The Future of Cars: Hybrid and Electric Insights

I'm Marshall Toplansky , I'm Joel Kotkin and you know , joel , we're a podcast that focuses largely on the unintended consequences of economic and political policies , and today we're going to tackle the unintended consequences of EVs , both on the distribution channel for cars , the car dealers , as well as the other issues related to how do you actually fuel them , refuel

them and deal with the energy grid . And to help us do that , we have two really wonderful guests . First is Jamie Farley . Jamie is a partner at Performance Brokerage Services , which is the largest brokerage of auto dealerships in the world , and she also is a 20-year veteran of Toyota's dealership management system . So , jamie , welcome .

And we have Mark Mills , who is executive director of the National Center for Energy Analytics , and he focuses on the science and economics of energy and technology policy . Thank you very much for joining us , mark . And Jamie and Joel , you want to kick us off ?

I mean , in a state like California , we're already being shoved in this direction , but what is the consumer saying to you ?

And when we look at the total landscape of EVs and what's out there on the road , they only make up 1% of our units and operations , so it's still a very , very small piece of what's actually out there in terms of vehicles . Is it growing fast ? Absolutely , but it is still relatively small and it varies vastly across the country .

So you know , you're in California . That's a completely different state in terms of the rate of adoption compared to other parts in the country , like the Midwest or the South or even the East . Obviously , they're a little bit further along as well , like DC .

So there's definitely this discrepancy and this push , but consumers are not quite there yet and there's several challenges that are getting in the way , and the dealers that are involved in this as well are a huge part of this right . They want to be there to serve the customer and meet the consumer demand for EV , but they're just not seeing that just yet .

So to amplify what Jamie said , I will add one point and one mild disagreement with the language choice . Jamie , you know what , but she'll appreciate this . Yes , they are . You know , ev sales were accelerated from zero . Any statistical growth from zero is rapid . It's utterly irrelevant that there's high growth rate in early phases of something .

It just is completely meaningless . So the language not Jamie's language , but I'm saying this to be mildly critical of accepting the framing that's in the general media and the hyperbole of the advocates of this accelerating pace of EV sales . It completely misses the core point which Jamie did correctly make . There a small share of new vehicle sales .

But let me amplify this with another language subtly , that automobile dealers know full well when a person buys a new vehicle for themselves , it's often a used vehicle . In fact , 75% of all vehicles purchased each year in America a new car to the owner are used cars , previously owned cars in the nomenclature of the automobile world .

So when you look at the actual percentage of vehicles purchased new to a human being , the citizen that wants a new vehicle or a newer vehicle or a first vehicle . The share that EV is comprised of that market is below 2% .

By density I mean how much energy you store in a pound of stuff . So instead of a gasoline tank that weighs 50 or 60 pounds to give you several hundred miles of range , you have a tank that weighs a thousand pounds . That has a consequence . It affects the kinds of tires you use , the range you have and the materials you use upstream .

So there's a massive call on materials cadmium , lithium , nickel , cobalt , steel , aluminum to build an EV and copper to build one compared to a conventional car . That's unavoidable in the chemistry that we have . We know how to build . So that's a physics problem that's not solved . You just deal with it .

The other physics problem is the ability to move energy from A to B , which is filling a tank , filling a battery . Those are dictated by the physics of chemicals and the physics of electricity .

Roughly speaking , moving energy as electricity into a fuel tank is 10 times more difficult , measured in either flow terms , how fast I can move it , or size terms , how big the fueling hose needs to be , it takes 10 times longer or it takes 10 times the physical infrastructure to get the same benefit . This is a different way of saying .

When you refuel a battery , it takes , in a quote supercharger 30 to 40 minutes . When you refuel a gasoline tank , for the same range , it takes three to four minutes . You could do a battery some classes of batteries in three or four minutes .

Very difficult to design batteries that can tolerate the electrical influx , the heating , in theory , but it would require a copper cable to connect to the car . That would weigh 100 pounds , in other words 10 times the weight of a 10-pound fuel hose used and the infrastructure behind it transformers , wires .

That cost 10 times more than the physical infrastructure for gasoline . That's just locked into the physics of electric flows .

We were told the other day that , like the Cybertruck , which I have to say is the ugliest car I've ever seen- You're talking about the Tesla .

The question I have about this particular class of retailer known as the auto dealer is that , if you look at their business models , the bulk of their profit comes historically from service revenue . Right , it comes from being taking your car in every every quarter or whatever it is , and and uh and getting it worked on in . Is that our ?

I guess the question is our dealers worried about the continued viability of that business model as EVs come in , are they going to need less service ? Are they going to need more service ? How do they view that ?

And , of course , evs still have tires and the weight of the battery increases the vehicle weight of the car , so there's more weight and wear and tear on those tires . So I think , generally speaking , there's concern that there might be less items to maintain , but some of those items might actually end up being more costly to maintain in the long run .

So I think it'll be really interesting to see how that plays out .

And if I'm a dealer too , if you're not selling tires and in the tire business , definitely make sure you're thinking about that , because you don't want your customer going down you know the street to the other tire place where you know they might not even know what the appropriate tires are to put on the car .

So if it's sedans and it's a little bit more affordable that way , obviously that's a huge factor going in and I think from a perspective from adopting EVs , a lot of times it is someone's second car or if it's a family , it's their third car .

So they also have to have the funds to be able to make that additional purchase , because they don't necessarily want to take that EV for a road trip . Because I know I don't want to have the anxiety about figuring out where I'm going to charge it up .

And if I do get to a charging station that I've mapped out well in advance and I get there and there's a line that I'm sitting and waiting , or if I get there and it's not working because the latest study I've seen is only one in five are actually functional right now that's a huge concern and it could ruin your vacation or it could ruin your trip , and

that's I'm definitely not up for that .

And what they discovered wasn't a consumer problem , because for most rental cars the distances most people drive are well within the range of the battery , so they don't have to worry . I rented a Hertz EV several times recently just because I wanted to see how their system worked . Their problem was the maintenance cost was higher .

So the trope that's been put out , the claim in the literature put out by the advocates is that they have fewer parts and they're simpler and they have lower maintenance and it's going to mean fewer jobs for the automakers and less maintenance . Neither of those things are true .

They do not result in less labor to manufacture them , nor are they lower cost to maintain . It's a complexity swap . In an EV , complexities reside in the electronics and the battery . In a car conventional car the complexities reside in the internal combustion engine and transmission . The complexity swap doesn't make one cheaper .

In fact , it will probably take a decade before EVs in fact are lower maintenance than conventional vehicles in all-in cost terms , because there's a learning curve to get in these complex systems made more reliable . So it is the trope that's out there and I know that manufacturers you know God bless them like to promote that feature . But it's actually not true .

You should say that , mark , because we have this kind or at least I will confess to having a little bit of an old school bias when I think about the cost of making something , the bill of materials for something I tend to think of the hardware right , and I think , if I'm not mistaken , making an electric motor is cheaper than making an internal combustion engine

. Is that right , Not ?

Making copper-wound electric motors at super high efficiencies is a very difficult , complex and expensive process .

You're right , the hyper-specific , different classes of electric motors made for EVs are on something of a learning curve . But the issue is not the electric motor . They're very reliable . Electric motors are reliable . But modern internal combustion engines are also very reliable . People generally don't take their cars in for tune-ups anymore .

They drive them until the end of the lease for their ownership cycle . If you're lucky they might change the oil .

They're actually designed and of course engineers know this , but auto dealers don't like to point this out they're designed to run almost indestructibly even if you're dumb enough not to change your oil , and there's astonishing reliability in internal combustion engines . They'll run for hundreds of thousands of miles with de minimis maintenance .

Things just don't break much anymore . So yeah , they're on a learning curve , but that's exactly the same learning curve . The thing that's different are the power electronics , which are complex and expensive . They also fail . They're machines .

They're having the silicon machines and the battery itself , which is a machine with cooling systems , safety systems and something on the order of 5,000 to 10,000 welds in it , multiple cells , usually thousands of them . So the electrochemical degradation , the electrical problems in batteries , very difficult for dealer mechanics to diagnose .

Manufacturers are getting better at designing batteries for transparency , but if you're a dealer you don't have any control over that . What you've got is a vehicle for which the battery is the single most expensive component . If something goes wrong , if you're the consumer , it means your vehicle has been written off .

Are they just ceding responsibility to the OEM for battery maintenance ? How do they view this ?

And then you add in the EVs , which have a different level of complexity , and it is completely new that they now this is an extra layer of challenge that they're going to have to overcome .

The technician who traditionally works with their hands and it's very hard labor will not only have to do that , but we'll also have to have the knowledge needed to take care of those battery components , the computer systems and that level of technology .

I have several friends who are own auto dealerships and they talk , as Jamie said , about the challenge they have at all levels , whether it's working in the body shop , the paint shops , every level of employment in the dealership , in the dealership Short people , short skills .

They go out to high schools and try to convince people there's a great path for great incomes with reasonable skills , training and you don't have a huge debt at the end of that point .

But the shifting requirement for dealers has already happened because especially of the so-called ADAS systems , the automated control systems that give you a computer controlled braking , computer controlled uh , you know , vision systems . Technicians are trainable , they're smart .

I mean , these are not the fact they don't have a , a degree in math or physics and electrical engineering is completely irrelevant . People are trainable but it's , I think it's a big lift for dealers where cars are going in general .

I think there's this is my opinion there's less than a 5% chance I would put near zero that EVs will have a material impact on dealers , except causing them to lose money because they have manufacturers pushing vehicles into their showrooms because of federal or state mandates .

The challenge dealers are going to have is if you're in a state that says you can't sell an internal combustion engine is , you're going to have a lot of consumers who can't afford those vehicles or don't want them because they're not useful or they're too expensive .

So it'll push the market into used cars because they'll be the only car they can register in that state .

So if there's a disruption to dealers coming , it's going to be primarily if those states maintain those mandates , those bans , and force auto dealers to sell things that they weren't planning to sell , which is a lot more used cars , because it'll be the only thing you can license in those states .

That's a huge disruption and that disruption starts far sooner than the 2032 mandates because manufacturers , not dealers , obviously plan four to five years out for production cycles .

So if you back that up from 2032 , three years from now you've got a big problem in a dozen states for the dealers that are thinking about what's coming down the pike , what they'll have available to sell , never mind maintain .

What I wonder about is why aren't we looking at the hybrid as a way to get us there faster , more flexibly than forcing this new technology ? That really is particularly bad for anyone who doesn't have a garage and money .

And if reducing carbon emissions is important to you , this is a great way to do it .

And literally we protest Toyota because Toyota is doing hybrids and was not prioritizing EVs . And I'm thinking what company in the world has probably reduced emissions more in the last 10 years than Toyota ? I can't think of anybody .

So I think what I wonder about is is this one of these situations where we're essentially not even really doing this thing to help the environment the fastest , but imposing something absolutely impossible and maybe even worse for the environment from the environment ?

I did a study a few years ago that illustrated the fact that you have to mine about 250,000 pounds of the earth to make one battery , one EV battery . I apologize , looks like I got interference noise in the background for you guys .

But when an EV is parked , unlike a conventional vehicle , parked either being refueled or when it's being manufactured parked euphemistically that's when the EV emissions occur . So there's obviously emissions from the grid that charge the vehicle , but that depends on what grid you're on .

You can be in a grid in Norway which is all hydropowered , or a grid in France which is three-quarters nuclear powered and have low fueling emissions . But all of them entail emissions to manufacture the vehicle that are unavoidable because of the massive quantities of materials Again , 250,000 pounds of stuff mined per vehicle with heavy machinery and ground up .

With heavy machinery and ground up , roughly speaking , you lead to the emissions of 30 to 50 tons of CO2 per EV . That comes to your driveway before you've driven it one mile . If you drove a hyper-efficient internal combustion engine , not a hybrid , just a conventional one you wouldn't emit 50 tons of CO2 over the life of the vehicle .

So , in fact , in many fuel cycle scenarios , the EV will increase global CO2 emissions . For the few cases where it decreases it , the decrease is small and totally offset by the increased emissions that are occurring in countries like China , pakistan , india and Indonesia as they expand their combustion of coal to operate their economies .

So the extent to which we spend our money and force our consumers to spend extra money to buy a vehicle to cut CO2 emissions , we're having no impact on the planet because it's one atmosphere , none whatsoever . And the extent there's any and again it's trivial it comes at extremely high cost . Evs are a lot of fun to drive .

Just on their merit , a lot of dealers will sell lots of EVs but , to Jamie's point , they'll sell them in very specific markets , to specific kinds of customers who have more wealth than the average car buyer . There's tens of millions more EVs that will get built and sold and Toyota will sell lots of them because they're a great automaker .

And Tesla will sell lots of them because they're now a really good automaker too great automaker and Tesla will sell lots of them because they're now a really good automaker too .

The future oil consumption would be even less . So the actual impacts are trivial . So it's wasted money . But the question you're asking is different .

If you ask from an engineering physics perspective , what's the optimal way to propel people and goods on the ground and the air is very different with minimal oil use , because that's really what people are trying to cut back on oil use . 98% of all goods and people are moved by burning oil .

Most of the other two percentage points is ethanol in Brazil and here , and a trivial amount from batteries . So what's so often is it's hybrid . You said it exactly , chris the , not the plug-in hybrid . What hybrids do is optimize the thermodynamic efficiency of an internal combustion engine and by doing that you can have a very significant impact on oil use .

Not , it's not trivial , it's much , much bigger in economic terms than it is with EVs because , to Jamie's point , you can use the same materials to get 90 hybrids , those 90 hybrids will actually be used , will actually save oil for consumers .

As the cost of the batteries comes down slightly it's not going to come down a lot and , more importantly , as the cost of the power electronics comes down and that's what's really a significant share of the cost in manufacturing hybrids the very complex power control systems , those