Sometime back this blog reported that electric cars would soon be replacing conventional models in sales popularity. Gas stations would close shop. Older cars would evaporate, simply on the basis of comparative cost of opertation. A humming, pollution-free land of wonder was just around the corner.
Insert crow into mouth. Chew. Actually what’s been happening is that cars themselves are disappearing in favor of the even less economical Carry All. What the hell is a Carry All? It’s the blanket term for an enclosed bed truck, which covers the SUV, minivan and Nissan Cube. That’s what people are buying. Terms such as ‘SUV’ or ‘Durango’ or ‘Jeep’ or ‘Suburban’ are just descriptors of trim level, and not very accurate at that. We’re all buying little freaking trucks. It was Hudson which introduced the step-down slide in and sit car over 50 years ago. Today we have gone back to step up vehicles. And none of them are electric.
But wait! There are electric cars. There’s the Nissan Leaf and the Tesla and…. There are also red headed left handers, too. And electric cars are about as common. If one is generous, a claim could be made that electric cars are replaying the adoption rate of the cell phone. No one had one. Doctors, lawyers and bigwigs had them. Then… wait a decade… everyone has one. Even by that scheme the electric car is well past due. I fear that it is time for me to admit defeat.
Allow me to wax moronic explaining my odious predictive failure. The cell phone analogy is entirely wrong. Cell phones did not replace anything. They were an entirely new idea. They replaced the pay phone—the phone no one owns—and perhaps the pager. But it’s not so much an evolution of the phone as it is a grafted extension of the phone system. At its core the cell phone is a hybrid of the walkie talkie and the telephone. It’s a walkie talkie that calls into the phone system. By contrast, the telephone is something that is wired to your house or wired to a wall and then transmits via wire to other wired receivers. Adopting the cell phone did not require someone to come into your home and yank all the wires out of your walls and then issue you a new receiver with all new parts. Instead, they just hung enough antennas and then made the anchors (the cell phones) cheaper and cheaper. And today the only communication system wired into your house is the internet, usually concurrent with Cable Television. Yes, today no one uses the telephone, now called a land line. But this isn’t because it’s been yanked out. Cars are different.
Cars are car part containers. No matter what brand or model, your car is 90% alike to all other cars. For any car system, there are all of maybe three variations. The spark plugs in your 1978 Delta 88 are identical to the ones in your 2017 Honda Civic. Ditto the nuts and bolts and glass and radio and pads and shocks and catalytic converter. What variation there is can be attributed to size constraints. The gear box of your F-150 is a bit different than the one in your Smart For Two. The greatest differences are in the body--a vast idiosyncratic package for your collection of largely non-unique components--and in the transmission, the mechanical force system, which needs to be custom configured specifically or you will go flopping down the road as opposed to rolling. It’s a tailored suit and a fancy set of shoes thrown over very similar interior bits.
There are two approaches to building an electric car. Approach One (Techno Salvage): invent only the systems that you need to, specifically the engine and the fuel container. The engine is a bunch of electric stuff and can be distributed. You’re not carrying fuel anymore. You just have to make room for batteries. Approach Two (Rainbow Gold): Reinvent everything. Build the car around the constraints of the electrical drive system. Both approaches suck equally. Two factors have limited the electric car’s development thus far. First, electric cars, no matter how they are configured, are not 90 % alike to other cars. Many electric cars are not 90% alike to other electric cars. They are more different than other manufactured items. If plumbing were at a similar stage of standardization, only the rich would crap indoors. Second, and most importantly…
Elon Musk is an idiot.
He’s an idiot who can land a spent rocket engine back on its mooring. He’s an idiot who can plausibly dig a hole to China. He’s an idiot who can successfully design and market a home use flamethrower. (I had the idea first. Really.) He can will a lot of things into being. Without a doubt he is one of the most successful dreamers in the world today. The auto industry is a pile of manure and does not deserve Elon Musk. And the sooner he figures that out the better all humanity is going to be.
When it comes to the electric car, Musk’s Tesla is clearly the pick of the litter. Of the three electric car start-ups from a decade ago, his is the only one to have produced a car that functions. Second place goes to the group who produced a car that did not function. Third place is from a group which did not produce a car. So Musk is Peggy Flemming in an Olympics in which the two other contestants did not skate.
Musk has followed the accepted historic pattern. Entice investors. Don’t use your own money. Start with a bling car to stir up interest. Once the bling thing is generally perfected, strip it down to a mass production archetype and then scale up manufacturing of the affordable model. Everyone from Columbia to Henry Ford did it this way. Ford’s first car wasn’t the Model T, it was the Cadillac. Once that car was perfected, Ford used what he learned and made the Model T. (Very long story short.) GM’s founding makes were Buick and Cadillac and then they scaled down to Chevrolet and Pontiac and other plebian makes. Although following in their footsteps so far, Musk has missed two steps which will inevitably be his automotive undoing.
Historical Missed Step One: R&D is something you buy. It is not something you do. Innovation is a thing that happens in someone’s garage in the middle of the night. Or it takes place in a university. It cannot be willed into being through spread sheets and benchmarks and project management. It is a creative process with a high failure rate. You hand the successful innovators dump trucks worth of cash. The failures you don’t have to pay.
This goes to the basics of knowing what business you are in. At some point Musk decided that he was a battery manufacturer. This is like owning a monopoly on helium when your aim is to find a use for balloons. Auto manufacturers are in the business of screwing together auto parts and putting such under a nice canopy. They are not in the business of inventing auto parts. Traditionally most auto innovations came from either other basic industries (inevitably exploiting university research) or from auto racing. (Traditionally most innovations come from someone employed in R&D at another auto firm who has been working on a side project on his own in his own garage. He comes to you with an innovation that he could not get green lighted at his employer and is now handing off to you the ready to go perfected product for one large lump sum.) In short, the time to go into the electric car business is AFTER the battery technology is perfected, not before.
Musk has also decided to reinvent the way cars are sold. That part of the process is actually NOT BROKEN. The whole make cars, ship them to dealers, dealers hit up banks and send you money cycle works. Dealers will also fix your cars and sell your parts. It keeps you in coin and makes life happy for customers. Musk’s system of build them and set them in a lot and then take pot luck ties up a lot of cash. And his custom of using salaried auto hikers to do the customer’s tax and regs and physically drive the car to the buyer’s home has efficiencies only a pizza delivery service can appreciate. How does one buy a Tesla in the first place? As opposed to having dealerships, which would lend some visibility to his product, Musk puts the burden of making the purchase and arranging financing on the customer. With predictable results. *
Musk’s answer to the cash flow issue is to float bonds and then scramble to pay for them. And to seemingly blow weed prior to investor conference calls. Not that the process of business itself is all that high and exalted, but if you fail at it, you fail.
Musk isn’t the con man Tucker was. His car works and can be produced. It’s everything else he’s screwed up, much to the detriment of the electric car field. Failures such as this are common, since…
Historical Missed Step Two: The Auto Industry is a Mausoleum for Money. Major Auto Manufacturers are Vulture Capitalist Creations. What do Ransom Olds, Henry Ford, David Buick and Walter Chrysler have in common? They were all kicked out of firms that they founded. Not necessarily the firms they are known for, but they were all booted at one time or another. None of the existing Big Three American auto makers is the result of a successful start-up. All of them are cobbled together remains of failed or amalgamated firms. General Motors is an amalgamation of several HUNDRED former manufacturers. Chrysler is what remains of Maxwell, which itself was culled from the wreckage of United Motors, an entity spawned from the failed Bicycle Trust monopoly. Jeep is what is left of Overland, a failed parts client of GM. Jeep was obtained through merger with American Motors, an amalgamation of Nash and Hudson. Hyundai was a program to provide reliable cars to shipyard workers. It was only after merging with KIA that Hyundia obtained drive system technology needed to sustain themselves as an actual exporter. The list of firms which are lumbering husks of other firms runs on and on, with no sunshine seen for start-ups.
It could be argued that Ford is a successful start-up. Ford took a payoff from the original Henry Ford Motor Company (which became Cadillac and then General Motors), took his staff and their experience and went to start a new firm. That firm, Detroit Automobile Company, failed within a year. The firm we now know as Ford is itself a recapitalization. (“Recapitalization” is a big word for screwing the original investors and making off with the assets.) Like all auto companies, Ford diversified (in one instance funding Dodge) and amalgamated (taking over Lincoln Motors). Ford and Musk are both visionaries of a type, although Ford’s vision had less to do with emergent technology than it did guidance to a specific price point, expanding the reach of the car to the average citizen. Like Musk, Ford had his run-ins with Wall Street and government naysayers. At one point the government threatened to turn over control of Ford to Nash Motors. Musk has gotten into as much trouble as he is likely to—which is to say that Tesla is irrelevant and not worth the government’s lead to shoot. In the end, Ford was not quite a vulture, but was vulture enough to muddle through. And in the end, I think Tesla is what a vulture eats.
I do still believe that the electric car will be a big thing. Just not anytime soon. And it won’t be coming from Elon Musk, who will be long gone to his orbital habitat to blow weed to his heart’s content by the time we get an electric car under $20,000.00. Musk’s flame out has undoubtedly discouraged others from jumping into the electric car fray. But the global auto industry has other issues.
There is a 40% global production overcapacity in the auto industry. Sounds ominous. Many cryptic and dire things can be plausibly extrapolated from just this factoid. In fact, the industry as a whole ponders this daily. It’s the auto industry’s version of Zen meditation.
What does this factoid boil down to? Remember I told you that modern auto companies are mostly vulture capitalist creations. (There is another factor that I will explain later.) Each firm has inherited a lot of stuff, generally for pennies on the dollar of their actual value. And they are not using 40% of it. If they actually needed this stuff, it would cost them a fortune to buy it. So they are sitting on it, even though they don’t need it. And they make payments to maintain it. If this sounds silly, then you obviously do not own a storage locker. The auto industry rents lots of storage lockers, figuratively speaking, crammed to the gills with stuff which is highly valuable only to the auto industry. No one wants to give up their horde. The way the game has been played thus far is to acquire additional hordes when a competitor goes out of business.
Sort of. That game has actually been over for a little while. It can only be played within national borders. The game is over here in America, since there are only two players left. GM and Ford cannot amalgamate. They can only eat foreign car companies, but that capacity is limited by the other factor that I hinted at. Bluntly, many car companies are Government Sponsored Enterprises. Germany has two major car companies, BMW and VW. VW is essentially a jobs program. If Hyundai isn’t an actual bodily appendage of the South Korean government, it certainly qualifies as a condom. Fiat is the crown jewels of Italy, having amalgamated all of its civilian and sports car lines. Japan’s many auto makers are situated somewhat similar to those in the US circa 1950, but their government’s cradle to grave welfare state is not factored into their export’s prices. They are effectively jobs programs also. It’s the same story everywhere. The upswing of this is that the market is littered with irrational actors.
I’m not saying that this is bad. And it’s not unique to the auto industry. It just means that they are not glass eyed utilitarians. They are beholding to labor unions and social factors and humanity in general. Many are the civilian putz-facing ends of national military industrial complexes. Again, this does not make them bad, but it does make their behavior a tad unpredictable. The good news, from an electric car perspective, is that zero emissions is an agreed on goal. The bad news is, electric cars are not the highest priority. There are three priorities ahead of it, one of which is a distraction and one of which is a chimera.
Distraction: Waiting for Godot. China has a billion potential auto buyers. The minute, the second, the microsecond, China swings those doors open all global production overcapacity evaporates. Or at least mine does as I carve out my unfair share of this virgin and prosperous market. Heh heh heh. Wrong, round eye! Wrong, rising sun bastard! Wrong, fish and chips, frog eating, kraut eating eurosimpleton! The Glorious People’s Republic which is rising to consume all the Earth will make its own damn cars. China’s people are not your customers. They are China’s customers. Mother Mao Funny Money stays home. If there is one thing that we can take away from decades’ worth of economic engagement with the People’s Republic of Chinese Earth it’s is that they are a giant leech black hole squatting on the face of global capitalism. If allowed to, the Chinese may sell us cars—replicas of western cars, really—but they will largely drive their own cars—also replicas of western cars, really. The Chinese may eventually even have electric cars, provided we make the batteries easy enough for them to copy. So Godot is a no go.
Chimera: Sometime some time ago all of the great IT minds migrated away from dull science fiction science to the heady Wall Street fairyland of the Hedge Fund. There they toiled away, night and day, on computers which would make NASA blush, plugging in predictive programs which would guide the already well to do in becoming even more so. The behavior being predicted was binary in nature, buy or sell. And after many decades of continual development involving some of the best paid mathematicians and theoretical programming architects on Earth, the net cumulative result of these efforts HAVE ZERO EFFICACY. Given this, what makes anyone think that we can program a car to drive itself?
Wait! We have autonomous drones which fly and shoot missiles and kill people. No, we do not. The drones that kill people are radio controlled. They have human operators. We do have autonomous munitions, which react well to sensors and can read maps to hit stationary targets. In theory, we could have flying killer robots any day now, but that’s not the benchmark that we are attempting to have parity with. Both flying and killing are comparatively easy. A flying killer robot does not have to stop behind the school bus which is halted at the railroad tracks even though no train is coming.
Wait! Computer models are getting better all the time. We now predict the weather with near flawless accuracy. While this may be true, I remind you of the collective failures at predicting the stock market. The weather follow’s God’s rules—and God is pretty consistent. Driving is the weather, plus human psychology, plus physics in random ratios changing by the second. It’s easy enough for a 16 year old to be passably good at, but beyond the capacity of a machine which adds in groupings of two no matter how kryptonian its sensor array may be nor majestic its branch routines.
Wait! There already ARE self-driving cars! What are you blathering about? Long answer short: they’re not safe. The only way to make them workable is to designate “auto-pilot” only lanes. If we go down that route, we might as well just have an effective mass transportation system and dispense with cars altogether.
Look, I’m probably going to have to hang up another ‘I was wrong’ sign here. But I cannot help but feel that we are all being sold a load of crud. The first delusion is that the self-driving cars are for us consumers--that we will all be entitled to flop down in our buggies one day muttering “home, James” and be mystically whisked off while we enjoy nappy time. As fun as that sounds, we are not the market. Nor are they attempting to put the Ubers under. It’s the truck drivers that they are out to un-employ. Mark my words, once it becomes obvious that robo-trucks are a hazard to the highways, the trucking firms are going to demand “auto-pilot only” lanes. (And they will ask that the robot delivery trucks be allowed to operate at night in urban areas.) This is all a not very high tech scheme to avoid paying rednecks as well as claim ownership of the public way. I say we nip this in the bud. If you want to send freight across the country largely unattended there’s a thing called the choo-choo. But if you are using the roads that were made for us, for our enjoyment, for our personal transportation, and are sending corporate farm hog sludge from Amarillo to Providence, then we demand that you hire a redneck to guide it. **
A factoid frequently pitched by the computer car people goes “Did you know that the average car is only in operation 2 % of the time?” As if the entire auto thing wasn’t massively wasteful in and of itself. The pitch then goes on to postulate “Imagine a world where an operating car could simply be summoned to your door as needed? When not in use the car moves to places where it is likely to be summoned. In such a future, no one would need personal cars at all.” Imagine a world where your wife summons an automated car at 3:00 AM only to find the podmobile’s faux leather bucket seats encrusted in vomit. Imagine a world where your wife has done her grocery shopping and decides to leave such in the podmobile until someone gets home to hike them in. Wait! She can’t! Imagine a world where at a high volume time of day your wife has to share a podmobile with someone who smells. Or because of the communal nature of podmobiles, she is not allowed to stow stuff for future use, rearrange her face, fart, sing off key or do any of the other personal Zen things the dickless are so fond of. We can’t get women to use mass transportation as it is. By what fit of Imagineering is this going to work? Until you can reprogram women, this is a non-starter.
What appears to be in it for the car companies is a belief that these roving automatic car fleets will need to be replaced on a consistently short-cycle basis. As it stands, the average current car is lasting in excess of a decade. Not surprisingly concurrent with this phenomena, car payments are now extending well past their traditional three year horizon. I don’t know how great these cars are, but few people are prone to give up on something they are still making payments on. And once you’re through paying on something for five to seven years, most folks are content to drive it into the ground. Beyond stockpiles of crud, this is where the rest of the 40% overcapacity is coming from. People are just holding onto cars longer.
Lost in this is Ford’s original idea of making cars affordable. Given the constant median wage in the United States, an affordable car would be from $12,000 to 16,000. If you look around, you will find that there are few if any new cars at that price. There are a number of reasons for this all of which boil down to (A) the car manufacturer needs to make $2000 per unit just to send you a box and (B) the retailer needs to make $1000 just to sell you a box. You can also add in about $5000 worth of mandated crud on each car. That’s $8,000 out the door to give you about a ton of nothing. Any further things, such as a door handle, are going to cost you more. The next big auto innovation, whatever it might be, will address this issue, but for the moment the entire industry is stuck.
Right now selling you a hybrid or electric vehicle is a dicey proposition. Both have systems which may not last the life of the payments. Both require replenishments costing thousands of dollars at the five to seven year mark. This is not a design for a happy customer.
Which brings us to the electric car’s final impediment, the last auto industry distraction. In order to stay in business the auto makers have to sell cars people want to buy. Largely these are the aforementioned Carry Alls in their various plumage. The industry makes good money on these things even though they are entirely a technological and environmental dead end. It’s good money now, but it is just treading water. The industry as a whole is going to have to pick a future and then go there.
*Tesla’s claim is that they are manufacturing vehicles which they have already sold. In short, everything off of their assembly line already has a buyer.
**The Interstates were not really made “for us” although interconnecting roads were. Prior to the rise of the automobile, the roads in America did not connect. It was the auto industry, and us the consumers, who pushed to put through connecting and improved roads. The interstate system, which is where a lot of the freight travels, was dreamed up by Eisenhower as a military necessity. Like the internet, it just happens to have civilian applications. It was felt that the interstates would encourage intra-American tourism, mostly via car. They were NEVER intended as freightways and the trucks should not have been allowed on them. We have railroads.
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