Minnesota and Electric Vehicles
The oil industry is spreading false claims about electric vehicles. Here are eleven myths and “reality checks” rooted in Minnesota data, provided by the Fresh Energy policy team.
The Minnesota Pollution Control Agency (MPCA) is working on adopting Clean Car Standards, which would require vehicle manufacturers to sell more low and zero emission vehicles in Minnesota. When the MPCA adopts Clean Car Standards, about 6% of the vehicles sold in Minnesota would need to be Zero Emission Vehicles when the standard comes into effect, which--at the earliest--is 2023. For comparison, in 2018 electric vehicles had a 1.1% market share in Minnesota. These standards would be good for Minnesota--the people, the economy, and even the auto dealers, although they might not see it right now.
The only entity that will be clearly losing in this transition is the oil industry, so they want to slow this down as much as possible. Behind the scenes, they have started a campaign against Clean Cars by spreading a lot of myths about the Clean Car Standards and the electric vehicle market in Minnesota. Here are some of their claims, and a reality check.
Myth #1: There is no customer demand for electric vehicles.
Reality check: The latest Consumer Reports study shows that in Minnesota 6 out of 10 consumers are interested in electric vehicles and 30% would consider buying or leasing one in the next two years.
Myth #2: Since electric vehicles have just a little over 1% market share in Minnesota, it is clear that people are not ready to buy them.
Reality check: People are not buying electric vehicles in Minnesota because they can’t find any at Minnesota dealers. Tesla is selling more electric vehicles in Minnesota than all other manufacturers combined. As of early October 2019, there were 51,000 new light duty vehicles on dealer lots and out of those only 300 were electric vehicles.
There are about 320 auto dealers in Minnesota that could carry electric vehicles right now. At a minimum, each auto dealership should consistently have at least five electric vehicles on their lot for them to do marketing and for customers to have any choice here. Only nine out of those 320 dealers have five or more electric vehicles on their lots. Forty-six Minnesota dealers have one to four electric vehicles on their lot, and the other 250+ dealers don’t have any. For comparison, on average, Minnesota Toyota dealers have, on average, 27 Camrys on their lots and on average, Minnesota Ford dealers carry 44 F-150 pickup trucks at each Ford dealership. The reality is that the lack of vehicle availability and marketing support by manufacturers is a huge obstacle for electric vehicle sales in Minnesota right now. You can find the list of electric vehicles available in Minnesota at www.EVInfoList.com and dealership stocking levels at www.Cars.com.
Myth #3: Clean Car Standards would be bad for Minnesota auto dealers.
Reality check: Auto manufacturers are putting Minnesota auto dealers in a very risky situation here by not providing electric vehicles and marketing support. If auto dealers don’t consistently receive enough electric vehicles to keep healthy stocking levels and good customer choice, they can’t compete in this growing segment. Right now, Tesla has just one store in Minnesota and they already sell more electric vehicles here than all other manufacturers combined. And even when measured against all vehicles sold, Tesla outsold many established manufacturers like Acura, Cadillac, Chrysler, Infiniti, Lincoln, and Volvo in first seven months of 2019 in Minnesota. The Tesla Model 3 was also the sixth most sold passenger car in the United Sates in the third quarter of 2019. If auto manufacturers keep treating Minnesota as fly-over country, auto dealers will see their market share further erode. This will be accelerated later next year when Tesla brings their crossover Model Y and Rivian and Tesla launch their pickup trucks to the market.
Myth #4: Since auto manufacturers make less money selling electric vehicles, they will have to raise the price of other models.
Reality check: It is true that electric vehicles currently provide lower profits due to higher R&D investment needs, lower volumes, and new technologies, but automakers are well positioned to invest in new technologies that will be crucial for their future success. As an example, in 2018 the big three US automakers – GM, Ford, and Fiat Chrysler – had respectively $8.4, $3.7 and $4.3 billion of net income. As battery and electric vehicle drivetrain technologies are becoming more standardized and the manufacturing volumes are increasing, we will see a change in the profit trend. GM has estimated that electric vehicles will be profitable for them “early next decade.” The good news is that the next decade starts in less than three months. Also, a Volkswagen executive cited in a New York Times report last month said the automaker pays less than $100 per kWh for its batteries. This would mean that their production costs would already be at a level that they could sell their new ID3 model with similar profit margins as their traditional internal combustion engine vehicles. https://www.businessinsider.com/vw-electric-cars-battery-costs-versus-tesla-2019-9
Myth #5: Adopting these standards will limit consumer choice by removing trucks, minivans and SUVs from showroom floors to make way for the required low-emission options.
Reality Check: On average, auto dealers have hundreds of vehicles on their showrooms and lots. Let’s say that a dealer has 200 vehicles on their lot and their goal is to have electric vehicles be 6% of their sales. This means that they would now have 12 electric vehicles out of their total of 200 vehicles. They can keep the electric vehicles wherever they want since these standards would not micromanage where and how dealers would stock these vehicles. Also, since many of the future electric vehicles are trucks, minivans and SUVs, this will clearly increase consumer choice.
Myth #6: Rural auto dealers would be forced to stock and sell electric vehicles.
Reality check: These standards don’t micromanage which dealers sell electric vehicles and which don’t. The standards would simply require auto manufacturers to make sure that 6% of their vehicle sales in Minnesota are electric vehicles, and it doesn’t matter which dealers do it. We have already seen some metro dealers (and even some rural dealers) specializing in electric vehicle sales, so they would now get more support and better allocation as a result of these standards.
Myth #7: Dealers could not trade vehicles with dealers in other states because those vehicles “might not meet the standards.”
Reality check: Clean Cars Minnesota is not setting any technical standards for vehicles, but just general fleet average efficiency standards. It will not micromanage what kinds of vehicles dealers sell. Manufacturers just have to make sure that the combined vehicle fleet sold in Minnesota meets the levels set by the standards.
Myth #8: California cities have still bad air quality so why would we follow their example?
Reality check: These standards were set in California precisely because the air quality was poor in bigger cities, and the standards have drastically improved air quality there. Electricity production used to be the biggest source of climate change-causing pollution in Minnesota, but those emissions have seen a dramatic drop due to increased renewable energy production. Transportation emissions have actually started increasing again in recent years, and now produce the most climate pollution of any sector in Minnesota. Clean Car Standards in Minnesota would change this trend line.
Myth #9: Clean Car Standards in Minnesota would not have a meaningful impact on emissions.
Reality check: Electric vehicles are our best opportunity to wean ourselves off of our oil addiction while at the same time drastically reducing our climate pollution. Electric motors are 85-95% efficient, whereas internal combustion engines are 15-25% efficient, so electric vehicles use much less energy. This leads to much cheaper fueling costs and much lower emissions. Anyone who starts driving electric cures their oil addiction and drops their transportation energy consumption by 75% overnight. Electric vehicles also provide us an opportunity to choose how our transportation energy is produced, and the good news is that our electricity production is getting cleaner at a remarkable pace. For more info about environmental impact comparisons see www.Carboncounter.com.
Myth #10: More efficient cars are less safe.
Reality check: This claim might have had some truth in it in '70s and '80s, but nowadays there is no correlation between vehicle energy consumption and the safety of the vehicle. The Insurance Institute for Highway Safety (IIHS) provides the most comprehensive safety ratings in the US, and all electric vehicles available in Minnesota get either their highest base level rating (Good) or even earn their top Safety Pick or Top Safety Pick + level. Check out the ratings at www.iihs.org.
Myth #11: We should let the market take care of this. If there is a demand, automakers will respond to it.
Reality check: Unfortunately, sometimes standards are needed because automakers don’t follow market rules and operate with customer interest in mind. Auto manufacturers do their best to steer consumer interest toward models that make the most profit for them and then push as many of those models as possible to their dealers. Dealers are also getting higher incentives to sell these models, even though they might not be the best choices for consumers. This could be fine if automakers would really be willing to accept the risks associated with this approach.
Automakers have a track record of privatizing the profits and socializing the risks of selling less fuel-efficient vehicles. I’m sure we all remember what happened when the last recession hit in 2008. US auto manufacturers had willfully ignored all warning signs and kept manufacturing and pushing the biggest SUVs and trucks. When oil prices rose and the recession hit, sales dried up, so they turned to the government and asked US taxpayers to bail them out. We can see many warning signs of this pattern, and the general public knows this, too. When Consumer Reports asked this summer if American adults think that automakers care about lowering fuel costs for customers only about a third (34 percent) of those surveyed thought that to be the case. In this same survey an overwhelming majority — 88 percent — of American adults agree that automakers should continue to improve fuel economy for all vehicle types. https://advocacy.consumerreports.org/press_release/fueleconomysurvey2019/