Doing the Tesla Stretch

Electric cars to our economic rescue (with a nudge from government)

By Peter Burnett

New car sales are flat. In Australia we’ve just had the 17th consecutive month of declining sales. Of course, sales do go up and down and there are many reasons for the current dip including tight lending for cars and low consumer confidence.

Sales are also flat in other countries including the United Kingdom, but some commentators are advancing explanations far more significant than tight money and low consumer confidence. For example, the online newsletter MarketsInsider is suggesting that the US may have already passed ‘peak car’ due to generational and disruptive factors such as debt-strapped millennials, ride-hailing apps and self-driving technology.

I don’t know if being debt-strapped is the only factor for millennials, as my own millennial progeny give me the clear sense that cars just don’t have the allure that they did for me and my fellow baby-boomers. But quibbling aside, it seems clear that such disruptive factors are at work.

A Tesla for the market

I also suspect there may be another disruptive factor operating, a by-product of the ‘Tesla Stretch’. The Tesla Stretch refers to the fact that buyers are so keen to have a pure-electric car (ie, a battery-electric vehicle, or ‘BEV’, not a hybrid) that they are willing to pay around $30,000 more than they would normally spend on a new car. People who would never consider buying an entry-level BMW or Mercedes are paying BMW and Mercedes-like prices for the privilege of owning a Tesla, or at least a BEV.

The so-called ‘mass market’ Tesla, the Tesla Model 3, has only just gone on sale in Australia. In fact, the wider market for electric vehicles is only just getting off the ground here and it will be at least another 12 months before fully-electric vehicles are available here in any numbers and at least another couple after that before the cost of an electric vehicles begins to achieve price-parity with conventional internal combustion engine (‘ICE’: don’t you love these acronyms?) vehicles.

Although it’s too early to tell whether the Tesla Stretch will be a real thing here or not, there’s no reason to think Australians will be any different to Americans or Europeans in this regard. Moreover, I think the Tesla Stretch is already having an indirect impact here and that the current drop in car sales is partly the result of its by-product, which might be called the ‘Tesla Strike’.

A Tesla Strike?

The Tesla Strike would be a form of ‘buyers strike’, in which buyers want a BEV but, because they are not readily available, or not available at an affordable price, decide to wait. This flash of insight has come to me because I am one such buyer. My current car is about due for replacement and I’m keen to reduce my environmental footprint. I also like new technology (and cars, although this feels like admitting to being a dinosaur).

In principle, I’m prepared to do the Tesla Stretch, at least to some degree, but none of the handful of BEVs available so far meets my needs and fits my price-range. So, I’ve decided that my current car is my last ICE vehicle and that I’ll just wait.

In a small market like Australia there wouldn’t have to be too many more people like me out there for the Tesla Strike to be a ‘thing’, a phenomenon affecting sales and thus the economy, and calling for policy attention from government. The Government could act to increase the supply of electric cars by removing barriers to market entry, for example by streamlining the certification of electric cars for sale in Australia, introducing training programs in servicing electric cars, or subsidising the installation of recharging infrastructure, anything that would signal to electric car manufacturers that if they commit to supplying us, we’ll commit to giving this technology a long-term future.

Direct subsidies to car buyers might be one policy option but this may not be as effective as removing barriers to market entry. This is because simply increasing demand in the short term, without more, may not give manufacturers an incentive to establish sales and servicing networks here when there is already more than enough demand in larger markets for the BEVs currently available.

Wouldn’t it be ironic if governments, having so far baulked at spending on an electric car transition as an environmental measure, decided to do so as an economic measure?

As a bonus, oil imports would begin to go down, as would carbon emissions, increasingly so as ever-cheaper renewable energy replaces fossil-fuel power in our electricity network.

Ironic or not, for a government focused on the economy, Tesla Stretch surely beats Tesla Strike.

Image by Image by Gerd Altmann from Pixabay