GWPF Newsletter: China’s Electric Carmakers Battle for Survival After Subsidies Scaled Back

Tesla Discloses US Revenues Collapse

In this newsletter:

1) China’s Electric Carmakers Battle for Survival After Subsidies Scaled Back
Bloomberg News, 30 October 2019 
 
2) Tesla Discloses US Revenues Collapsed 39% 
Wolf Street, 29 October 2019 

 
3) Electric Vehicle Adoption Overshadowed By SUV Boom
OilPrice.com, 16 October 2019
 
4) The Electric Car Fantasy
Mark P Mills, City Journal, 30 October 2019 
 
5) Global Travel Revolution Challenges Climate Targets
John Kemp, Reuters, 31 October 2019 
 
6) Why Are People So Unreasonable These Days?
Ron Clutz, Science Matters, 31 October 2019
 
7) Escape From Model Land
Climate Etc., 29 October 2019
 
8) And Finally: The Election And Another Lying Climate Poll
Climate Scepticism, 31 October 2019 

Full details:

1) China’s Electric Carmakers Battle for Survival After Subsidies Scaled Back
Bloomberg News, 30 October 2019 

In a battle for survival, hundreds of Chinese EV makers are trying to convince buyers that it’s worth paying higher prices than opting for cheaper gas guzzlers. It’s not working at the moment.

When Elon Musk’s Tesla Inc. delivered positive earnings few saw coming last quarter, China’s top electric carmakers were weathering a historical contraction in demand.

Warren Buffett-backed BYD Co., the country’s biggest maker of new energy vehicles -- all-electric, fuel-cell and plugin hybrid cars -- just reported an 89% slump in third-quarter earnings and warned profit could fall as much as 43% this year. BAIC BluePark New Energy Technology Co., China’s biggest maker of all-electric automobiles, also forecast a 2019 loss in a grim earnings update.

In a battle for survival, hundreds of Chinese EV makers are trying to convince buyers that it’s worth paying higher prices than opting for cheaper gas guzzlers. It’s not working at the moment. Electric-car sales fell for three straight months through September, as the government -- after spending billions of yuan to nurture the industry -- scaled back subsidies.

Full story 
 
2) Tesla Discloses US Revenues Collapsed 39% 
Wolf Street, 29 October 2019 

This is a holy-cow moment.

This morning, Tesla filed its Form 10-Q quarterly earnings report with the SEC, a moment when no one was supposed to pay attention after the surprise quarterly profit that had caused such a hullabaloo last week.

Tesla is not required to disclose in its promo-laden earnings report that was primarily designed to downplay its first year-over-year revenue decline since the Financial Crisis.

But that revenue decline is a lot more nerve-wracking than what it looks like on the surface. […]

When an automaker’s automotive revenues plunge 12% year-over-year, that’s catastrophic enough. But the details in today’s 10-Q filing of how that plunge was composed – or rather where it occurred – made it a lot more catastrophic: Revenues in the US, its largest market, collapsed.

I’m not using that word lightly. When revenues plunge 39%, it’s a collapse.

Full post
 
3) Electric Vehicle Adoption Overshadowed By SUV Boom
OilPrice.com, 16 October 2019

There are now 200 million SUVs on the roads globally, up from 35 million in 2010, according to data the International Energy Agency (IEA). In fact, 60 percent of the increase of the global vehicle fleet since 2010 came from SUVs.

Because SUVs are significantly less fuel efficient than smaller more compact cars, the impact on oil demand and greenhouse gas emissions is substantial. SUVs accounted for “all of the 3.3 million barrels a day growth in oil demand from passenger cars between 2010 and 2018,” the IEA said.

EVs have been making significant headway in vehicle sales, raising hopes that the energy transition may accelerate and lead to peak oil demand. But the IEA cautioned that SUVs are undercutting much of the progress. If sales of SUVs continue on their current trajectory, it would add another 2 million barrels per day (mb/d) by 2040, “offsetting the savings from nearly 150 million electric cars” the IEA warned.

The fallout for the climate could be profound. SUVs accounted for additional greenhouse gas emissions that were second only to the power sector. Shockingly, the increase in emissions from SUVs alone exceeded the increase in emissions from heavy industry, trucks and aviation, which is notable given the massive expansion of industrial capacity in places like India and China.

With that said, the global auto market is heading for trouble more generally, at least in the short run. Total sales are expected to decline globally this year as the economy decelerates and flirts with recession. The IEA said that sales of the internal combustion engine (ICE) declined by 2 percent in 2018, which was the first contraction since the global financial crisis a decade earlier.

The slowdown is notable in most major economies. For instance, between April and August, India saw car sales fall by a quarter compared to the same period a year earlier.

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4) The Electric Car Fantasy
Mark P Mills, City Journal, 30 October 2019 

If today’s electric cars were genuinely compelling, consumers wouldn’t have to be ordered to buy them.

New York Senator Chuck Schumer has promised that if Democrats win the Senate in 2020, they’ll pass a law requiring that every car in America be electric by 2040.

Chinese policymakers must be celebrating, because China makes the majority of the world’s batteries and has the most new battery factories under construction.

The Chinese will need someone to buy all those batteries. This past summer, when China abandoned subsidies for electric vehicles (EVs), sales collapsed. China’s plan now is to require automakers to produce EVs, but at a paltry 3 percent to 4 percent of output.

Perhaps Beijing will ultimately increase the allocation, but truly revolutionary technologies never require governments to order their adoption. As for Schumer’s plan, it will fail on every front—including saving China’s battery industry.

Let’s start with what consumers want. SUVs and pickups now account for 70 percent of all vehicles purchased. Most people, it seems, like big vehicles. The minority who buy purely for economy choose small cars with gasoline engines. This option, by the way, puts less carbon dioxide into the atmosphere than a Tesla.

Consumers are price-sensitive in every category, a reality that politicians ignore at their peril.

Batteries add about $12,000 to the cost of small and midsize cars. That’s meaningful for all consumers but the 1 percent. According to the Bureau of Labor Statistics, automobiles constitute the most expensive category of consumables for the average household, costing twice that of health care. (Housing is the biggest expense, but that’s not a consumable.) A recent McKinsey analysis suggests that automakers could “decontent” EVs to cut costs—that is, take out the extra features that every salesman knows are what sells cars.

Setting aside details like cost and features, the key claim is that widespread use of EVs will reduce global carbon-dioxide emissions—except that it won’t, at least not meaningfully. First, it bears noting that regardless of Washington’s creative accounting, the all-EV-option would entail at least a $2 trillion cost to America’s economy, just in higher car costs. Then, simple arithmetic shows that this option wouldn’t even eliminate 8 percent of world oil demand. And the impact on global carbon-dioxide emissions would be even smaller.

Why? It takes energy—the equivalent of 80 to 300 barrels of oil—to fabricate a battery that can hold energy equal to one barrel. Thus, energy used to make batteries brings a carbon “debt” to EVs which, depending on where the factories are located, greatly diminishes, or even cancels out, emissions saved by not burning oil.

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5) Global Travel Revolution Challenges Climate Targets
John Kemp, Reuters, 31 October 2019 

The global travel & tourism revolution is spreading to China and other rapidly developing economies in Asia. It underscores how challenging it will be to meet emissions targets while satisfying growing aspirations for tourism and leisure.

Travel and tourism is one of the world’s largest and fastest-growing industries, and the number of leisure travelers globally is set to increase enormously in the next few decades as more families reach middle-class status for the first time.

Travel to learn more about the world and experience new places appears to be a basic human instinct; all modern societies show increasing demand for travel, much of it for leisure, as incomes rise and transportation improves.

Leisure travel is set to make one of the largest contributions to rising energy consumption and carbon emissions through 2050, with much of the increase concentrated in Asia, the Middle East, Africa and Latin America.

International air travel will make an especially large contribution to emissions because aviation is energy-intensive and for the foreseeable future there are no low-carbon alternatives to relying on jet fuel.

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6) Why Are People So Unreasonable These Days?
Ron Clutz, Science Matters, 31 October 2019

For some reason, many intellectuals who identify as philosophical skeptics embrace large chunks of climate dogma without critical examination.

Steven Pinker is part of the progressive clan, and shares their blind spot, but speaks wisely in a recent article about the precarious balance between reason and intolerance these days.

Some excerpts in italics with my bolds show his keen grasp of many aspects of the problems in contemporary discourse, even while he nods superficially to the climate consensus.  His article at Skeptic.com is Why We Are Not Living in a Post-Truth Era:  An (Unnecessary) Defense of Reason and a (Necessary) Defense of Universities’ Role in Advancing it.

Humans Are Rational Beings

In the first part Pinker does a good job clearing away several arguments that humans are not primarily rational anyway.  For example, he summarizes:

So if anyone tries to excuse irrationality and dogma by pointing a finger at our evolutionary origins, I say: Don’t blame the hunter-gatherers. Rational inference, skepticism, and debate are in our nature every bit as much as freezing in response to a rustle in the grass.

Why were truth and rationality selected for? The answer is that reality is a powerful selection pressure. As the science fiction author Philip K. Dick put it, “Reality is that which, when you stop believing in it, doesn’t go away.”  Either there is an armadillo in the burrow or there isn’t. Those who were so hidebound by stereotype or habit that they could not deduce out where it was or how to kill it went hungry.

Irrationality Contends Against Reason

Pinker provides insight into the modern struggle to be reasonable in the face of irrationality.

So if we do have the capacity to be rational, why are we so often irrational? There are several reasons. The most obvious was pointed out by Herbert Simon, one of the founders of both cognitive psychology and artificial intelligence: rationality must be bounded. A perfect reasoner would require all the time in the world, and unlimited memory. So we often satisfice, trading accuracy for efficiency.

Also, though reality is always a powerful selection pressure, we did not evolve with the truth-augmenting technologies that have been invented in recent millennia and centuries, such as writing, quantitative datasets, scientific methodology, and specialized expertise.

And annoyingly, facts and logic can compromise our self-presentation as effective and benevolent, a powerful human motive. We all try to come across as infallible, omniscient, and saintly. Rationality can be a nuisance in this campaign, because inconvenient truths will inevitably come to light that suggest we are mere mortals. The dismissal of facts and logic is often damage control against threats to our self-presentation.

Beliefs also can be signals of loyalty to a coalition. As Tooby has pointed out, the more improbable the belief, the more credible the signal. It’s hard to affirm your solidarity with the tribe by declaring that rocks fall down instead of up, because anyone can say that rocks fall down instead of up. But if you say that God is three persons in one, or that Hillary Clinton ran a child sex ring out of a Washington pizzeria, you’ve shown that you’re willing to take risks for the team.

Group loyalty is an underestimated source of irrationality in the public sphere, especially when it comes to politicized scientific issues like evolution and climate change. Dan Kahan has shown that, contrary to what most scientists believe, a denial of the facts of human evolution or anthropogenic climate change is not a symptom of scientific illiteracy. The deniers know as much science as the accepters. They contrast instead on political orientation: the farther to the right, the more denial.

Kahan notes that there is a perverse rationality to this “expressive cognition.” Unless you are one of a small number of deciders and influencers, your opinion on climate change will have no effect on the climate. But it could have an enormous effect on how you’re accepted your social circle—whether you’re seen as someone who at best just doesn’t get it and who at worst is a traitor. For someone in a modern university to deny human-made climate change, or for someone in a rural Southern or Midwestern community to affirm it, would be social death. So, it’s perversely rational for people to affirm the validating beliefs of their social circle. The problem is that what’s rational for the individual may not be rational for the nation or the planet. Kahan calls it the “Tragedy of the Belief Commons..”

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7) Escape From Model Land
Climate Etc., 29 October 2019
Judith Curry

“Letting go of the phantastic mathematical objects and achievables of model- land can lead to more relevant information on the real world and thus better-informed decision- making.” – Erica Thompson and Lenny Smith

The title and motivation for this post comes from a new paper by Erica Thompson and Lenny Smith, Escape from Model-Land. Excerpts from the paper:

“Model-land is a hypothetical world (Figure 1) in which mathematical simulations are evaluated against other mathematical simulations, mathematical models against other (or the same) mathematical model, everything is well-posed and models (and their imperfections) are known perfectly.”

“It also promotes a seductive, fairy-tale state of mind in which optimising a simulation invariably reflects desirable pathways in the real world. Decision-support in model-land implies taking the output of model simulations at face value (perhaps using some form of statistical processing to account for blatant inconsistencies), and then interpreting frequencies in model-land to represent probabilities in the real-world.”

“It is comfortable for researchers to remain in model-land as far as possible, since within model-land everything is well-defined, our statistical methods are all valid, and we can prove and utilise theorems. Exploring the furthest reaches of model-land in fact is a very productive career strategy, since it is limited only by the available computational resource.”

“For what we term “climate-like” tasks, the realms of sophisticated statistical processing which variously “identify the best model”, “calibrate the parameters of the model”, “form a probability distribution from the ensemble”, “calculate the size of the discrepancy” etc., are castles in the air built on a single assumption which is known to be incorrect: that the model is perfect. These mathematical “phantastic objects”, are great works of logic but their outcomes are relevant only in model-land until a direct assertion is made that their underlying assumptions hold “well enough”; that they are shown to be adequate for purpose, not merely today’s best available model. Until the outcome is known, the ultimate arbiter must be expert judgment, as a model is always blind to things it does not contain and thus may experience Big Surprises.”

The Hawkmoth Effect

The essential, and largely unrecognized, problem with global climate models is model structural uncertainty/error, which is referred to by Thompson and Smith as the Hawkmoth Effect.

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8) And Finally: The Election And Another Lying Climate Poll
Climate Scepticism, 31 October 2019 

The Guardian has a piece with the headline: “Climate crisis affects how majority will vote in UK election – poll” reporting on a survey which claims that two-thirds of people agree that the climate emergency is the biggest issue facing humankind, with only 7% disagreeing.

They go on to claim that:

“More than half of those polled (54%) said climate change would affect how they would vote, with the proportion rising to 74% for under-25s.”

The Guardian typically gives no link to the source, but the poll’s findings can be consulted at the website of the survey’s client, ClientEarth, here, and it’s an objet lesson in how to mislead without actually lying in opinion research.

Remember the old adage: “Opinions are like amygdalae. Everyone has one or two, but no-one knows why, or what they’re for”?

The survey starts, in best Cook/Lewandowsky fashion, by establishing the existence of a consensus, asking respondents:

“Do you agree or disagree that:

– Climate change is an issue that will affect us and future generations;

– Awareness of climate change is growing;

– People are becoming much more fearful ands anxious about climate change;

– The climate emergency demands much more urgent action;”

Once they’ve been softened up with talk of fear, anxiety, emergency and urgency, it’s little wonder that 63% are willing to assent to the final binary choice:

– Climate exchange is now the biggest issue facing humankind

.. from which it follows that it will effect my voting habits, choice of pension plan, and anything else you care to mention, your honour.

[Why not One Opinion Poll to Rule them All, with just one question:

“Do you agree with what the authorities tell you everyone else believes, or are you the kind of miserable contrarian who has no friends on Facebook and gets his information from Russian bots and climate denier sites?”]

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The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at www.thegwpf.com.