I’ve written before about why I think California is the canary in the coal mine for the success or failure of electric vehicle (EV) mandates.
Now, based on an experience I had in Phoenix last Thursday, I think there are multiple canaries.
I had rented a car from Avis on-line, to be picked up at the rental car center close to Phoenix’s Sky Harbor Airport. By filling out various items on line, I could go to the Avis counter, show my credit card and driver’s license, and be on to the garage to pick up my car.
That’s what I was told. But after waiting over 10 minutes in line for 2 customers to be taken care of, I approached the person behind the counter and handed her the two documents, saying, “So now I can pick up the car, right?”
“Not that simple,” she answered, “I’ve got to see if there’s a car available.” She went to a computer at the end of the counter and spent 5 to 10 minutes on it before coming back to me. She then told me that there were no cars available with internal combustion engines (ICE), even though I had explicitly reserved one. If I was willing to take an EV, she said, I could get one right away. “How long a wait if I want a gas-powered car?” I asked. “15 to 20 minutes,” she replied. I pondered. On the one hand, I wanted to visit a former student who is terminally ill and maximize my time with him before my event started in the evening. On the other hand, I didn’t want to drive an EV when I wasn’t familiar with that kind of car. I had driven a Tesla a short distance 4 or 5 years ago, but I didn’t remember if there were any special things I needed to know. I decided to get a water and use the men’s room while I waited for the ICE.
Then came the canary. “It’s too bad,” she said, “We have a lot of EVs ready but no one wants them. And soon we’re going be switching to 80% EVs.”
I wonder how that will work out.
READER COMMENTS
Dylan
Dec 4 2023 at 2:05pm
That seems strange to me, but I wouldn’t read too much into it.
A) When renting a car, particularly in a place like Phoenix, I’d wager that there are more people taking longer than average trips. Maybe they are going to go to the Grand Canyon or somewhere else outside of the metro where range becomes more important.
B) When traveling to an area you’re not familiar with, there might be more anxiety about knowing where you can charge. That’s not an issue for people buying who can charge at home.
As for the difference in driving, there hasn’t been one really that I’ve noticed in the couple times I’ve driven a Tesla. Start the car and go. The big screen takes some getting used to compared to the 90s cars that were the last I owned. But that is true of ICEs as well these days
Richard W Fulmer
Dec 4 2023 at 4:16pm
I read more into it than you do. One would think that the car rental companies know that, as you say, people renting cars in Phoenix may want to drive long distances and purchase their fleets accordingly. If they’re not catering to demand, why not? Has corporate headquarters put “stakeholder welfare” ahead of profit? Or is government regulation directing that rental car fleets include a certain proportion of EVs? Not good either way.
Dylan
Dec 5 2023 at 9:44am
I think Kevin below also makes a good observation. When these EV purchase commitments were made, the mix of travelers probably skewed more heavily business. And, business folks might be more likely to want to rent an EV. Perhaps partly driven by the net zero commitments many companies have made in the entrance of “stakeholder welfare” as you mention, but also the types of trips they make are more conducive to EVs?
Of course, there are also the lower maintenance costs that EVs have, particularly in their early years, which one would think would be attractive to rental car companies.
I have no idea if the government has specific incentives that encourage rental car companies to convert their fleets to EVs. I wouldn’t be surprised if they do. But, I also wouldn’t be surprised that companies took a close look at their TCO and decided EVs were a smart investment.
Dan jennings
Dec 5 2023 at 7:42pm
Richard W Fulmer
Dec 4 2023 at 4:30pm
According to this article, Hertz led the way with Avis-Budget and Enterprise following suit. Would this be a good time to buy stock in car rental companies that haven’t started replacing their fleets with EVs?
Dylan
Dec 5 2023 at 9:27am
Perhaps you could buy those stocks, or you can be more direct and try shorting TSLA. That stock is wildly overvalued if these canaries are right.
BC
Dec 4 2023 at 10:12pm
“there might be more anxiety about knowing where you can charge”
I love the phrase that EV apologists use to describe a functional product flaw that doesn’t meet customer needs, “range anxiety”. It’s not that EVs can’t recharge on the go like ICEs can gas up on the go. The problem is one of customers’ frail emotional psychology. They’re just anxious.
My experience in the private sector, where companies can’t just mandate that customers buy their products, is that it’s never a good sign when product teams start attributing lack of customer demand to customers’ alleged flaws that prevent said customers from realizing how great the product really is. That is really a bad canary in the coal mine.
Dylan
Dec 5 2023 at 5:31am
Now I think you’re reading too much into my comment. I think both of the reasons I gave are legitimate for people renting to not want an EV. I’m going further than I can get on a full charge and don’t want to have to spend my time looking for a supercharger on my vacation makes total sense. As does not knowing where or even how to charge and again not wanting to take the time to learn. Again, makes total sense on a short trip somewhere.
A quick search shows that there are 682 charging stations in Phoenix, and around a quarter of them are free. But most of those will be slow chargers, there’s only 97 Level 3 chargers, and how many of those are going to be compatible with the EVs that the rental car company is renting? If I was the rental car agency, and I have a bunch of EVs that I’m having trouble renting, I’d probably do my best to make sure that there was a map of all of the compatible charging stations in the area that was easily available to my customer. And point out that lots of hotels even offer free charging. And, I don’t know the answer to this, do rental agencies still require you to “top off” an EV before dropping it off? If not, then this seems a significant benefit to renting an EV. If you do, well then, the last minute fill up is going to take even longer, which is certainly going to cause anxiety if you’re running late for a flight.
Jon Murphy
Dec 4 2023 at 2:37pm
My brother and his wife ran into that exact issue in Boston this past summer. Nothing but EVs even though he reserved an ICE. At least you had the option to wait. They told him that they were no ICE. They got the EV, but still ended up doing public transit or bumming rides with other people because Boston & Cape Cod have almost no EV stations (and the ones that are around are usually broken). Their car ran out of juice on the first day of their two-week vacation and they had no way to recharge it.
BC
Dec 4 2023 at 10:16pm
When their EV ran out of juice, did they try finding a mental health professional to help them overcome their “range anxiety”?
Knut P. Heen
Dec 5 2023 at 3:13am
There are many Tesla Superchargers in that area, and the computer will tell you how to get there before running out. Just Google Tesla Supercharger and the map will give you around 20 from Boston to Cape Cod.
Jon Murphy
Dec 5 2023 at 7:11am
I should note that I am reporting their actual experience.
And, point of fact, 20 is a terribly few number of stations, especially when most don’t work and you’re at the height of tourist season.
MarkW
Dec 5 2023 at 12:00pm
Not to mention that EVs from other manufacturers cannot currently use Tesla superchargers. Other manufacturers are switching over to the Tesla connector starting next year and Tesla agree with the Biden admin to open some (but not all) Tesla stations to other types, but none of this is a reality yet.
Knut P. Heen
Dec 6 2023 at 6:07am
I guess the US is lagging behind then. In Norway, I know Volvo can use the Superchargers already, but generally chargers are as common as gas stations here. Anyway, EVs are more suitably charged at home during the night when the electricity price is low. That is not an option with a rental car.
Dylan
Dec 6 2023 at 9:55am
@Knut – Lots of chargers at hotels already, something like 1/5 of all public chargers as of a couple of years ago. And both Marriott and Hilton have announced plans to increase the number of chargers, including Type-3 chargers dramatically. Interestingly, Hilton says that “Hilton.com’s EV charging search filter jumped from fourth to second place when it comes to converting searches to stays.” Suggesting that this is an economic incentive for them to add EV charging, not just an ESG motivated decision.
https://www.travelweekly.com/Travel-News/Hotel-News/Big-hotel-brands-leading-charge-electric-vehicle-stations
Kevin Clark
Dec 4 2023 at 4:23pm
W.A.G.: transaction costs. (All consumer costs are transaction costs)
1 A majority of travelers are now consumers rather than business travelers. 2 They don’t want to risk their cherished vacation time finding or waiting in charging stations. 3 They’re uncertain of what other risks there might be with an EV.
Add these costs into the rental fee. I’d pick the ICE option too. If I’m going to experiment, it would be at home.
IATC.
Speed
Dec 4 2023 at 8:50pm
My experiences with driving EVs — They are no different than IC cars with automatic transmissions. Gas, Brake, Drive, Reverse, Park.
My biggest problems with rental cars is figuring out how to work the radio and find my destination using whatever map device the car has.
jseliger
Dec 4 2023 at 9:56pm
based on an experience I had in Phoenix
Take Waymo next time: that’s the real canary.
BC
Dec 4 2023 at 9:59pm
“She then told me that there were no cars available with internal combustion engines (ICE), even though I had explicitly reserved one.”
Did you explain to her that anyone can take a reservation but the holding of the reservation is the important part?
“She went to a computer at the end of the counter and spent 5 to 10 minutes on it before coming back to me.”
In the old days, they used to speak to the supervisor…
“And soon we’re going be switching to 80% EVs”
My guess is a lot of people will be taking the insurance…
For people too young to have seen this Seinfeld episode: [https://www.youtube.com/watch?v=4T2GmGSNvaM].
MarkW
Dec 5 2023 at 12:05pm
Yikes — something to watch out for. We don’t own an EV now — I don’t want to have to figure out the EV charging rigmarole while on vacation. Not to mention, we often fly places to start a vacation road-trip, and I want no part of an EV in that scenario. The first time a rental car company guarantees me an ICE car and has only EVs available is the last time I’ll rent with them. I guess one defense is to rent a large, 4WD SUV — nobody’s likely to try to give you a Rivian.
steve
Dec 5 2023 at 12:10pm
Link goes to an article critical of rental companies giving people surprise EVs. If you already own an EV you have figured out how to work with it. You mostly charge it at home. A surprise EV doesnt work well since people wont know where to find chargers without using apps they arent familiar with.
The article also points out that most car companies dont have that many EVs. About 10% of the Hetz cars are EVs and they are aiming for 25% this year or next. Suspect the claim about 80% is exaggerated. I cant find any evidence of government requiring them to buy them. Their claim is that the rental company likes them since they are very low maintenance for the first year or two and they hold their resale value well.
https://www.theatlantic.com/technology/archive/2023/06/electric-vehicle-rental-cars-hertz-chargers/674429/
Steve
Ahmed Fares
Dec 5 2023 at 3:00pm
Two sources for the same article in case gated, one from the Financial Post and one from Bloomberg:
https://financialpost.com/commodities/energy/electric-vehicles/reports-ev-slowdown-greatly-exaggerated
https://www.bnnbloomberg.ca/reports-of-an-electric-vehicle-slowdown-have-been-greatly-exaggerated-1.2007284
Charley Hooper
Dec 5 2023 at 3:18pm
That disagrees with a recent article in the WSJ:
Ahmed Fares
Dec 5 2023 at 4:04pm
https://www.washingtonpost.com/climate-solutions/2023/09/15/ev-tipping-point-electric-poll/
Life cycle costs for an EV are lower than for ICE cars. The debt servicing costs for the higher upfront capital costs of EVs have been made worse by the current high interest rates in the fight against inflation. If interest rates begin to fall next year as predicted, sales should pick up again.
Ahmed Fares
Dec 5 2023 at 4:19pm
After I posted my comment, this article popped up in my RSS feed, which makes the same argument for the impact of higher interest rates on renewables.
https://www.nytimes.com/2023/12/05/climate/renewable-energy-inflation-climate-cop28.html
Mike Burnson
Dec 5 2023 at 4:35pm
This is the typical result of command (aka fascist) economies, where government determines what must be produced rather than consumers. Auto companies are forced to build cars for which there is little consumer demand. The very limited demand is largely the result of subsidies; that is, more government interference in consumer markets.
Once again, the problem is government: forced production of cars consumers don’t want and cannot readily afford, subsidies to make them “affordable”, more subsidies to install charging stations, then blame the consumers for not wanting what corrupt government forces us to use.
James Anderson Merritt
Dec 5 2023 at 8:06pm
I’m patiently waiting for the rental companies to begin retiring their rental EVs to their used-car sales divisions. In the 90s and 2000s, I bought two Ford Taurus cars from Hertz. Both served me well for many years at very low cost (until the Ford 100K-mile auto-transmission curse made them too expensive to maintain — if not for that, I might still be driving the second of the two). I am interested to see what kind of discounts can be had, as the discounts for the ICE vehicles I purchased were very steep, relative to their sticker prices for new vehicles of the same vintage years. I know that the batteries wear out and that replacing them will be expensive, but improvements in range, capacity, calendar-lifetime and price have already occurred and will continue to happen before I ever have to replace an EV battery that is not under warranty. Chances are good that I can achieve the long-term benefits of EVs while spending only a reasonable amount over the vehicle’s lifetime. I can wait.
Ahmed Fares
Dec 5 2023 at 10:04pm
Noah Smith weighs in on the EV slowdown debate. (There are links in the quote which appear in the source below the quote).
https://www.noahpinion.blog/p/at-least-five-interesting-things-bff
Richard Fulmer
Dec 6 2023 at 1:11am
Is it also worth worrying about where the power for the charging stations will come from?
Walter Boggs
Dec 6 2023 at 5:53pm
I wonder about that too. I don’t think we’re seeing enough honesty about this topic amid the “EVs are the future” push.
David Henderson
Dec 6 2023 at 3:19pm
Noah’s right that it hasn’t slowed or stalled. That’s a separate issue from whether we will get to 80 percent EVs and plug-in hybrids. I predict we won’t.
Dylan
Dec 6 2023 at 3:53pm
@David
Over what time period? And, is the prediction just for the rental car market or all vehicles sold?
David Henderson
Dec 6 2023 at 6:40pm
All vehicles sold in U.S. market. Model year 2030.
Ahmed Fares
Dec 6 2023 at 8:17pm
The prediction in the following article from 2017 has obviously not come true yet, but the idea of the death spiral(s) is correct.
https://www.linkedin.com/pulse/death-spiral-big-oil-cars-nicholas-patete-irop-cpa-
On a personal note, our two-car family is now electric. Assuming profit-rate equalizing prices, the gas station we used to go to now has to raise its prices to maintain the same profit rate. Because the gas station is buying less gasoline, the refineries which are capital intensive will have to raise their prices also, as well as the oil producers. And this is just on the fuel side because the same economics of spreading fixed costs over a smaller volume of sales will impact the automakers in the same way.
For the EV producers, the opposite is true. Each new EV consumer helps to offset fixed costs, which drives down the price of EVs.
This is similar to the utility death spiral, which illustrates the same idea.
Richard W Fulmer
Dec 7 2023 at 10:15am
Less demand for gasoline will more likely result in lower prices. Demand curves slope downward.
Ahmed Fares
Dec 7 2023 at 3:21pm
Op-Ed: How Will ‘EV Effect’ Impact The Oil Industry, Gas Prices? (emphasis mine)
Now imagine for a moment that you sell an inelastic demanded product and demand for that product has been dropping a little every year. Over the course of four years, demand has dropped by five percent. You know that lowering your prices is not going to help sales rebound, you still have to cover your fixed costs, and you don’t want to lower your salary. Those poor souls who are still using your product will pay whatever they have to to get it. Raising prices seems like the best alternative.
Interestingly, in many instances, it doesn’t take a ginormous loss of sales to cause a business pain. Margins are often tight, and even a small five-percent drop in sales volume can hurt. Imagine what might happen when 10% of the vehicles on the road are electric. That will be a 10% loss in oil revenue.
Going forward, as the broader public moves toward adopting EVs, oil companies would have to sell petrol at a loss for multiple years to have any impact on impeding EV adoption. The more reasonable and likely course of action would be to raise prices, thus making up for the lost revenue. Of course, doing this is only going to make driving an EV all the more attractive. A feedback loop is generated.
https://insideevs.com/features/546871/ev-impact-oil-gas-price/
Richard Fulmer
Dec 8 2023 at 12:06am
That’s very hard to imagine. Demand for a product with an inelastic demand, by definition, doesn’t drop.
As demand for gasoline falls, prices will drop and some gas stations will go out of business. Oil refineries can to some extent reduce the amount of gasoline produced from every barrel of crude oil and increase the amount of other products. Eventually, however, some refineries will also have to shut down.
Note that producers in a free market don’t have the luxury of raising prices as demand falls. Competitors will lower their prices to gain market share.
By contrast, power companies that have been granted monopoly rights and who are guaranteed a set profit, have the luxury of raising prices (subject to regulatory approval) as demand falls. Eventually, however, they will shut down power generation plants as demand falls.
Before all that happens, however, global mining operations will have to increase several fold to produce the metals for the EVs, wind turbines, solar panels, batteries, and transmission lines that will be needed to replace ICE vehicles and to provide power to recharge the EVs. Environmental activists will work hard to keep that from happening.
Activists don’t want green technology, they want magic.
David Henderson
Dec 8 2023 at 11:30am
Richard Fulmer writes:
That’s false. Inelasticity refers to what happens when a price changes and nothing else changes. But many things can reduce demand: income, prices of substitutes, prices of complements, and tastes, to name four.
Richard Fulmer
Dec 8 2023 at 1:10pm
Yes, you’re right. My mistake.
David Henderson
Dec 8 2023 at 5:42pm
Thanks, Richard. You have a lot of integrity.
Richard Fulmer
Dec 8 2023 at 5:55pm
Thanks, but I make no such claims.
Grand Rapids Mike
Dec 7 2023 at 8:33pm
For the car rental companies wonder what their plans are for resale of EVs and the battery guarantees the are offered. For ICE cars its 1 yr or so, and their is a good market resale for ICE cars.
MarkW
Dec 8 2023 at 6:59am
It looks like there might be a good opportunity to pick up a Tesla as SIXT in the US is apparently dumping them due to high repair costs. It’s interesting that in Europe, the company is buying cheap Chinese BYD cars for its rental fleet in large numbers.
I wouldn’t be surprised to see a big divergence in the US and European auto markets over the next decade. I’d expect the much higher fuel prices, shorter driving distances, milder climate, and more stringent regulatory environment to drive a much faster EV transition in Europe. Stay tuned in a few years for Europeans bashing the US for its stubborn refusal to switch away from gas-powered vehicles.
Grand Rapids Mike
Dec 9 2023 at 4:02pm
Interesting link on the low resale value of Teslas due to high repair cost. Another factor impacting resale is that the early buyers were EV enthusiast. Resale buyers are not so much in the EV enthusiast camp, especially if they may have to replace the batteries. Car market covers a variety of drivers with needs, income etc. So how the EV resale goes will be interesting.
Ahmed Fares
Dec 9 2023 at 5:12pm
A Life Cycle Cost Analysis (LCCA) shows that EVs are cheaper than ICE vehicles. This is because the higher upfront capital costs are more than offset by the lower fuel and maintenance costs. The math does not pencil out the same for rental companies. This is because fuel costs are borne by consumers, not the rental companies. You rent a car with a full tank of gas and return it with a full tank of gas, or they add a charge if you don’t.
The other thing about an LCCA is that it is dependent not only on the discount rate but also the timing of cash flows. A Google search shows that a battery replacement for the average consumer is 10 to 20 years out. At a 10% discount rate, the present value of a $20k battery is $8k and for 20 years it’s about $3k. (I’m ignoring inflation in battery prices because improvements in battery chemistry are reducing the price of batteries all the time.)
Given that rental companies keep their cars about 2 years, the present value of that $20k battery replacement is about $17k, which is probably why they have to discount the resale value so sharply to compensate for the fact that the battery needs to be replaced sooner because of higher mileage.
So if you’re going to buy a new EV, put $5k in a stock index fund and assuming a 10% rate of return, in 15 years you’ll have about $20k which you can use to replace the battery.
Battery replacement is not so scary when you look at it that way.
Grand Rapids Mike
Dec 10 2023 at 10:33pm
LLCA shows that shows that EVs are cheaper. Well need to show me, ie the hard validated numbers. My unvalidated assumption is that the referenced LCAA was prepared by an EV advocate. I have two ICE cars, 1 and 6 yrs old, with minimal cost, just to name drop they are Hondas.
Ahmed Fares
Dec 11 2023 at 12:23am
The article linked to a source with hard data (link opens in a pdf file):
https://cleanenergycanada.org/wp-content/uploads/2022/03/Report_TheTrueCost.pdf
Michael Klimas
Dec 11 2023 at 9:47am
Well for my 10 yr plus Honda Accord with 90K miles so far, my rough not yet validated est of total cost is $40K including purchase, gas & maintenance. The Honda Accord gets great mileage of 35 to 40 mpg on highway and 25 to 30 in city driving. Only maintenance above a EV is Oil Changes every 3 to 4 K miles and Transmission Fluid changes every 2 to 3 yrs along coolant changes every 3 yrs. So far 3 battery changes. Today’s ICE cars are built better than ever, especially Honda & Toyota, and BTW suggest buying tires from Costco. Tires by far is the highest cost element, then comes brakes. Should note that most these expensive cost for tires and brakes would be the same for EV’s. Also has my 10 yr old plus Honda Accord has a substantial resale value. Hope to own for at least another 5 to 1o yrs. The money saved will be used to pay the higher Illinois taxes, especially Cook county property taxes. Also BTW $2 per liter gas cost cited in your comment is a huge real rip off. Since there is 3.78 liter per gallon that = $7.56 per gallon in US dollars. Wow, another reason to avoid moving to Canada, unless of course one want to die. Gas cost in Cook County, Illinois with its high taxes is $3.35 per gallon. If I go over the border to Lake county its .20 to .30 cheaper, and even lower in the hinterlands of Illinois. So I will take my ICE, wishing you the best with your EV. Should note my used name used in the comment is a reference to my home town, moved to Illinois for a job and the benefit of not having local TV showing the Det. Lions games.
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