There is a lesson in the humiliating climbdown. State-led industrial strategies never work. Indeed, the failure of the drive into EV is a textbook example of everything that goes wrong.
First, it backs the wrong industries. No one really has any idea what products people might want in five or ten years time, which is why it is best to leave it to private companies and their investors to make their own bets, reap the rewards when they get it right, and bear the losses when they don’t.
Politicians and bureaucrats are no better at making those decisions, as usually a lot worse. Don’t believe me? Just ask consumers. Hertz in the US is disposing of the 20,000 EVs it bought with great fanfare in recent years, and is replacing them with petrol models, due to lack of demand. Over the past year, figures from the Society for Motor Manufacturers and Traders revealed a steep fall in EV interest from private buyers.
Next, the state over-invests. Even if there is a small market for EVs, there certainly wasn’t space for huge new industries in France, Germany, the US, or in a dozen smaller countries. The car industry was awash with over-capacity already, and that was before the Government started throwing billions at electric vehicle plants. All that happens is that prices collapse, and no one makes any money.
Finally, it distorts the market with subsidies. Governments start out spending a few billion on new EV factories, then they have to start subsidising the EVs so that people actually buy them, then they have to impose tariffs and quotas to stop imports from countries where other government have invested too much.
Robert Johnson is a UK-based business writer specializing in finance and entrepreneurship. With an eye for market trends and a keen interest in the corporate world, he offers readers valuable insights into business developments.
