The future of transportation, we are told, is electric.
Like the horse and carriage, the combustion engine will be relegated to the history books. And, perhaps, rolled out at local fairs as a novelty ride for the kiddies.
In the early 1900s, free market forces pushed the horse and carriage out of mainstream use. Consumers saw the advantages offered by automobiles, and they chose to buy them instead.
People acting in their own best interests would not have surprised Adam Smith. He coined the term the ‘invisible hand’ in 1776. You’re probably familiar with his theory. It states that when everyone pursues their own individual interests, this ultimately benefits society as a whole.
And the widespread adoption of cars over the last century has clearly benefited societies across the world as a whole.
Of course, today’s cars are nothing like the ones your great grandparents drove. Free market forces have meant they need to constantly evolve to remain competitive. In 2017, cars are generally more efficient, safer, and faster than ever before.
A small percentage are even powered by electricity. And, if nations stick to the Paris climate accord, that percentage could top 6% of the world’s total cars by 2030.
That’s an admirable goal. In fact, 100% electric is an admirable goal too. All companies need to do is create electric vehicles that are superior to their fossil fuel-powered cousins. The invisible hand will take care of the rest.
Unfortunately, that’s unlikely to happen. Governments in the UK and France have already outlined plans to ban petrol and diesel vehicles by 2040. Other national governments are likely to follow.
As you know, governments are rarely content to watch the ‘invisible hand’ play out. They’re filled with bureaucrats, after all, who know better than their constituents. And they’re not shy about legislating their beliefs into law.
This is the path governments are taking to ensure you’ll have an electric vehicle parked in your garage. Or, better yet, have an app that can summon a shared electric vehicle at the push of a button.
When governments push through measures the market is not ready for, it inevitably leads to bigger problems than they tried to solve.
If car makers are told they only have 23 years left to make petrol cars, their incentive for further innovations evaporates. The efficiency and performance improvements you’ve seen over the past 23 years will not be repeated. The invisible hand has been slapped back.
Sure, car companies will have to pour money into producing better electric vehicles. But they’ll no longer be competing with petrol cars. Their only competition? Other EVs.
And the fact that, even in 23 years, you’ll need to be forced to buy one should tell you something. Global governments, at least, expect electric vehicles to remain inferior.