A big part of the transition from fossil fuels to renewable energy is electric cars. I've lost track of how many times we've talked about evs in one way or another on this show, but in some places, the growing desire for electric cars has also come with growing pains. Hong Kong based reporter Linda Lu went out to see a strange site that can be found in a number of cities in China, EV graveyards where unwanted early models are piling.
Up, hundreds and hundreds of these cars sitting under the sun gathering bus as far as that I could see.
Later, contributor Villa Marx talks about how Norway, which offers generous tax breaks for EV buyers, is now contending with some unexpected consequences of so many people flocking to buy them.
So when you have this big hole in your public finances because of these incentives, because of these exemptions from tax for evs, you've seen that whole become problematic and it's become a bit of a political footballer Norway.
And a city councilman in Oslo, Norway tells us why even with more evs, he thinks cities like his would still be better off with fewer cars period. I'm West Kasova today on the Big Take the Upsides and down sides of the EV Boom. Hey Linda, Hi, wear's how you? I'm all right. I am just fascinated to talk to you about this because your story was about something I didn't even know existed, these EV graveyards. How did you even come up with the idea to write about this?
So Chinese media has been reporting this phenomenon since two thousand nineteen, and we kind of thought, maybe, you know, these car companies and government after previous media reports, they would have cleaned them up by now, But actually, as we discovered to our surprise, they are very much still
out there. So these are EV's that have been kind of abandoned after usually it's the right hailing companies that own them went bust, or they're EV's that have become obsolete because they usually lower quality, have lower driving ranges, so now that you get better models on the market, people don't want them anymore.
And so they've just been abandon.
So when we went to visit a couple of these EV graveyards and Hungre City recently, we just saw hundreds and hundreds of these cars sitting under the sun, gathering dust as far as that I could see. Essentially, they've got weeds growing all around them. There's weeds coming out of their trunks. Some of them still have soft toys or drink bottles left over from their previous drivers. A very kind of desolate picture of abandoned cars.
And why were they just left there?
I think people don't really know what to do with these cars. The companies that owned them went bankrupt and the government have been trying to clean them up, but the legal ownership of these cars are not clear. Now we've read about some of these cars are actually waiting to be auctioned off, but again it's not clear who should take responsibility for them.
And why were there so many of these ride sharing companies that popped up in China and then just went belly.
Up with EV's. The Chinese government kick started a boom with giving out millions of not billions of juan and subsidies to try to get people interested in these evs. At that time, the evs were lower quality, lower driving ranges. Consumers weren't that interested, but the right hailing companies were, so they started up to take advantage of the subsidies.
So it makes sense why these ride sharing companies would suddenly pop up if they're getting these government incentives. But who is making all of these cars in China?
China had a lot of new EV startups that essentially into the market after all of the subsidies came on the scene. You've also got existing car makers that started churning out evs as well, on top of gasoline cars. At one stage, there were as many as five hundred EV startups.
All of them making cars.
Not all of them were making cars, but they were definitely trying to get a piece of those subsidies. Recently, after the subsidies dried up, so the government essentially slashed those subsidies from twenty nineteen and last year ended that program.
Why did they do that.
I think it's a combination of the government realizing a lot of it's actually gone to waste, and also China always has kind of a ten year plan.
When did the government start noticing that this was becoming a problem, that all these cars were being abandoned and just left to right.
The kind of abandoned graveyards didn't gain attention until twenty nineteen, but the government was aware of subsidy fraud as early as twenty sixteen.
And what did subsidy fraud?
The companies were fraudulent claiming subsidies for evs that they said they were making when they weren't making, you know, evs that would qualify it. Some companies made just empty chases of cars that didn't contain any batteries, getting like a generous eight thousand US dollar subsidy for each car that they claimed to have sold. Some companies made evs that did have batteries, but the batteries didn't fit the standards, so they wouldn't have qualified it, but they still fraudulently
claimed them. And then these right hailing companies that started up, some of them were backed by carmakers themselves, so carmakers would just easily shif their inventory from themselves to these right hailing companies to get those subsidies.
All told, how much did China spend on the subsidies to both car makers and these ride sharing companies.
Local media have reported that they estimated something like nine billion yun of subsidies were fradulently claimed, and.
That comes out to about one point two five billion US dollars today. One of the things you write in this story is that not only is it just an isore to have all these cars stacking up, but it's what you call a missed opportunity.
Yes, exactly, because all of these cars contain metals in their batteries such as nicole, cobalt, and lithium that are very much in demand to make new evs these days. Not to mention, obviously, you've got other components in the car that could be reused. So essentially they've become what people have caught them urban minds that are just waiting to be recycled.
And despite all these cars that went to waste and all the money that went to waste, you write that there was an upside to this huge investment in cars that it gave a big boost to China's EV industry.
Yeah, that was something that surprised me. Essentially, after speaking to analysts about this phenomenon, one of them told me that she thinks that it's something that was essential to China's journey and EV adoption because without these early stage ride healing companies, there wouldn't have been this demand for car companies to keep investing in EV related technologies and At the same time, when customers weren't buying them, they
still had exposure to EV's through using these right healing companies. They acted as an education for customers that EV's were a safe alternative.
So what does the government said about these things? What do they say are they're going to do with them?
We reached out the Chinese government for the story. Unfortunately they didn't respond to us. Local media reports have said that Hongo governments, where these ev graveyards that we visited were located, said that they were trying to clean them up. But obviously they're still out there because we just saw them recently.
Are there still more cars coming into these graveyards or are these artifacts from another time that is passed.
I think there's a possibility that more cars could still end up being abandoned. Hangjol, the city that we're discussing, essentially released new rules again saying that EV's that are driven has to be over a certain price range, So that would eliminate a lot of the older, cheaper evs. So I think as long as Chinese cities continue to adjust their EV standards, you're going to have more cars that will become obsolete.
So you could have this generation of great evs winding up in the graveyard as the new generation comes out and the other ones are just no longer useful exactly. And you mentioned earlier that there big lost opportunity of not recycling the batteries and all the precious metals that these cars contain. Do you think that's going to happen? Somebody, it seems, could probably make a lot of money doing that. Yeah.
And it's funny because after the story went out, I've had a reader reached out to me that said they deal in industrial assets and could they please be referred to whoever owns these evs because they would very much like to get their hands and try to recycle these cars. But in China, I think there is an appetite to recycle them again. I think it's a question of who owns these cars and who has the responsibility to take
care of them. I think once that sorted out, these cars could very much be put to reuse again.
Linda, you cover China's car industry. When you look at this story, what's the lesson you take away from this?
When you use industrial policy to to try to basically grow a nascent sector, access and wastes are quite an easy thing to happen, you know, other countries like the US or also you know, dolling out subsidies to try to grow the EV sector. I think this is something maybe that people should pay attention to, just to make sure that well, it's a good thing that you're going this green space, but also make sure that you know
there's compliance. People aren't just in there to get the easy money, that it's genuine growth that you're trying to help.
Steward, Linda, thanks so much for coming on the show.
Thanks Liz for having me.
After the break. What happened when Norway gave citizens big sweeteners to buy evs? Let's go from China to Norway. Bloomberg Business Week contributor Villain Marx reports that the government's big pushed make evs attractive has been a huge success, and now that's created a bit of a puzzle too. Film you're writing about Norway's amazing success story with EV's and they have just a huge number of electric vehicles on the road.
They really do. It's by far the most in terms of per capita EV adoption anywhere in the world, hundreds of thousands of them in a relatively small country, and.
When somebody in Norway goes to buy a car, they're almost always now buying an electric vehicle.
Is that right? Yeah, we looked at the last couple of months and we looked at the averages. It was more than ninety six percent of all new car purchases or either electric vehicles or hybrids, and that was just an astonishing number.
And of course it's not just an accident. The reason that happened is because Norway really wants people to buy electric cars.
Yeah, this has been a long time program in Norway. They were moving in this direction really before any other government in the world was thinking about this, going back to the nineteen nineties, they had some of the earliest tax incentives and the consequence has been that for people deciding to buy a new car, it's just not made economic sense to buy a car that's not in some way electrically powered because of the level of taxation on hydrocarbon and carbon emitting vehicles.
Can you run through some of those numbers, because that was one of the things that really leaped out at me in your story was just how expensive it is to buy a gasoline powered car in Norway.
So ninety six percent let's say roughly new car purchases are electric vehicles. Obviously, that leaves a very small number that are not. But in terms of those that are facing that decision when they start to look at how much is going to cost them to buy a emitting vehicle,
it's absolutely astronomical. We're talking tens of thousands of dollars more than you would expect some of the vehicles, going up to well over one hundred thousand dollars for a not particularly fancy car, just based on the amount of
taxation that's being applied. So, for instance, we looked at the data and over the past three decades, the EV market's been exempted from what's known as the auto purchase tax that currently averages more than twenty seven thousand US dollars a car, and that is not forgetting on top of the vat the value added TACKS, which is itself twenty five percent, and so with your combustion vehicle and that's what you decide to buy, those fees are being
based on just a combination of weight and emissions, and therefore the bigger and the dirtier your car is, you're going to be paying a huge amount more than.
That, and so Norway has just exempted electric vehicles from all of these additional.
Fees, yeah, largely over the last few years until very recently, And that was kind of the crux of our piece. Is this fork in the road, if you'll forgive the pun, that the government's had to make to try and figure out how they make this sustainable from a taxation burden distribution perspective for citizens. As they get to a point where double digit percentage of their total vehicle fleet for passengers is now electric, where do you draw the line?
And that was the question that we set out to try and answer.
And the reason why Norway is really struggling with this is because they're losing a huge amount of tax revenue because all these people are buying evs, which they wanted them to do, but as a result, they're not getting all the money from those car sales.
Governments make a huge amount of cash every year from car tax right, and so when you've got tens of thousands, hundreds of thousands, millions of vehicles in larger economies being brought every year, that translates into billions of dollars in
tax revenue. And in twenty twenty two last year. According to government estimates in Norway, those incentives for EV purchases, they ended up costing the national treasury around four billion dollars the equivalent in tax revenue, and we figured out that was around two two percent of the country's entire treasury take for the year. And it's become a bit of a political football in Norway.
Why did Norway adapt these incentives so much earlier than a lot of other countries.
That is a debatable question to answer, and it depends who you ask. Norwegians felt they had a responsibility to try and be at the head of the curve on this adoption of evs as one of the mechanisms as a country they can adopt to try and get closer to net zero. And because they make huge margins on their oil exports and their production, this is something that as a country they were perhaps more easily able to access the financing for these kinds of incentives, these exemptions
of the taxes on other vehicles. They've ended up with what they wanted. They've seen the numbers of EV purchases rise, as I said, to ninety six percent, and theyre at a point now where in theory, within the next eighteen months, cars that emit carbon will no longer be happening, at least for new purchases anywhere in Norway. And speaking to the dealerships, you know they're planning for that. The manufacturers,
they're planning for that. When you're thinking about buying a new car, of course, you're not just thinking about what's the sticker price, you're also thinking what's it going to cost me to run? And part of the value proposition that Norway has made four users of electric vehicles is that you will maybe pay less when you first purchase it, but you'll also have lower running costs. You will not have such high fees when you're passing through tolls on
major highways or into major cities. You won't pay such high parking fees in major cities. A lot of people use ferries in Norway to get around the country, either to islands or different parts of the mainland, and those then also face much lower fees if you're driving an
electric vehicle. There are some other really interesting kind of developments over the last few years around giving apartment owners this so called right to charge, meaning that if you own a block of flats or you're one of several condo owners in a building, all the other condo owners have to share the cost of reducing new charging infrastructure. So if you're the first EV owner in a block of six apartments, it's not all on you. The other five are forced by law to help underwrite that cost.
So you say they're reducing these incentives, exactly what are they cutting back now?
Over the last few decades, there have been different types of tax incentives on vehicle purchases, whether that's the value added tax or an auto purchase tax, and these have all been very live debates inside the Norwegian government over
the last couple of years. What they've started to do, though, is think about how they can disincentivize people from buying perhaps the larger, heavier, maybe even more expensive evs with a form of essentially progressive taxations, so that when you get above a certain value of a car, you will face a tax rate that is not in place lower
down that value scale. And so what they're thinking is that if they can increase the taxes on the more expensive vehicles but maintain some of the exemption for the cheaper ones, it will allow people further down the socio economic ladder to still make this transition to an EV but won't necessarily encourage wealthier people to buy multiple evs at a time when frankly, they would like to have less cars overall.
How are people in Norway reacting to new taxes and fees and cars that for so many years were an incentive to buy them.
One thing it has seemingly incentivized is to have people driving when it's very cheap to get into town. If you maybe live in the suburb, you're incentivized to drive your car because you can park and you don't pay a congestion charge or whatever it might be. They seem to have had enough warning, had enough advanced notice on
these price changes. There's not been too much outcry. It does seem to have had the impact of encouraging people to move faster in some ways, and that's why we've got to this extraordinariyly ninety six percent number of new purchases being evs and hybrids.
Norway is just starting to roll these things out. But you write about as an example of what happens if you take away these incentives too quickly, because their experience was completely different.
Yeah, I was having this conversation with one of the CEOs of one of the larger charging network companies, and here and his team were very keen to point out that in Sweden, where they'd ended these subsidies, in their words, too quickly, they saw this drop in demand for evs because they hadn't maybe got to that point of momentum, that tipping point, whatever you want to call it, where people felt they had no choice but to move along that transition curve, and so people I think over the
course of the first half of this year there was a twenty percent drop in private car registrations for evs in Sweden, which they pointed to as evidence of don't move too quickly and too soon.
For places like the US and the UK that are at least a few years behind Norway in this transition to evs, what are the lessons that they should be taken away from Norway's example.
I'm an EV owner myself, that's my disclosure. I live in the UK. And one thing that again and again, the network is not yet there that people feel one hundred percent confident driving out of their house, their garage that they will get to where they want to be over long distances without complications or delays. And that's the lesson based on these conversations I had with Norwegians that they really seem to have got right. That is not
a consideration for people there. They know that there are sufficiently large and sufficiently widespread charging facilities that that range anxiety you hear so often about is not a problem for them.
Film. Thanks so much for coming on the show.
Thanks for having me.
After the break. How Norway's capital, Aslo, is trying to quickly adapt to so many new electric cars and its streets. I didn't trade all spends a lot of time thinking about this trend decision from gas cars to evs. He's a city councilman in Oslo, Norway, and he leads the Transport and Environmental Affairs committee. I think, what is the impact of so many people in the city and really in Norway buying evs.
Well, it's a very important part of our climate efforts here in Norway. Of course, transportation cars is one of the main sources of emissions, and it's had a certain impact on the missions from car transportation, but we haven't come that far. It's about twelve thirteen percent of the total amount of cars right now, but for the city we have a much higher percentage, I think closer to forty percent now, and this does make a big difference.
You know, it's quieter, it's less polluting. There are many benefits to changing to evs, and we see that become so popular that now it's over ninety percent of the new car sales.
And we've been talking about all the incentives that the government gives the people to encourage them to buy evs. How do people feel about evs, about switching over from combustion engine cars.
I think the kind of the phase where people were skeptical or unsure about evs are way behind us. There are having some starting issues with getting people chargers, having fast charging network, you know, in the whole country, but mainly now evs are just completely normal and most people would probably just not to consider buying a fossil fuel car if they buy a new car, both because there are a lot of you know, incentives, but also because they are basically just as useful and a bit cheaper.
So that question of charging that you mentioned is always the big achilles heel with getting people to switch over. Imagine you had to deal with that question of getting enough charging stations in Asla we have and we.
Still have issues with that with parking spaces especially not every one in the city, of course, have their own garage or their own house, so there are, you know, incentives we have spent a lot of money to incentivize, for example, people living in a city block where you can get chargers in your garage. So and of course also the city provides some public chargers, but I think that those are kind of quite manageable.
What are some of the kind of unexpected downsides if there weren't any to so many electric vehicles, Like everyone thinks it's gonna be great, We're gonna switch over to EV's, and yet there's always things you just can't see.
The biggest problem, I would say, is just that an EV is still a car, you know. It's there are a lot of cars in the city. We want to reduce the amount, and right now we are in a situation where evs are so lucrative that is actually cheaper than for example, using public transportation. A lot of people might use evs that might just as well have used
the bike or walk to where they're going. So when we have been incentivizing them as much as we have in Norway, we can actually get to the kind of downside where you know, kind of squeeze out even more environmentally friendly modes of transportation. We are suffering a bit from the success of the EV revolution here in this city, I would say.
And I guess it's not even just the question of green fuel versus dirty fossil fuel, but just quality of life that if you have a city where people walk and ride bikes, it's nicer than if everybody is stuck in traffic exactly.
And this is kind of the next frontier, I guess, of the urban transportation debate, because here in Norway we have kind of had one answer to the environmental issues, and that has been to subsidize a new car for everyone. The battle for space in the city will be the same no matter you know, how you power your vehicle. And I guess that's kind of where we're now. The
debate has gone in Austro. There is almost no opposition to the EV policies, but there are a growing kind of conflict about do we just want to be satisfied with everyone getting an electric car, or do we also want people to switch from the car to other multiple transportation that are more efficient and environmentally friendly.
Is there any concern that you as looks at some American cities, which of course are just blocked up with cars since there's such a huge US car culture, and say, yeah, we don't want to be like that.
Absolutely, And you know, we are lucky and or sure because this city was built before the cars. That's usually not the case for a lot of American cities. So we do have that privilege that a lot of our infrastructure is kind of made before we got the car explosion after the war. We do see that we have a better starting point. The city has been built around the subway system. We have a very good public transport system. There are more people traveling every day with public transport
in this city than with cars. The very cheap availability of electric cars can be a threat to that, and this has to do with how we plan our cities, how where we build new developments, and of course what we incentivize. We want all cars to be electric, but we also want there to be fewer cars, and I think it's very important to be able to reach both those goals.
Ivan, thanks for talking with me today, Thank you, thanks for listening to us here at the Big Take it's a daily podcast from Bloomberg and iHeartRadio. For more shows from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or wherever you listen. And we'd love to hear from you. Email us questions or comments to Big Take at Bloomberg dot net. The supervising producer of The Big Take is Vicky Bergolina. Our senior producer is Catherine Fink. Our producers are Michael
Falleerro and Mo Barrow. Hilde Garcia is our engineer. Our original music was composed by Leo Sidrin. I'm West Kasova. We'll be back tomorrow with another Big Take.