EVs can succeed, but federal strategy has been a recipe for failure

In one of the more dramatic instances of state-driven industrial policy in recent years, the U.S. government, in step with the European Union and the Chinese government, decided to compel an electric vehicle future to be achieved at lightning speed. A combination of central planners and environmental voices collaborated to turn a buyer's choice of transportation into a government-compelled policy.

As such, the Detroit 3 hastily shifted strategy and announced a collective $100 billion in investment in crash course electrification programs, in addition to tens of billions in U.S. government tax incentives to subsidize EV purchases. Automakers globally announced up to $500 billion in investment programs in a bid to survive the new regime being imposed by regulators.

So now, a couple of years into this ballyhooed EV future, where do things stand?

Unrealistic expectations

EV market share sits at about 7 percent in the U.S., way below projections, and growth has stalled. The only thing keeping EV market share hopes alive is a bloated product line in the queue to hit the market in coming quarters. It's all a colossal mistake.

This top-down approach failed to take into account consumer preferences for a major financial decision. The government's strategy failed to link basic charging infrastructure that would make a massive EV fleet a practical reality.

Washington assumed it would lead American industry to the greener pastures. The feds assessed that eliminating tailpipe emissions would save the planet, without a comprehensive appraisal of environmental impact. Talk to the citizens of Chile, Argentina or Indonesia, who are seeing massive upticks in mining activity, often in ecologically sensitive areas, to access the multitude of resources required for EV batteries.

This is a classic example of failed central planning and bureaucratic arrogance. Economist Thomas Sowell famously opines there is only so much any one person can know. Any time a determination gets made higher up the food chain, the probability of unwise or counterproductive decisions increases. It is an unavoidable element of centralized decision making.

There is great wisdom and efficacy in allowing decisions to be made at the most local level practical. National defense? An issue that must be addressed at the federal level. Residential zoning, homelessness and most public policy issues are best addressed at levels well below the federal government. The botched, wildly costly rollout of EVs is a direct consequence of an overly centralized approach to a complex issue.

Compare the value creation of another major technology that has emerged concurrent with the mad dash to EVs. Artificial intelligence has created immense U.S. wealth in just a few years. This success is a result of years, perhaps decades, of quiet, largely privately funded organic research that incrementally developed products, and found markets, to allow for stratospheric value creation. The U.S. now boasts highly profitable companies, an ecosystem of innovation and impressive productivity gains percolating throughout the economy. This outcome results from creativity, risk taking, entrepreneurship and appropriate market signals.

Imagine if five years ago Washington had mandated companies jump into the AI future and surrounded them with rules, regulations and requirements? I'll take "the under" in that scenario.

Where and how decisions get made is a critical component in the probability of success. Top-down policies rarely result in successful outcomes, and we have a century of examples of failed centrally planned economies.

Correct path to EVs

EVs have been in active development for 40 years and represent an exciting potential future state for the industry. Battery technology, cost, charging infrastructure, range and consumer acceptance are issues that will continue to be addressed as creative companies engage with buyers to determine the path forward — incrementally, and one product at a time. Government has a role to play, but it must do so with humility, and an understanding that what it knows is limited and has to be continually road tested with reality.

Today, we have a stalled EV industry, jilted consumers who paid more for inferior experiences and American companies hemorrhaging cash to build EVs buyers don't want. Moreover, given the oversupply of EV models launched by traditional automakers, we are likely squelching the creativity and new ideas represented by EV startups such as Rivian, Fisker and Lucid, which struggle to compete in an overcrowded marketplace.

Are we better off for this $100 billion U.S. corporate investment? I'd humbly suggest not, and would advise more humility on the part of U.S. policymakers.