China's E.V. Graveyards Are an Indictment of Government PolicyA Bloomberg report blames "unconstrained capitalism" for a glut of abandoned electric vehicles. But the industry also received billions of dollars in public funds.
JOE LANCASTER
8.23.2023
Last week, Bloomberg reported on China's electric vehicle (E.V.) "graveyards"—plots of land across the country where hundreds of vehicles have been abandoned.
From the outset, the piece places blame on "the excess and waste that can happen when capital floods into a burgeoning industry." It closes by quoting a Shenzhen–based photographer who calls the graveyards "a result of unconstrained capitalism…. The waste of resources, the damage to the environment, the vanishing wealth, it's a natural consequence." Not only does this quote get cause and effect totally wrong, but it also ignores the fact that China poured tons of government money into the industry.
China's government first implemented E.V. subsidies in 2009, spending nearly $30 billion by 2022. Buyers could receive rebates of as much as $8,400 per vehicle purchased. By the mid-'10s, Beijing disadvantaged the production of cars with poor fuel economy, and cities like Shijiazhuang and Hangzhou banned cars with internal combustion engines altogether.
Companies rushed to market with unimpressive offerings, especially compared to their gas-burning counterparts; some got barely 60 miles of range per charge. Most were bought by companies that would rent them to drivers.
But when the country started paring back incentives in 2019, many companies weren't prepared to compete without government cash as a backstop and were forced to close, relegating their fleets to molder in open fields.
E.V. graveyards are therefore an indictment of government policy, not capitalism. When private entrepreneurs enter into a nascent market, they put their own capital on the line; their ambition is tempered by the fear that failure will mean losing their shirt. But when the government agrees to cover part of the bill, or requires people to use that product, then it artificially lowers the risk.
China's example shows how subsidies skew the market. With the promise of free money, hundreds of companies flooded the market with substandard products that, on their own, stood no chance of competing directly with gas-powered cars. When the spigot shut off, those companies couldn't survive: Bloomberg reports that there are about one-fifth as many E.V. manufacturers in China today as there were in 2019.
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Source:
https://reason.com/2023/08/23/chinas-e-v-graveyards-are-an-indictment-of-government-policy/
