Electric Vehicles Need Jolt from Gov't Support

Auto shows, such as the one this month in Montreal felt somewhat subdued.

The only loud noises came from periodic unveilings of various 2020 models. The crowd was small and consisted of people paid to be there. They gathered around exhibit spaces tightly packed with vehicles that fewer and fewer people appear willing to buy, the heirs of artifacts from the debt-fueled boom in automobile sales that peaked a couple of years ago.

Some wondered if the reign of the car in Canada’s economy is over. And since the North American Free Trade Agreement was just rewritten for the sake of the Detroit-based automakers and their unions, it seems a question that should be raised from time to time.

Canadians bought 1.92 million cars and light trucks last year, a 3%drop from 2018 and 6% decline from a record 2.04 million in 2017. This year probably won’t be any better. Bloomberg News this week reported that North America’s Big Three automakers have slowed production, and Aurora, Ont.-based Magna International Inc. (TSX:MG), one of the world’s biggest auto-parts makers, cut its outlook for 2020.

Industry people predict sales of 1.91 million units this year, heralding a third consecutive annual decline. But if they are concerned, they aren't showing it. “We see that as healthy,” said one in an interview. "That’s not any kind of major correction. That’s a healthy industry. For us, the real story behind that (decline) is a change in segmentation."

Many have remarked on the contradiction between the growing desire to do something about climate change and the buoyant demand for the mode of personal ground transportation that leaves the largest carbon footprint. The International Energy Agency in its 2019 World Energy Outlook said SUVs are responsible for the second-most carbon-dioxide emissions since 2010, behind only the power industry.

If we’re serious about climate change, they say, we’re going to have to buy different cars, fewer cars, or both.

At the Montreal show, Ford debuted the Mustang Mach-E, an all-electric SUV that’s been tagged with Ford’s most famous nameplate. It could be an important innovation, but it’s not going to bend the demand curve for automobiles anytime soon. The base price is $50,500. Ford expects to build only 50,000 this year because the supply of batteries won’t allow for more. A spokeswoman said the company isn’t providing production estimates for future years at this time.

Incidentally, Ford is building the Mach-E in Cuautitlán, Mexico, so the managed trade provisions in the United States–Mexico–Canada Agreement might not be enough to reverse the southern flow of investment in the North American automobile industry.

Car industry folks wouldn’t say if Canada factored in Ford’s electric-vehicle strategy, citing the company’s policy of keeping such plans to itself. But if governments want to get more electric vehicles on the road, he said they will have to keep the incentives coming. The baseline Mach-E is priced just low enough to qualify for the maximum $8,000 rebate that Quebec will give buyers of electric vehicles.