A friend of mine rented a car a few weeks ago to drive from Nashville to Knoxville. The rental car agent assured easily sold her on the Kia EV6 electric vehicle (EV), explaining that it had a range of 310 miles, was fully charged and would easily get her the 160 miles to west Knoxville that evening. What the employee of this unnamed rental car company (rhymes with “squirts) did not explain, however, was that driving up the Cumberland Plateau would significantly diminish the battery efficiency. This 25-year-old young woman ended up stranded along I-40 in the middle of the night.
The federal government is providing billions of dollars in incentives for rental car companies to transition to electric vehicles. In part motivated by those subsidies, Hertz has announced that, as a part of its commitment to ESG, EVs will constitute more than 30% of its fleet by the end of next year.
The company has not explained where stranding its customers fits into its ESG program.
My young friend’s challenges are just some of the growing pains of this inevitable shift from internal combustion to battery powered vehicles. But the root problem causing my young friend’s midnight roadside dilemma is that the federal government is trying to force a shift for which there is currently neither the demand nor the infrastructure to support. That demand will exist someday – perhaps soon. And when does, it will take about a week for all those gas stations along the interstate to become charging stations.
But currently, some significant portion of the “demand” for EVs isn’t from consumers; it’s from the government. Hertz would not be purchasing almost 100,000 EVs in the next 3 years if not for the federal subsidies for doing so. The rental car industry may have 300,000 EVs on its lots by the end of next year, but if drivers must worry about safely reaching their destinations, those battery cars will be the last ones chosen by a majority of customers. To paraphrase noted economist Yogi Berra, if people don’t want to buy EVs, no one can stop them.
We see this repeatedly. When a massive change is foisted on a complex system from the top down, huge unintended consequences result. (See Covid response.) Sometimes the negative unintended consequences are a small price to pay for some greater benefit. Sometimes not. In the grand scheme of things, a few people getting stranded while agents actually learn about the products they are renting is probably a small price to pay for the eventual benefits of electric vehicles. But it is a great reminder to always creatively question the assumptions, projections and negative repercussions of such sweeping top-down initiatives.
David Moon is president of Moon Capital Management. A version of this piece originally appeared in the USA TODAY NETWORK.