to $6.50, the reality is spending in this segment will fall 18.4% in total. The family tax benefit will squeak 4% higher in the next 4 years.

As written on Tuesday, the revenue projections of the government are unrealistic as we stare at a slowing world economy. German industrial production in March cratered to 44.1 and China’s auto sales continued a 7-month double-digit slump in February.

Analyzing the Labor response

Shorten claimed NDIS was cut A$1.6bn to get a surplus. Under Frydenberg’s budget, NDIS for 2019/20 will rise A$4.5bn. Out to 2022/23, it rises to over A$24bn.

The Opposition Leader also made reference to A$14bn in cuts to public schools. Note the funding to public schools on 2013/14 was A$4.8bn. In 2018/19 it was $7.7bn and projected in 2022/23 to be A$10.4bn. 

$200mn to renovate nursing campuses in Australia won’t achieve much. The John Curtin Medical Research School at the ANU cost $130mn alone.

Shorten made reference to bushfires being caused by climate change. Fire & Rescue NSW notes that 90% of fires are either deliberately or accidentally set. A Royal Commission after the horrible Black Saturday bushfires showed that policies which restricted backburning reduction targets were to blame for the larger spread of fires, not climate change. In 2013, Tasmania learned none of the lessons with similar policy restrictions preventing the Tasmanian Parks & Wildlife Service to complete more than 4% of all the 2.6m hectares it manages. The reef is not being damaged by climate change and floods and drought are no more frequent or severe than a century ago.

While climate alarmists will relish the prospect of 50% electric vehicles (EV) and cut emissions 45% by 2030 to save the planet, a few truths need to be considered:

1) our own Chief Scientist, Alan Finkel, has admitted that no matter what Australia does to mitigate global warming our impact will be zero. Naught. Nada. Putting emotion to one side, is there any point in spending $10s of billions to drive electricity prices?

2) South Australia and Victoria have already beta tested what having a higher percentage of renewable energy does or rather doesn’t do for sustainable and reliable baseload power. Both states have not only the highest energy prices in Australia but the world. These stats are backed up in Europe. The EU member states with a higher percentage of renewables have steeper electricity prices than those with less. These are facts.

3) Consumption patterns matterLast year Aussies bought only 2,200 EVs. In 2008, SUVs made up 19% of the new car sales mix. Today they make up 43%.
In 2008, c.50m total passengers were carried on Australian domestic flights to over 61m today. The IATA expects passengers flown will double over the current level by 2030. These are hardly the actions of people panicked about cataclysmic climate change. Or if they are, they expect others to economize on their behalf.

Qantas boasts having the largest carbon offset program in place yet only 2% of miles are paid for, meaning 98% aren’t. 

4) Global EV production capacity is around 2.1m units. While rising, it is still a minor blip on 79 million cars sold worldwide. Add to that, auto parts suppliers and car makers are reluctant to expand capacity too fast in a global auto market that is slowing rapidly.

Car sales in China have fallen for 7 straight months. In Feb 2019, sales fell 13.8% on the back of January’s -15% print.  Dec 2018 (-13%), Nov 2018 (-13.9%) & Oct 2018 (-11.7%) according to the Chinese Association of Automobile Manufacturers (CAAM). The US and Australian car markets are under pressure too. 

5) So haphazard is the drive for EV legislation that there are over 200 cities in Europe with different regulations. In the rush for cities to outdo one another this problem will only get worse. Getting two city councils to compromise is one thing but 200 or more across country lines?

Without consistent regulations, it is hard for makers to build EVs that can accommodate all the variance in laws without sharply boosting production costs. 

6) Fuel excise tax – at the moment, 5% of our tax revenue comes from the bowser. $25bn! Will Mr. Shorten happily give this up or do we expect when we’ve been forced to buy EVs that we will be stung with an electricity tax on our cars?

7) Norway is a poor example to benchmark against. It is 5% of our land mass, 1/5th our population and new car sales around 12% of Australia. According to BITRE, Australia has 877,561km of road network which is 9x larger than Norway.

Norway has around 8,000 chargers countrywide. Installation of fast chargers runs around A$60,000 per unit on top of the $100,000 preparation of each station for the high load 480V transformer setup to cope with the increased loads.

Norway state enterprise, Enova, said it would install fast chargers every 50km of 7,500km worth of main road/highway.

Australia has 234,820km of highways/main roads. Fast chargers at every 50km like the Norwegians would require a minimum of 4,700 charging stations across Australia. Norway commits to a minimum of 2 fast chargers and 2 standard chargers per station.

The problem is our plan for 570,000 cars per annum is 10x the number of EVs sold in Norway, requiring 10x the infrastructure.

While it is safe to assume that Norway’s stock of electric cars grows, our cumulative sales on Shorten’s plan would require far greater numbers. So let’s do the maths (note this doesn’t take into account the infrastructure issues of rural areas):

14,700 stations x $100,000 per station to = $1,470,000,000

4,700 stations x 20 fast chargers @ A$60,000 = $5,640,000,000 (rural)

4,700 stations x 20 slow chargers @ A$9,000 = $846,000,000 (rural)

10,000 stations x 5 fast chargers @ A$60,000 = $3,000,000,000 (urban)

570,000 home charging stations @ $5,500 per set = $3,135,000,000 (this is just for 2030)

Grand Total: A$14,091,000,000

Note that Shorten pledged $100m to EV charging stations around Australia to meet his goals. Even if he was to skimp on 2 fast and 2 slow chargers per stand, Aussies taxpayers will need to shell out $6.5bn. At least he could technically cover that with repealing $6bn in franking credits.

Norway’s privately run charging companies bill users at NOK2.50 (A$0.42c) per minute for fast charging. Norway’s electricity prices are around NOK 0.55 (A$0.05c) per kWh to households.  In South Australia, that price is 43c/kWh. So will Shorten subsidize an EV owner charging in Adelaide at the mark up a private retailer might charge? 

What about subsidies to EV buyers? If we go off Shorten’s assumptions of $3,400 per EV at 570,000 EVs per annum, the tax payer will fork out $1.94bn a year.

Will there be a cash-for-clunkers scheme?  If the plan is to drive internal combustion powertrains off the road, existing owners may not be emboldened with the decimation in the value of their existing cars. Let’s assume buyers are irrational and accept $3,000 per car (Gillard offered $2,000 back in 2010) trade-in under the scheme. That would amount to $1.73bn.

8) Making our own batteries! While it is true Australia is home to all of the relevant resources, sadly we do not have enough cobalt to make enough of them.

Australia is home to only 4% (5,100t) of the world’s cobalt. 60% of the world’s cobalt comes from DR Congo which has less than satisfactory labour laws surrounding children. If we want cheap EVs, we have to bear that cross of sacrificing children to save the planet. It can’t be done any other way.

Li-ion batteries consume around 42% of the globe’s cobalt supplies. Cars are 40% of that. The rest being computers, mobile phones, etc.

9) Automakers have set up their own battery capacity to supply internal production. Given our terrible history in automotives, we should not expect them to line up to buy our batteries.

Nissan spent around A$770m on a battery plant in Sunderland. Panasonic plowed $2.8bn into the battery plant that supplies Tesla.

10) Australia has no real homegrown industrial scale EV battery technology. If we bought in a technical license, that will only make our production costs prohibitive on a global scale. Our high wage costs would add to the improbability of it being a sensible venture.

All in, Shorten’s EV plans could cost Australians well over $20bn with c.$4bn in subsidies ongoing.

11) Green jobs – according to the ABS, jobs in the renewable sector have fallen from the peak of 19,000 in 2011/12 to 14,920 in 2016/17. The upshot is that green jobs in the renewable sector are not sustainable.

In short, Mr. Shorten’s budget reply was extremely thin on detail. Especially with respect to climate change. The LNP has plenty of ammunition to prosecute the case on his wild costing inaccuracies (as outlined above) yet will they have the gumption to fight on those lines. Saving the planet is one thing.

Loading a stretched grid with EVs and increasing the proportion of less reliable power sources looks like a recipe for disaster. We need only look at consumption patterns to get a true sense of how ‘woke’ people when it comes to global warming. South Australians and Victorians are already living the nightmare of renewables.

This election is about one thing – individual pocketbooks. The electorate needs working solutions, not electric dreams.

Bill Shorten’s electric dreams are our nightmare

Image result for fuel bowser out of use

When will politicians wake up? How can they honestly believe their targets are remotely achievable if the industry is not even in the ballpark to being able to supply those promises? Take the ALP’s plan to make electric vehicles (EVs) 50% of new car sales by 2030.

In 2018, 1,153,111 new automobiles were sold across Australia. This plan is so easily destroyed by simple mathematics, something CM did in 2017 when Macron waxed lyrical about 100% EV sales by 2040. The only 100% certainty is that Bill Shorten won’t hit the 50% target by 2030. Do we need the government to tell us what cars we wish to buy?

The first problem he will encounter is overall consumer demand for EVs. Few suit the diverse needs and utilities (e.g. boat enthusiasts who require towing capacity unmet by all current EVs or parents who need 7-seaters to ferry kids to footy) of individual buyers. If the types of EVs available don’t match the requirements of the users then few will see the point to buy one no matter what the subsidy. In 2008, SUVs were 19% of Aussie new car sales. It is 43% today. So much for the climate change fearing public voting with their wallets! That is the first problem.

Why is the government meddling in an industry they know next to nothing about? Having a zero emissions (ZE) target is one thing they might aim for, however why not tell auto makers they need to attain that goal but will be granted complete technological freedom to achieve it? If the auto makers see necessity as the mother of invention, who are regulators to dictate the technology? If an internal combustion engine can achieve ZE does that not meet the goal?

It stands to reason we should question those with the least idea on the technology to dictate the future. The ZE appeal of EVs is an ineffective virtue signaling device to voters.

If we look at Euro emissions regulations introduced since 1993, substantial progress has been made in the last 20 years. Euro 6 started in 2015. For diesel particulate matter, emissions are 97% down on Euro 1 (1993) and NOx down by 95% over the same period.

The irony here, is that governments have these thought bubbles and then consult the industry afterwards to see if those promises can be fulfilled. CM spoke to multiple global auto suppliers in the EV space at the Tokyo Motor Show in 2018 and this is what was said,

“So haphazard is the drive for EV legislation that there are over 200 cities in Europe with different regulations. In the rush for cities to outdo one another this problem will only get worse. Getting two city councils to compromise is one thing but 200 or more across country lines? Without consistent regulations, it is hard for makers to build EVs that can accommodate all the variance in laws without sharply boosting production costs…

…On top of that charging infrastructure is an issue. Japan is a good example. Its EV growth will be limited by elevator parking and in some suburban areas, where car lots are little more than rental patches of dirt where owners are unlikely to install charging points…

…Charging and battery technology will keep improving but infrastructure harmonisation and ultimately who pays for the cost is far from decided. With governments making emotional rather than rational decisions, the only conclusion to be drawn is unchecked virtuous bingo which will end up having to be heavily compromised from the initial promises as always.

So the suppliers aren’t on board for a start. They know their car manufacturer clients rather well and if they aren’t buying it, auto makers can’t sell it. Slowing sales worldwide adds to reluctance to add to expensive fixed cost capacity at the top of a cycle.

We have proof of this. Note what we wrote in 2017:

It isn’t a big surprise to see national governments virtue signal over climate abatement. The UK swiftly followed French plans to ban the sale of petrol/diesel cars from 2040. However, let’s get real. Government proactivity on climate change may appear serious but the activities of the auto industry are generally a far better indicator of their lobby power. As a car analyst at the turn of the century, how the excitement of electric vehicle (EV) alternatives to internal combustion engines was all the rage. Completely pie in the sky assumptions about adoption rates…

…In 1999 industry experts said that by 2010  EVs would be 10% of all units sold. Scroll forward to 2019 and they are near as makes no difference 2.5% of total vehicle sales…talk about a big miss. 10 years beyond the prediction, they’re only 25% of the way there. Pathetic. 

CM also discussed in this report, 30 reasons Tesla would be a bug on a windshield;

“To prove the theory of the recent thought bubbles made by policy makers, they are already getting urgent emails from energy suppliers on how the projections of EV sales will require huge investment in the grid. [Mr Shorten, will we have all these cars recharging overnight using renewables? Solar perhaps?] The UK electricity network is currently connected to systems in France, the Netherlands and Ireland through cables called interconnectors. The UK uses these to import or export electricity when it is most economical. Will this source be curtailed as nations are forced into self-imposed energy security by chasing unsustainable products?

The UK’s National Grid said that the extra capacity required just to charge EVs would require another new Hinkley C nuclear plant to cover it. Will people choose between watching  premiership football on Sky Sports or charging their car?

Car makers can’t produce at the desired speed and energy suppliers don’t have the excess capacity required to charge. Slightly large problems. We don’t need to look at failed EV policy to show government incompetence. Germany totally fluffed its bio-fuel promise back in 2008 that even a Greens’ politician ended up trashing it.

“The German authorities went big for bio-fuels in 2008 forcing gas stands to install E-10 pumps to cut CO2. However as many as 3 million cars at the time weren’t equipped to run on it and as a result consumers abandoned it leaving many gas stands with shortages of the petrol and gluts of E-10 which left the petrol companies liable to huge fines (around $630mn) for not hitting government targets.”

Claude Termes, a member of European Parliament from the Green Party in Luxembourg said in 2008 that legally mandated biofuels were a dead end…the sooner it disappears, the better…my preference is zero…policymakers cannot close their eyes in front of the facts. The European Parliament is increasingly skeptical of biofuels.” Even ADAC told German drivers to avoid using E10 when traveling in other parts of continental Europe.

Starting with the basics for Australia.

If we take 50% of total car sales in 2018 as the target by 2030, Shorten needs to sell 576,556 EVs per annum to meet his bold target.

Let’s deal with the elephant in the room – note that petrol excise is currently around 4.7% of total federal tax take (c. $19bn) and likely to grow to c.$23bn by 2021. Even if we were to assume that we achieved Shorten’s targets based on a flat overall car market by 2030, Shorten’s tax receipts from the fuel excise would collapse and only be amplified by subsidies paid on 576,556 EVs. Throw the global average of $6,000-10,000  in incentives per EV and we’ve quickly racked $3-5bn per annum in subsidies.

Then will he offer cash for clunkers (C4C) for the poor owners of fossil fuel cars? Many car owners would require a hefty slug of C4C to offset the massive depreciation that would ensue on a trade in of a fossil fueled powered car. People are going to want decent trade ins, not 5c in the dollar of what they would have got had the government not attacked car owners. The changeover price matters. Shorten  may well get his 50% by halving the industry.

Should we also consider whether fuel taxes should be replaced by electricity taxes? If that ends up all we drive who is to stop it? Surely the maintenance of roads and related infrastructure which we’re told our fuel taxes pay for the upkeep will still need to be funded by heavier EVs.

Take the Tesla Model X 100D. It weighs 2,509kg, 49% heavier than an equivalent BMW 5-series. The heavier the car, the more damaging to the road. Such is the progress of the Nissan Leaf that the kerb weight has risen in the new model to 1,538kg on the original, or 400kg heavier than a petrol Toyota Corolla. EVs are fat.

Global EV sales units were 2.1mn last year. Total car sales were 79m odd. Let’s assume auto makers could conceivably increase capacity by 2m every 2 years (plants take 2 years to build and those poor Congolese child slave laborers will be run off their feet digging for cobalt to go in the batteries) then conceivably 30mn cumulative EV units could be built by 2030. Unfortunately VW gave the real answer on how they view EVs.

“Volkswagen makes an interesting case study. After being caught red handed cheating diesel emissions regulations (a perfect example of how little VW must believe in man-made global warming) they were in full compliance at the 2017 Frankfurt Motor Show telling the world of their $80bn investment in EVs out to 2030, 300 new EV models comprising 3 million units in 25 years of which 1.5mn would be sold in China. 3 million cars would be c.30% of VW’s total output today.”

However auto makers are faced with a conundrum. Chinese car sales are slowing. US car sales are slowing. European car sales are drifting and Aussie car sales are weak. Capex into EVs will be a very gentle process. They don’t want to plug in massive investments into new capacity if end demand is likely to remain soft. That is basic business sense. Note parts manufacturers need to be convinced that building new plants alongside makers is sustainable. Many are gun shy given the OEMs sent many parts suppliers into receivership the last cycle.

Ahh but EVs are less harmful to the environment. Are they?

The IVL Swedish Environmental Research Institute was commissioned by the Swedish Transport Administration and the Swedish Energy Agency to investigate lithium-ion batteries climate impact from a life cycle perspective.

The report showed that battery manufacturing leads to high emissions. For every kilowatt hour of storage capacity in the battery generated emissions of 150 to 200 kilos of carbon dioxide already in the factory. Regular EV batteries with 25–30 kWh of capacity will result in 5 metric tonnes CO2, which is equivalent to 50,000 km driving in a regular, fuel-efficient diesel vehicle.

Another study by the International Council on Clean Transportation (ICCT) showed that depending on the power generation mix, an all EV Nissan Leaf in the US or China was no better than a 2012 Prius. Countries with higher relative nuclear power generation unsurprisingly had lower CO2 emissions outcomes for EVs. By deduction countries with higher shares of coal or gas fired power negated much of the ‘saving’ of an EV relative to gasoline power.

So pretty much on all measures, Bill Shorten’s misadventure on EVs will be a complete dud. If only he’d consulted with the industry before celebrating how “woke” he is. He’s simply not.