Electric Vehicle Subsidy Junkies Can’t Get Higher

BMW AG Chief Executive Officer Oliver Zipse was incredulous when asked this month whether the German premium carmaker would respond to a brutal price war in electric vehicles by cutting production.

“Do I understand you right that you try to slow us down? Two years ago, it was the other way around,” he told analysts, triggering wry laughter.

Carmakers not called Tesla Inc. have spent the past decade being cajoled by governments, capital markets and journalists like me to speed up the transition to electric vehicles — and for good reason, because the planet is overheating. Now that EV sales aren’t growing as fast as anticipated, Volkswagen AG, General Motors Co. and Ford Motor Co. are being forced to either reduce EV output or delay new models and factories. (BMW hasn’t cut back, yet.)

It’s an agonizing moment for incumbents and new entrants alike; the winners will those able to respond nimbly to volatile consumer demand, while not forgetting that the energy transition is unstoppable. Thanks to a flexible manufacturing system and prior experience of underwhelming EV sales, BMW should be more resilient than most.

Leaving aside enthusiastic early adopters, most consumers haven’t yet been persuaded to go electric due to lingering worries about cost, recharging, high insurance premiums and poor residual values. These problems are solvable, but I don’t blame customers for having doubts: A car is the second most expensive thing most of us buy, and EVs often aren’t affordable.

As with mobile phones or televisions , the next generation of battery-powered models will be better value and more capable than the first — and also more profitable for manufacturers. (Ford’s EV unit has lost more than $3 billion so far this year).

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