Biden’s EV Rules “Demonstrate to Men How Little They Really Know About What They Imagine They Can Design”

By James Pethokoukis. 

"You may have heard this one before: A pet food company launches a massive campaign for its new dog food, including a fancy label, celebrity and web influencer endorsements, TikTok videos, and even a CGI-heavy Super Bowl ad. Despite all the hype, sales go nowhere. When the CEO demands answers, the marketing head simply says, “It’s those damn dogs. They just won’t eat the stuff.”

I wonder if anyone in the Biden administration knows that somewhat hoary joke. Maybe one of its economists has because the jest offers insights into the weakness of central planning. It illustrates how assumptions by executives, akin to central planners, can lead to resource misallocation and inefficiencies when real-world preferences—like dogs’ tastes—are ignored. The scenario underscores the importance of market signals and consumer feedback in guiding production, showcasing the disconnect and overconfidence that can characterize top-down efforts. As economist Friedrich Hayek famously put it, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

This brings us to the Biden administration’s attempt at designing the future of the American auto industry through tough rules on tailpipe emissions to force automakers to sell more electric vehicles, as well as subsidies such as purchase tax credits, battery manufacturing, and electric charging infrastructure. All this is to help President Biden achieve his twin goals of slashing US greenhouse gas emissions in half by 2030 and eliminating them by 2050. And yet the effort may be losing momentum, as this WSJ chart suggests:

More evidence that formulating a plan isn’t the same as successfully executing one comes from a new FT piece on Toyota, whose commitment to hybrid vehicles—blending battery power with traditional combustion engines—faced skepticism from investors and environmentalists. EVs were the future, just accept it! Yet Toyota executives doubted the consumer demand for EVs, citing high prices and concerns over charging infrastructure—exactly the factors that seem to be currently undercutting EV sales. The FT notes that, while global demand for full EVs has increased over the past three years, their market share declined in the UK, with growth slowing in the US and Europe. Meanwhile, at Toyota, hybrid sales are up and profits are at record levels. Elsewhere, General Motors is reintroducing plug-in hybrids, recognizing slower customer transition to EVs, while Ford’s hybrid sales are expected to surge 40 percent this year.

Then there’s this, via that FT story:

Adam Jonas, an analyst at Morgan Stanley who confidently predicted that aggressive government regulation and a consumer preference for fully electric models would quickly extinguish the hybrid market, this month admitted: “I owe Toyota an apology.”

As for the Biden administration, it apparently plans to ease those tailpipe emissions limits aimed at encouraging a shift from gas to electric vehicles, a concession to automakers and labor unions. (And who knows the future of the entire Washington EV effort if the next president is a Republican.) This adjustment would extend the emissions timeline for automakers, delaying significant electric vehicle sales increases until after 2030. So kind of an apology, I guess—or at least an admission of sorts."