Demand Curve? What Demand Curve?
Today's little slice of economic ignorance comes from tech site Engadget, a frequent contributor of such morsels. Apparently California is considering new penalties on auto makers for not selling enough electric cars, penalties which by their structure will be fed right into the pocket of Tesla, already a gaping maw of government subsidy consumption:
Assemblywoman Autumn Burke tells the Associate Press that she's introducing a bill requiring that car manufacturers sell at least 15 percent zero-emissions free vehicles within a decade. Companies operating in the state already have to hit yearly emissions targets and get credits for sales, but this would require that they embrace electric or hydrogen fuel cell cars in a big way -- not just one or two novelty models. And if they don't sell enough eco-friendly cars, they'd have to either pay a fine to the state or pay rivals that meet the targets. Yes, they might inadvertently help the competition.
If the bill becomes law, it could light a fire under car makers that have so far been slow to adopt emissions-free tech. Only 3 percent of all California car sales are either electric or plug-in hybrids.
The underlying assumption, both by Ms. Burke as well as the article's author, seems to be that lack of electric car sales is entirely a supply-side problem -- low sales are because auto makers don't make enough of them. While I have no doubt that there would be incrementally more sales if auto makers had a larger variety of models with different combinations of features, all of this seems to ignore the demand side. Automakers, who are constantly locked in a death struggle over tiny increments of market share, and who already pay penalties for not selling as many electric cars as politicians would wish them to, have every incentive to sell as many as they can. The issue strikes me as one of demand rather than supply - given current technology limits and costs, and despite large financial incentives from the government in the form of tax subsidies, most buyers have eschewed electric vehicles to date. Neither Ms. Burke nor the author even pretend that this law will change this demand situation.
Which is why critics rightly argue that this is just another way to funnel other people's money into Elon Musk's pocket, without his actually having to sell any more cars. Tesla already depends on payments from other auto makers for electric vehicle indulgences for much of its revenue, and this can only go up under this kind of law.
