One of the biggest ironies of the current vicious political environment is the glaring disconnect between US President Trump’s staunch opposition to climate change policies and enthusiastic endorsement of extracting more fossil fuels, coupled with his simultaneous support of Elon Musk, culminating in a show of support for him by buying a Tesla to revive its flagging fortunes. The doubling of Tesla’s stock price from just before the Presidential elections in early November 2024 to its mid-December peak of close to $500, followed by its collapse back to pre-election levels ($236 on 21st March 2025), captures this contradiction.
The appointment of Musk as head of Trump’s Department of Government Efficiency (D. O.G. E) has brought to the fore this fundamental contradiction. Musk is perhaps the single biggest beneficiary of green subsidies in his capacity as founder and CEO of Tesla. Adding to that the subsidies he has got for Space X and other ventures, based on Washington Post data, it has been estimated that he obtained about $38 billion of subsidies.
Even without Musk’s chainsaw slashing of expenditures as head of D.O.G.E and the various global backlashes of the public and Tesla owners, aggravated by his far right behaviour, on purely performance grounds the problems for Tesla were mounting. By the fourth quarter of 2024, Electric Vehicle (EV) sales of the Chinese electric car maker BYD car were outpacing Tesla. The number of complaints about Tesla products from different sources were mounting. On 20th March, about 44,000 Tesla Cyber trucks were recalled to fix an exterior panel, that may come off when driving. This incident is not the first, but the eighth safety recall since the vehicle began to be produced. Almost all the Cyber trucks produced by Tesla since inception have now been recalled. It cannot get much worse than that.
The time it takes to charge batteries has been one of the stumbling blocks for petrol vehicle owners to switch over to electric vehicles. The five-minute charging battery that BYD has just demonstrated successfully has given it a huge edge over other EV companies, and Tesla will bear the brunt of that edge. With daily bad news and intensifying global backlash, it is very difficult for analysts to make reasonable projections of sales and stock prices of Tesla.
As Tesla and Musk are getting knocked off their pedestals, Chinese EV companies will come under more scrutiny. Most discussion of economic policy is about great power rivalry, and the Chinese are now undeniably the leaders in Electric Vehicles. In reaching this position, the Chinese EV sector has benefited hugely from the huge subsidies from their Government, not to mention the large number of their engineers returning from their training in US universities and subsequent work experience over decades. Estimating the value of those subsidies would be difficult but worthwhile. By contrast, what Musk received may have been much less.
What is unfortunately barely discussed, if at all, is how much ordinary citizens, wherever they live, have benefitted from this global push toward electric vehicles, and subsidized by so many countries. This push reduces direct carbon emissions. Other things equal, that is certainly very desirable. I have used the qualifying adjective ‘direct’ since it is very hard to estimate the other indirect emissions and other environmental damage from EVs: battery production and disposal, digging up the ground all over to provide charging stations, the possible carbon emissions due to electricity usage from these stations. What EVs certainly do well is provide a NIMBY (Not In My Backyard) solution in one dimension: noxious fumes from petrol vehicles in our vicinity. In Chinese cities, air quality has improved a lot, with the vicinities no longer sooty and grimy, while many Indian cities rank the worst globally for air quality.
As outlined in several articles, posted on my website unclogroads.com, starting with “Unclog Roads with a Vehicle Area Tax” in 2006, a fundamental goal of transport policy should be to reduce road area per passenger km. travelled. This need not entail bans or sweeping restrictions on use of cars. A steep revenue neutral Vehicle Area ‘Tax’ will reduce a multitude of problems emanating from the massive underpricing of vehicle area. Revenue neutral means other vehicle related taxes and fuel taxes will be correspondingly reduced to compensate car owners, with perhaps a cash rebate. Hence the word ‘Tax’ is in quotes. It can be more accurately called Vehicle Area Levy.
When there is such a tax, car owners will buy smaller vehicles. Firstly, travel time will substantially reduce due to less congestion. By themselves EVs do absolutely nothing to reduce total travel time, the main adverse effect from cars that we face in daily life. The magnitude of this adverse effect, including the nuisance value of congestion when driving and parking, should not be taken lightly. The demands for Work From Home after Covid-19 ended, leading some to even quit, was largely a revolt against long and arduous commutes.
Secondly, within cities and to connect cities, less road area will need to be built to accommodate expanding vehicle area. Manufacturing cement for roads is quite polluting. Building roads entails clearing of trees, and the concreting of the soil contributes to local heating. Instead of just trying to reduce global warming by switching to EVs, we need to also tackle what can be called local heating. END Text 894 Words.
(Vivek Moorthy is Distinguished Professor, St. Joseph’s Institute of Management, Bengaluru)
Views are personal and do not represent the stand of this organisation.
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