The Nissan car company profits are down 99 percent,and this is not a typo - they plunged in the first quarter to $21.25 million, which amounts to a rounding error, really.
A near-total wipeout – which triggered the wiping out of 12,500 jobs, the immediate suspension of manufacturing in Indonesia and Spain and an announcement that Japan’s second-largest car company will reduce its model lineup by at least 10 percent by 2022. It is quite possible there won’t be a Nissan by 2022 if they continue on this road. And it’s already starting – I called a dealership in Schwyz looking for a deal and I got a marijuana shop instead. And they said they’re cool with whatever.
What’s caused the downfall, of course, is all the money being spend on electric cars, for which there is no market. Or rather, there’s no money to be made from making them.
Nissan committed billions to development of electric cars they won’t be able to sell – unless the ability of people to buy them somehow increases by 30-50 percent or more. Besides, the market for electric cars is really confined to Europe because of the regulations, and China where electricity prices are the lowest.
And none of this is healthy and sustainable economics.
And Nissan is not alone in this – for Tesla, in their most important US market the plunge in registrations has been huge. In the second quarter registrations of the Model X plunged by 40% compared to a year ago, registrations of the Model S plunged by 54%, to just 1,205 vehicles. This type of drop is devastating for any automaker, unless it plans to discontinue the model soon.Then it gets wild in the EU with their constant drive for regulations and taxes that can be extracted from it. Keep in mind that taxes from cigarette products are declining and something needs to make up for the drop. From 2020 only 95 grams of CO2 emissions per kilometer driven are permitted per car produced. If the output is higher, there will be drastic fines, like half the price of the car. For car companies this means the consumption of fuel must be around four litters per 100 kilometers. But there are no combustion engines that can comply with this standard, except for the smallest ones. So, the European car manufactures have no choice but to produce electric cars, for which there is no market to speak of. BMW just announced that it is accelerating its electric car plans by two years, they aim to have 25 electrified models in 2023. It will be interesting to watch their bottom line by then, unless they can somehow suspend reality. Their CEO Harald Krüger already said that he will not seek another term with the company.
Another problem is, the governments have completely failed to take into consideration the availability of electricity to fuel cars.
If every car is plugged into the power grid, then the concern becomes – will we just simply shift the CO2 emissions from cars to power plants?
And consider this - when it gets cold, the battery will lose on average 20-25% of its charge. The idea that electric cars will replace fossil fuels is really a dream. That will maybe work in warm territories, but when it gets cold, they will require more energy production to service them. And this comes at a time when power plants also have increased demand to keep people warm.
Now I slow down for the Electric Love part, and obviously I refer the song by Serena Ryder. And there is a line in it I don’t fully get, but these are the best ones because you can get your imagination fly.
“Our love's electric and now, babe
So close to water that we'll never know.”
Finishing on the subject of cars, I like the ones that roar. Last month we took delivery in Toronto of a new M BMW sedan. I asked my younger son how fast does this thing go off the line. He said: “the power hits you like a sock full of quarters”.
Now, that’s how guys talk.
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Tom Kubiak is the author of The Traveler