There is no “I” in ZEV

The transition to zero emission vehicles away from internal combustion vehicles has been a preoccupation of mine in recent columns, and this is not without merit, as multiple governments within Canadian borders and beyond are moving swiftly to accelerate that transition.    

What seems to be lost in this transition—with governments continuously advancing the goal posts for when all vehicle sales should be 100% ZEVs— is the perspective of the consumer.

The title of the column is a bit of a riff on the sports analogy that there is no “I” in team meaning that there is no room for individual egos and prima donnas on most team sports.   

The issue with the transition to zero emission vehicles is exactly the opposite.   

That is to say that individual consumers are going to be absolutely paramount to how quickly the world transitions to zero emission vehicles, and yet they have been largely ignored by environmental and EV advocates, the auto industry—I would argue, and most importantly the governments that are not only establishing targets that they’d like to achieve for zero emission vehicle sales penetration, but targets that they are increasingly mandating vehicle manufacturers to achieve.

If we take a step back and look at the bigger picture it is evident that a lot of these targets—complemented by mandates are being set essentially as part of a reverse engineering exercise to meet the 2015 Paris Agreement emissions reduction objectives to ensure that future emissions limit global warming to no more than 1.5 degrees Celsius above pre-industrial levels.

This is a laudable and necessary objective to ensure the ongoing sustainability of our planet. It is also an objective that most, if not all, automakers subscribe to.

With respect to mandates, however, the approach from governments seems to be that that they can simply require automakers by legislation to meet sales targets for zero emission vehicles (and maybe assist in encouraging consumer demand by providing some form of incentive to do so, while also committing insufficient funds to build out the necessary charging and fueling infrastructure) and automakers will magically meet those targets.   

Additionally, not all, but many in the environmental community are of the view that all automotive consumers are convinced of the technological superiority of electric vehicles and are itching to make the change if only they had the opportunity, and that it is simply an issue of “build them and they will come.” Such groups have therefore been advocating for ZEV mandates to ensure that there are EVs at every dealership in quantity for consumers to purchase.   

But is that the case with respect to both consumer desires and dealer inventories? I would argue that the answer in both cases is “No.” 

While survey after survey shows that upwards of 60% of those surveyed would consider purchasing an electric car, the proof is in the pudding. If that is the case, one would expect ZEV sales to be higher than the current 5% of new vehicles sales in Canada.

So there seems to be something going on with respect to what consumers say they will do on their next purchase and what they actually do. I call this the “say/do gap”.

Then the argument is always made that the number of ZEVs on the road are not higher because there simply are no ZEVs at dealerships for consumers to test drive and purchase, and if the vehicles were just there, consumers would purchase them.

While survey after survey shows that upwards of 60% of those surveyed would consider purchasing an electric car, the proof is in the pudding. If that is the case, one would expect  ZEV sales to be higher than the current 5% of  new vehicles sales in Canada.

Well, guess what? There have been virtually no vehicles of any type at the dealerships of any manufacturer over the last year to 18 months owing to the microchip crisis and numerous other supply chain challenges that the industry has been working through.   

Yet people are still purchasing cars and in fact light duty vehicle sales increased by about 7% in 2021 compared to 2020, despite the fact that there were very limited inventories of vehicles for most of the year.    

In this sense the traditional model of dealers with large lots full of inventory of every model, colour and equipment level have come to emulate what has largely been the situation for electric vehicles since they were first sold; it is largely a situation of placing an order and waiting weeks or months for the vehicle to arrive.   

Indeed, this is how the majority of vehicles are sold elsewhere in the world other than North America and one of the learnings that has come out of the current situation is that this is perhaps a better model for all.   

Consumers can order exactly the vehicle that they want. Dealers are spared having to obtain, finance and manage millions of dollars of inventory. Factories can build to order. 

However, let’s return to the main point I wanted to make with this column…the glaring lack of consumer engagement by governments that are dictating that 100% of new car sales by 2035 shall be zero-emission vehicles.

I think you would be hard pressed to find auto consumers who have even heard about such government targets let alone internalized what that actually might mean for them.

If we look at where things are right now, a very recent Natural Resources Canada study summarizes the current situation nicely. Here are some of the key findings:

  • Only 25% are very interested in a zero emission vehicle and will definitely consider one when purchasing their next vehicle;
  • Only 27% of those surveyed can name any ZEV makes or models;
  • 34% don’t feel that there is a ZEV that meets the needs of their lifestyle; and
  • Crucially, a whooping 53% agree that there are too few, if any, publicly available charging stations where they drive.

We have some serious work to do.

I think you would be hard pressed to find auto consumers who have even heard about such government targets let alone internalized  what that actually might mean for them.

The reality is that a ZEV mandate does not guarantee the supply or diversity of ZEV models available for consumers—which is ostensibly the reason why governments and mandate advocates push for such a policy tool.

What a mandate does ensure is that manufacturers will have to carefully manage their fleets to mitigate penalties they would incur from selling more ICE vehicles than legislation or regulation would allow vis-à-vis the number of ZEVs they are required to sell.   

This means that as the industry transitions that consumers may not actually be able to get the type of ICE vehicle they want if they are not yet willing to embrace a ZEV. In essence, a ZEV mandate forces automakers to do what no government would ever do—dictate to the consumer the type of vehicle they can purchase without consulting and engaging the consumer in that process.

An analogy might be the government setting vegan targets for beef producers—to address the very real climate change issue of methane gas produced by cow flatulence.   

Under a vegan mandate, beef producers would be required to have all of their products that they wish to bring to market be 100% vegan by 2035.

For the farmer trying to transition out of beef and into soybeans for tofu, for instance it would be a huge undertaking. So there would be a ton of time and regulatory intervention to get the beef farmers to move to feedstocks for vegan products, but how much time and effort has the government spent persuading consumers that this is a good and necessary change and that tofu is actually better for them, and oh yeah, they won’t be able to buy beef in 2035??

The challenges are very much the same as we move through this transition from ICE vehicles to ZEVs.

Governments need to be clear, transparent, and committed to bringing the consumer along through what broadly will be a very disruptive and life-changing period as we move to net zero emissions by 2050 and 100% zero emission vehicle sales by 2035.

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