Beginning as a niche market to now being reported on almost daily, it is safe to say that electric vehicles (EVs) are playing a major role in today’s public policy debates. Despite the constant attention they receive from reporters and politicians alike, discussions about EVs, especially regarding mandates and forced transitions, are often filled with emotional rhetoric that generally ignores the facts. In response, the Institute for Energy Research has published a new report titled “When Government Chooses Your Car: Examining the Challenges and Complexities of a Transition to Electric Vehicles.” The report provides an overview of the current state of the EV market, the costs associated with EVs, and the barriers to widespread EV adoption, separating myths from facts about EV policy.
Key Facts and Figures:
Costs:
- Edmunds found a 42% gap in the price for an average internal combustion engine vehicle and an average EV.
- The bipartisan Infrastructure Investment and Jobs Act passed in 2022 appropriated $7.5 billion for EV charging infrastructure, but as of the middle of 2024 only 7 EV charging stations had begun operating.
- The replacement cost for electric vehicle tires is $300 to $500 more than for comparable ICE vehicles.
Limitations:
- Surveys consistently find only limited interest in purchasing electric vehicles.
- EVs driven during the wintertime in the areas of the country that experience cold temperatures can temporarily lose anywhere from 10-36 percent of their range.
- Going to 100 percent EVs will double US electric demand, putting further stress on the US electrical grid.
Myths fueling policy:
- EVs are not as energy efficient as claimed; most of the energy loss (59%) for an electric vehicle is in the electrical power system itself and is often overlooked.
- The environmental footprint of EVs is understated; although the tailpipe emissions of an electric vehicle are zero, the carbon dioxide emissions related to the production of an electric vehicle battery and the electricity produced to power an electric vehicle are significant.
- EVs are not better for national security. EV supply chains are in particular dominated by China.
Electric Vehicles and the U.S. Car Market
Within the category of electric vehicles, there are multiple sub-categories including battery-electric vehicles (BEV), plug-in hybrid electric vehicles (PHEV), and hybrid-electric vehicles (HEV). BEVs do not use liquid hydrocarbons as an additional fuel source while PHEVs and HEVs do. Additionally, hybrid vehicles continue to outpace BEVs in sales and have for many years.
EV sales have grown over the past few years, but they still remain a small part of the total vehicle market in the United States. The most recent federal data from 2023 shows almost 1.15 million BEVs were sold, representing about 7.4% of the 15.5 million vehicles sold that year. An additional 295,000 PHEVs and nearly 1.2 million HEVs were also sold. However, in the first half of 2024, there has been a significant slowing of BEV sales. Even with their 2023 sales, BEVs make up roughly 1% of all vehicles on the road. Additionally, many EV producers, such as Ford and General Motors, have backed off their previously optimistic claims about the future of EVs or even halted production. Other companies are set to miss their EV production targets. The latest U.S. Energy Information Administration (EIA) projections estimate the electric vehicle share of new vehicle sales (including both BEV and PHEV) will not exceed 20% by 2050 in the reference scenario and not exceed 30% even in a high oil price scenario.
Since consumers ultimately choose what vehicles are purchased, the inaccuracy of EV production targets shows that they are not plugged in with consumer demand. However, policymakers are attempting to use the arm of the state to change this trajectory by advocating for a forced transition of the U.S. market to electric vehicles. But before more policy is made, the data on the costs of EVs ought to be consulted.
The Cost of Electric Vehicles
Despite what many politicians, bureaucrats, and activists say, a forced transition to EVs is anything but costless.
One of the most apparent costs is the price differential between EVs and internal combustion engine (ICE) vehicles, with Edmunds finding a 42% gap in the price for an average ICE vehicle and an average EV. This is, in fact, a primary reason that consumers cite when asked about the decision to forgo purchasing an EV. This price differential is due primarily to the cost of an EV’s battery module and the fact that even using optimistic assumptions, EVs do not ever reach cost parity in some categories of light-duty vehicles.
Charging is also a major cost that is often ignored. Electricity prices vary significantly between daytime and nighttime hours and public charging stations are significantly more expensive than charging at home. It should be noted that state taxes on liquid fuels artificially raise the costs of ICE vehicles. Depending on the make and model, the time it takes to fully charge an EV can also be much greater than the time it takes to fill up a tank of gas.
At-home EV charging infrastructure also imposes a cost on consumers as EVs cannot be plugged into a standard wall socket. There are significant costs associated with public EV infrastructure as well. The Infrastructure Investment and Jobs Act passed in 2022 appropriated $7.5 billion for EV charging infrastructure. However, as of the middle of 2024, only seven EV charging stations built using these taxpayer funds were operational.
While EV maintenance costs are often trivialized, the long-term costs are yet to be seen. Tires for EVs are 30-45% higher due to the greater wear and tear from the load of the vehicle. The extra maintenance cost of vehicles with over 100,000 miles could offset other electric vehicle maintenance savings. EVs also take longer to repair than ICE vehicles and often cost about 30% more. Insurance, too, is higher on EVs than on ICE.
Depreciation is another factor affecting EV sales. Recent data from CarEdge indicates that Teslas may depreciate at double the rate of gas-powered vehicles. Specifically, the Tesla Model Y, Model S, and Model X are projected to lose 57% of their value after five years, compared to the gas-powered RAV4’s expected 28% depreciation. This discrepancy is due to the car’s battery, meaning that all too often it is simply cheaper to buy a new vehicle than replace the battery.
EVs place significant wear and tear on the roads, as well. EVs are much heavier than a comparable ICE vehicle, mostly due to the size of the battery. This heaviness causes more damage to roads and infrastructure, which will only increase as more EVs end up on the road. The environmental, safety, and consumer costs associated with road damage and repair are rarely considered when analyzing the impact of EVs. Though this point is hardly discussed in public policy circles, wear to infrastructure must be taken into account in the models of EV costs.
With emission reductions being a major talking point of politicians advocating for the forced EV transition, the true amount of emissions must also be considered. Surprisingly, a study by Emission Analytics found that tire wear particulate emissions were more than a thousand times greater over the life of the car than the particulate emissions from a tailpipe. According to the study, a 500-pound increase in vehicle weight can result in tire emissions 400 times greater than real-world tailpipe emissions. Due to this, a forced transition would likely increase, not decrease, overall PM emissions.
Finally, the costs associated with mineral sourcing materials necessary for EV production are downplayed. EVs require six times the number of mineral inputs compared to a standard car. The current supply of the mined minerals necessary for a rapid forced transition from ICE vehicles to EVs simply is not enough. These minerals, of course, also have a major environmental impact in terms of emissions and toxic waste. Thus this “green” industry might not be as environmentally friendly as many tend to believe.
Limitations to EV Adoption
With a rapid transition to electric vehicles, numerous obstacles must be addressed including, but not limited to, consumer preferences, battery size, vehicle driving range, charging infrastructure, electrical generation capacity and shortages, battery recycling, and questions of safety.
The goal of changing the makeup of the road to primarily or even only EVs raises the question: if this goal is so obviously worth achieving, why has it not occurred already? The simple answer to this is consumer demand. As has already been discussed, consumers view the costs of EVs as prohibitively high, whether that be a result of the price of EVs, charging time, and/or reliability. Regardless of the political will or if the courts uphold the legislation, there is no authority to force consumers to purchase said vehicles. At the end of the day, consumers are still sovereign and they have shown what they truly want and value with their dollars.
Both the limited driving range and battery size are significant barriers to full-scale EV adoption. Many say that battery storage technology will exist in the future, but the fact of the matter is that it does not exist today, meaning that a rapid transition to EVs would be subject to the current costs and limitations of existing battery technology. Additionally, the size of a battery directly affects the car’s price and the total possible range of the EV. Essentially, this means that to keep up with a standard ICE, EVs either must be significantly more expensive or have a much shorter range. The usage of EVs also leads to battery deterioration, significantly affecting their range. All of these factors, to put it in a lighthearted tone, mean that EVs are not up for the great American road trip.
Due to the amount of time required to charge an EV’s battery, major changes to charging infrastructure would also have to be made. More land is required as the model of “refueling” changes from quick at-the-pump service to longer wait periods for battery recharging. As has been discussed, the technology needed on both a micro and macro scale for EVs to be fully implemented imposes significant costs.
Potentially a more important limitation is the dependency of EVs on the power grid. ICE vehicles are mostly independent of the power grid, meaning that one could still operate their gas-powered vehicle in the middle of a power grid failure. EVs, however, are dependent on the grid being up and running. The U.S. electric grid is already struggling to meet peak demand today. In just the last few years, both California and Texas have had significant outages, and multiple regional transmission operators have warned of generation shortfalls soon. In the case of a blackout, virtually all EVs go dark due to their limited range and the necessity for electricity to charge and run their engines.
EV batteries both at the beginning and the end of their life cycle face significant challenges. Refining the minerals to make EVs harms humans and the environment. Additionally, recycling batteries is dangerous as used lithium-ion batteries are considered hazardous waste.
The safety of EVs is also a limiting factor for a full transition. While the true data on EV fires is unknown, EV fires do occur and their nature is more dangerous than a typical car fire. Because a battery fire is a chemical fire, safe extinguishing would mean that the battery needs to be fully submerged for 24 hours to prevent re-ignition. There have also been incidents of EVs with saltwater damage from floods igniting. The additional weight of EVs is also likely to create more traffic fatalities as studies have found that a 1,000 lb. increase in vehicle weight resulted in a 47% increase in fatality risk.
Myths Fueling EV Policy
A major myth around EVs is that of the magnitude of fuel savings. While it is true there would be savings from spending less on gas, the cost of electricity is dependent on the area of the country one is in. The $9,900 savings for an EV versus a conventional car drops to $6,540 when compared to a car in the same class as a BMW 3. It drops even further, to $2,844, when compared to the Hyundai Sonata Hybrid. In the case of the California five-year electric cost ($.33/kWh vs. $.12/kWh), the savings of $9,900 drop to $5,175. The hybrid is even $1,881 cheaper when a realistic electric cost is used. Needless to say, the marginal difference in fuel cost may not come close to bridging the gap between the initial sticker price of EVs and ICE vehicles.
Another myth is the notion that EVs are carbon-free. Although there are zero tailpipe emissions, there is still a carbon footprint. Much of this has to do with how the electricity of an EV was generated. Studies have also shown that carbon emissions from producing EVs are significantly higher than in producing ICE vehicles.
It also must be noted that renewable energy cannot meet the energy requirements of EVs. The U.S. grid is already facing reliability issues and although some claim that the introduction of wind and solar can allow for a full transition away from other fuel sources like coal, nameplate capacity and accredited capacity vary greatly. What this means is that while a wind “farm” could claim to meet the same generation as a coal plant due to installing enough turbines to meet the same nameplate capacity, in reality, the actual amount produced by turbines will be much lower than what is theoretically possible.
Conclusion
While EVs seem like the next new thing, the reality is that battery technology has been around since the late 1800s. While battery technology has improved significantly, we should acknowledge the fact that market competition drove the adoption of the internal combustion engine. Thomas Edison, for example, was highly aware of the limitations batteries placed upon EVs.
The arrival of the internal combustion engine disrupted the EV market because of its overall advantages to users. EV policy debates also often overlook the role that hybrids play. If reducing emissions, for example, is the goal, hybrids offer an average CO2 reduction of 30% compared to a conventional fossil fuel-based vehicle. Hybrids also do not require a changing of current infrastructure for their usage and do not take the time that EVs do to refuel. Both of these points are ignored in current discussions on forced EV transitions.
As the future of technological change is uncertain, public policy must prioritize consumer sovereignty as the guiding principle that should shape the automobile market.
Consumers, with their diverse set of preferences and needs in automobiles, should be free to choose the type of vehicle that best suits their needs, and we should rely on the market process to determine the exact make-up of the automobile market. Consumer choices serve as signals to producers about what to supply. High demand for a product indicates its desirability, prompting businesses to produce more, while low demand can lead to reduced production and further innovation.
When consumers express their preferences, businesses are incentivized to innovate and improve product quality to attract customers. This process drives competition and leads to better products and services. In a market driven by consumer choice, businesses must be accountable to their customers. If a company fails to meet consumer needs, it risks losing market share to competitors, encouraging firms to prioritize consumer satisfaction.
Ultimately, consumer sovereignty ensures that the market responds to the needs and desires of individuals. It empowers consumers to make choices that reflect their values and preferences. Under this system, consumers can choose between ICE, hybrid, electric vehicles, or whatever the future holds concerning transportation. This ensures that everyone maintains access to mobility, a feature of American life that has been fundamental to our dynamism and growth for over a century.
