Rail & Highways

We pray the Gov’t makes more $60bn mistakes!

Can the media and shadow politicians get a grip? Since when should taxpayers complain when the government makes a huge error in our favour? We can pretty much stake our lives on the fact that 99% of government programs end up way more expensive than initially budgeted for. French Submarines anyone? NBN? We should be looking at the JobKeeper revision as a massive positive.

The federal government estimated that the JobKeeper program would initially cost $130 billion. Now it appears they overestimated it by $60 billion. That was driven by the idiosyncrasies of who would be eligible at the employer end – from the self-employed to big business and everything in between.

Given the limited time window, forgive the Treasury and Tax Office for not landing estimates on target. It is ridiculous to expect they could estimate such a fluid piece of legislation.

The unwelcome arrival of COVID19 and the sudden stay-at-home orders that ensued hardly gave a generous window of opportunity to apply Japanese level precision engineering to the process.

Our only criticism lies with the drip feed approach to restarting the hibernating economy. As we mentioned yesterday with respect to the 50 US states, so many appear to be copying each other rather than making bold data driven decisions based on facts not consensus.

The reality is that the Treasury will need to make many more multi billion dollar mistakes in the spirit of JobKeeper to help mitigate the damage caused by the looking trillion dollar deficits.

Perhaps the $60 billion saving can be redeployed to building a bullet train from Sydney to Melbourne. A 20-yr project that is just the type of infrastructure spending which ticks so many boxes – relieving pressure on the state capitol cities, housing, assist a growing population and provide lots of jobs.

Harley Davidson board finally ditches its pillion passenger

HD Delinq

We had been expecting for years that Harley Davidson (HOG) CEO Matt Levatich wasn’t the right person to lead the company out of years of misery. Finally, the board took that view too. In 2017 we wrote,

Harley-Davidson is suffering from divine franchise syndrome. It has failed to modernize its line up… its competitors do not seem to be suffering as BMW, KTM and Triumph hitting new shipment records.

We also wrote in 2018 that

“Harley is losing share in America, it’s largest market…Australia and Japan remain soft. Harley used to sell 16,000 units in Japan. In 2018 it will be lucky to ship 9,500.”

Unit sales in Japan fell below 9,000 units in 2019. An utter disaster.

Global sales went backwards for all 5 years of his tenure. 30+ day delinquency rates and annualised loss experiences are at 9-year highs. Instead of investing harder in solving the rout, the company embarked on an aggressive share buyback program to pad the softening earnings, which was expanded again this year, two weeks ahead of his departure.

We pondered last year,

How has CEO Matt Levatich managed to hold on over the past 4 years? Since taking the helm, volumes have fallen from 268,000 [to 228,000]. Revenues have shrunk from $6bn to $5.7bn and EBIT of $1.2bn to $733mn.”

In FY 2019 HOG global sales slumped to 218,000 units, revenues fell to $4.57bn and EBIT of $290m.

We never thought the maths added up. The strategy, which seemed formulated by a communications firm rather than one led by passionate bikers, was the problem. Its historic rival, Indian Motorcycles (Polaris Industries), has led with innovative products – such as the FTR1200 – that harked back to its flat track history. Indian parent Polaris Industries cites tough overall market conditions but is confident that “product” will be a major factor.

Image result for indian fTR750

The announcement of CEO Levatich’s departure should cause the shares to jump. The aftermarket is already showing +5%.  Going back in history, when failed CEO Jurgen Schrempp stepped down from Daimler-Chrysler, the shares added 10bn euro to its market cap the very next day. 

If Chairman Jochen Zeitz’s comments are anything to go by, Harley should bounce hard.

The Board and Matt mutually agreed that now is the time for new leadership at Harley-Davidson. Matt was instrumental in defining the More Roads to Harley-Davidson accelerated plan for growth, and we will look to new leadership to recharge our business.

The motorcycle industry needs a strong Harley. Let the healing begin.

Heathrow jettisons reality for religion

Forget economic planning for the next 20-30 years. Drag up the non-binding Paris Climate Accord (of 2015) and use it as an excuse to hobble economic growth by claiming the third runway at Heathrow Airport is illegal. Forget the fact that passenger growth is a true underlying reflection of travellers’ true feelings about climate change. When it comes to offsetting one’s own carbon footprint by electing to pay a penalty, the truth is that 98% of people couldn’t care less.

Stopping Heathrow’s 3rd runway follows a dangerous path. Surely councils can see airport expansion benefits the community more than impedes it. Why do councils fall for tales of doom spewed by activists who often haven’t the first clue about what they are protesting about other than what they have read in The Guardian or heard from Hollywood star Emma Thomson who flew in from NY to tell them to panic?

Officers at Uttlesford District Council in Essex had recommended the approval of proposals to increase London Stansted Airport’s passenger cap to 43mpa in 2018 from 35m. However, the council’s special planning committee members rejected the scheme in January 2020.

Bristol Airport applied to the North Somerset Council to expand capacity by 30% in 2017, to keep up with the faster than expected demand. It was recommended for the jobs that would be created but the council rejected it, despite assurances the airport itself would be net-zero emissions in its operations.

While the activists may well rejoice at stopping the expansion, some fast facts about Heathrow Airport should send chills down the spines of Westminster:

  1. Currently operating at 98% capacity with 473,000 flights a year (capped at 480,000). It was 350,000 in 1991.
  2. Civil Aviation Authority notes Heathrow handled 80.9m passengers in 2019 up from 63m in 2002 and 40m in 1991. 
  3. Heathrow handles 50% of all London’s flights and 27% of all UK flights.
  4. Heathrow estimates 30% for business, 35% for holidays and 35% for visiting friends and relatives.
  5. 65% of passengers are going to the UK. 35% use Heathrow as a hub to connect.
  6. 76,000 are employed at Heathrow Airport.
  7. Heathrow is the 7th busiest airport in the world.

Demand is growing. Moreover, Britain’s population is expected to swell from 66m today to over 73m by 2045, the largest country in Europe.

The simple thing is facts don’t matter. Despite today’s modern fleet of aircraft burning 15-20% less fuel and spewing far lower emissions of planes even 10 years old, hysteria wins the day.

By the International Air Transport Association’s (IATA) own admission, global air travel in totality is only 2% of man-made CO2 emissions. That is to say that all air travel is responsible for 0.00003% of CO2 in the atmosphere. Heathrow makes up 0.1% of all commercial flights globally.

Not to worry, IATA has got behind the movement to do its bit for climate change too. In a two page flyer, it covered the idea that we reckless passengers must consider our carbon footprint but at the same time help the U.N. raise $40bn in taxes, sorry ‘climate finance,’ between 2021 and 2035.

The Carbon Offsetting & Reduction Scheme for International Aviation (CORSIA) is the vehicle which the UN’s International Civil Aviation Organization (ICAO) intends to liberate us from our sins and help fund the waste so endemic in the NY based cabal. Wherever the UN is involved expect a sinister agenda behind the virtue.

All airlines have been required to monitor, report and verify their emissions on international flights since Jan 1, 2019. Operators will be required to buy “emissions units” from the UN. If one asked the UN would it prefer emissions to be cut or taxes to be raised, it would select the latter every time.

What of the UN IPCC summits going forward? How will activists, government officials and observers manage to get to upcoming climate conferences if their ability to fly is curtailed? Best allow for expansion to ensure their vacuous jollies remain uninterrupted, especially after Greta Thunberg’s efforts caused a 50% rebound in attendees at Madrid.

Forget fears of Brexit hurting the economy. Just let green councils run amock based on religion. The ultimate irony will be when airlines, bursting at the seams, request to put on larger aircraft to cope with the growth that has been restrained by the infrastructure.

XPT – Facts and Figures

Image result for xpt trains

While the media has been quick to point fingers, are there any data buried inside the annual reports and releases from NSW Trains/Transport NSW in the lead up to the tragic derailment at Wallan yesterday that point to problems?

On Feb 18, 2020, several days before the accident, Transport for NSW made the following statement:

The NSW Government is replacing the ageing NSW regional rail fleet of XPT, XPLORER and Endeavour trains, which includes trains that are up to 37 years old.”

A contract with Momentum Trains for the $2.8 billion project to design, build, finance and maintain the new regional rail fleet, along with a new purpose-built maintenance facility in Dubbo. This is an artist’s impression of the new rolling stock.

In the 2013/14 Annual Report,

Around 65 new state-of-the-art trains, including some 520 new carriages, will carry passengers to the Central Coast, Newcastle, Blue Mountains and Illawarra. The first train is expected to be in service by 2019 and the new fleet will be progressively rolled out through to 2024.” was announced. Unfortunately, 2023 is the realistic time frame for the first trains to arrive.

The 2017/18 AR also discussed the announced fleet upgrades. 
According to the 2016/17 Annual Report, “Sydney Trains is responsible for the maintenance of the rail assets. Sydney Trains charges NSW Trains for the maintenance of rolling stock, infrastructure and stations utilised by NSW Trains, and recovers associated costs.

Problems with the existing fleet were revealed relatively frequently in press releases and annual reports.

On page 25 of the NSW Trains 2018/19 Annual Report, it clearly states,

Temporary speed restrictions impacted services to Moree, Brisbane and Melbourne during the year. Trains were required to travel at reduced speeds due to extreme weather conditions and infrastructure issues. In addition, trespass and copper wire theft in the Victorian ARTC network also affected our ability to meet the punctuality target.

The reliability of the ageing XPT fleet has affected punctuality and we are working closely with the fleet, maintainer to minimise the impact on customers.

XPT Reliability

As we can see XPT punctuality vs the other regional services it compares to shows a marked drop off to 55.7%.

In the 2017/18 Annual Report, NSW Trains noted,

Signals passed at danger (SPADs) continued to trend upwards during the reporting period. There were 39 SPADs in 2017–18, which is 15 per cent higher than the previous year.

Note in 2018/19 that had climbed again to 42.

SPAD

Lost Time Injury Frequency Rates (LTIFR), which is a combination of physical and psychological stress revealed the following. A more than doubling of the previously recorded peak. Were staff feeling the pressure of the ailing fleet and infrastructure?

LTIFR

In the 2016/17 AR further problems were flagged with infrastructure problems.

Temporary speed restrictions put in place by the Australian Rail Track Corporation (ARTC) were imposed periodically throughout the financial year and the number of these increased from January to June 2017. The speed restrictions significantly affected Intercity services on the Southern Highlands line and Regional services on the Melbourne and Canberra lines between Campbelltown and Goulburn

Copper wire theft from the ARTC network affecting signal operation on the main South line during February 2017 and June 2017 caused delays to Southern Highlands Intercity and South Regional services. To improve reliability and reduce customer delays, NSW TrainLink worked closely with ARTC and John Holland to better track work possession planning, prioritise rollingstock projects with Sydney Trains, the maintainer of the NSW TrainLink fleet, and develop plans for extreme weather conditions.

In August 2013, a big push had been rolled out to improve reliability of the rolling stock.  Rob Mason, CEO of NSW Trains said in the statement:

In addition to daily maintenance and our already high standards, there have been a number of measures implemented aimed at reducing the likelihood of faults on our XPT fleet.”

These measures include:

  • frequent replacement of components such as wheel bearings
  • an anti-corrosion program, including examinations for corrosion and minor repairs communication systems upgrades
  • establishment of a Reliability Improvement Program Team tasked with investigating incidents and creating solutions for future issues.”

In the 2017/18 AR, on p. 19 NSW Trains note,

Automatic Train Protection (ATP) is being installed on trains and tracks to boost safety across the electrified network. The ATP system monitors train speed and will alert the driver if the train has exceeded the permitted speed. It will also automatically apply the emergency brake if necessary…The first stage of the ATP System implementation (Newcastle Interchange to Cockle Creek) is planned for March 2019.

In defence of NSW Trains, the annual reports all point to the acknowledgement of the problems with rolling stock and infrastructure.  Sabotage and theft of crucial safety systems seem to have played a role. Was that responsible for the increase in SPAD incidents? Is this a factor for the crash at Wallan?

It seems that V-Line train drivers had been warned (on advice from the Australian Rail Track Corporation) on Wednesday in a memo which stated that some of its trains would be diverted through the 15km/h Wallan Loop on Thursday. Apparently, the signal hut at Wallan had been damaged by the bushfires. In December 2019, Infrastructure Australia knocked back a proposal to upgrade the line from Melbourne to Albury as a national priority.

Plenty more tales will be told as the result of the investigation but it appears that these problems have been well flagged by NSW Trains since 2013/14.

Nothing to be proud about

Biz Ivest

Flipping through the latest RBA Chart Pack, it is no surprise that business investment keeps sliding off a cliff. As a % of GDP, it has slid from a peak of 18% off the short-term trough of 14% (GFC) to 11%, which now puts it at 1994 levels. It proves the old adage that businesses don’t invest because interest rates are low, they invest because they have confidence in the cycle.

Our government should be looking at this with alarm bells. It doesn’t take too much imagination to work out that political instability has played its part.

Australia was once regarded as the vanguard of political stability in the region which made it a sensible investment choice for domestic and international investors as a place to do business. There was a comfort in knowing that there wouldn’t be revolving door prime ministers and flip flops on policy positions. After all, much business investment takes years to get to the production stage.

The Howard years saw our business investment surge. Sensible fiscal policy was a feature too. While Rudd can be forgiven for GFC causing a slump in business investment it resumed until political instability put the mocker on business confidence.

We have been running deficits ever since and cranking up the national debt (we wrote about it here) because it is clear we don’t have sensible free-market conditions to self sustain direct investment at anywhere the levels we need.

Instead, we kowtow to radical activists who try to stop investment in projects like Adani and conduct illegal secondary boycotts on businesses like Greyhound Australia and Siemens without repercussions.

Whether coal is evil or not is irrelevant. The problem is such activism, which is further supported by ideologically corrupted government environmental departments – that push their own agenda on granting approvals – doesn’t endear domestic industries or foreigners to invest in us. These are dangerous precedents. All of this tokenism when we only need look at the realities of what will happen down the line.

Don’t take our word for it. Even our domestic businesses are leaving.

Thanks to Australia’s ridiculous energy prices, Aussie company Bluescope confirmed the expansion of capacity in Ohio. In Feb 2019, the company CEO said, “much cheaper energy in the United States is a major driver of the company’s preparedness to invest in a $1 billion expansion in Ohio.”

In 2017, Tomago Aluminium reported, “We have to grow to be competitive and to be ahead of the curve, but when the spot price went to $14,000 [per megawatt hour] we had to take that load off. It’s just not sustainable. You can’t smelt at that price. We have had to curtail or modulate the load [on occasions] or we get hammered by the price…We cannot continue to keep paying those prices. We have to find a solution. The prices are crippling”

Aust Manuf.png

Unfortunately, 28 years of unfettered economic expansion has made us complacent. We think this economical miracle has no off-ramp.

None of this is remotely surprising.

Can we honestly say that the impact of higher electricity prices hasn’t been a factor in pushing away investment in engineering and manufacturing? So this mad push for renewables will not alleviate this pressure. Germany is the perfect beta-test crash dummy. It predicted flat prices. They doubled from those forecasts.

GEP.png

Yet our political class is playing with fire.

We never thought Australia was realistically going to have a surplus when it was announced. Secretly there must be a sigh of relief in Treasury that the impacts of the bushfires and coronavirus will provide a convenient scapegoat to miss those targets under the premise of ‘doing the right thing.’  And no that does not mean the government is glad those two catastrophes have happened from a humanistic approach.

We need proper reforms. We need to ditch these notions of political correctness in public policy. We are as unimaginative as many other governments around the world. Living on a low-interest rate fuelled debt bomb. Kicking the can down the road simply does not work. Why aren’t politicians convicting their cases with evidence rather than folding to ideological positions held by fringe dwellers on Twitter?

When we visited Israel on a business delegation in 2018, Israeli PM Benjamin Netanyahu uttered the only 4 words that mattered for investors – “we want your business.” The innovation nation knows what it is good at and is prepared to back it to the hilt.

It would be so nice if our government spent some time in Israel to discover that we have it all wrong. Because we are only storing up a rude awakening. When our economy does suffer from the eventual ramifications of all of that lack of investment, the public will be howling that they can’t pay their mortgages, that they can’t get decent jobs and they can’t keep the lights on. None of that would have been necessary if they had been more open to business.

The ultimate result will be that we’ll put ourselves deeper into debt to fund some monster infrastructure projects that will provide short term relief, not long term solutions.

The foreign investors that could have helped had we treated them in a more dignified fashion will just buy our assets at fire-sale prices instead. Then we’ll have another moment to howl at the moon.

That will be the true price of our complacency. Experience is a hard teacher. You get the test first and the lesson afterwards.

Aspirational Goulburn is growing so fast it even has an Aston Martin Drive

5 years ago, this area was a barren wasteland on the outskirts of Goulburn, a country town around 200km south of Sydney. 1 hour north of Canberra.

Just look at how many new homes have been built since then. 100s. More under way.

One wonders if this neighborhood has a high water market for aspirational car ownership with an Aston Martin Drive as one of the street names.

In 2010 Goulburn Mulwaree Council had 28,000 residents. It is forecast to be around 31,000 this year, or an 11% jump. Goulburn City itself has grown from 22,017 in 2012 to a projected 23,500 in 2020, or a 7% rise.

The question remains will the infrastructure keep up?

The link between laundry and high speed rail

Having lived in Japan for two decades, it was so easy to take things such as this dry-cleaning message for granted. The way it was put in a plastic zip-lock bag with the item stuck to the docket. Complete attention to detail.

I didn’t realise how much I missed this part of the culture. Yet it transcends across every facet of life.

Take the bullet train. JR Central, the owner of the main Tokaido Line reported the following in its latest annual report.

In over 50 years there have been zero accidents. The railway has spent JPY3.5 trillion with a “t” ($35bn) in safety and maintenance alone. Safety and reliability are paramount to growing ridership.

The train runs 368 services a day servicing 466,000 passengers. It had an average delay of 0.7 minutes per train service. For the environmentalists, the Tokaido Line emits 1/12th the CO2 per passenger of a commercial aircraft. So there is a green lining too.

When attending the Australia vs NZ cricket on a hot day earlier in the month, “The Light Rail Service has stopped working. Buses will operate in their place” popped up on the big screen. The entire 30,000 crowd burst out into spontaneous laughter. How much bigger joke could this project get? How can it take 50 minutes to get to Randwick from Circular Quay?

In short, a French designed train built in India couldn’t operate because the temperature expanded the track causing it to become jammed. If being delayed for over one year wasn’t embarrassing enough, who knew Australia had hot days from time to time?

Our Sydney Metro has also been plagued by setbacks. Same situation. French designed trains made in India. Breaking down in tunnels and so forth. Driverless they may be but rudderless too.

Yet the Japanese are about to take the bullet train to a new level. The MAGLEV will allow passengers to get to Nagoya from Tokyo (300km) in 40 minutes! Imagine a trip to Canberra in that time? Tokyo to Osaka (500km) will only take 67 minutes.

If we think that Australia has grown its population by 2.2m (+10%) since 2013, our airports won’t be able to handle the extra expansion. At the moment, there are 54,500 flights annually between Sydney and Melbourne. On a daily basis around 27,000 people make this pilgrimage.

By comparison, the Tokaido Line runs around 78,000 passenger per day bettwen Tokyo and Nagoya. 145,000 between Tokyo and Osaka.

High speed rail is a no brainer for Australia. As a former ANU student some 30 years ago, I often made the journey from Sydney to Canberra. The distance between Liverpool and Campbelltown is around 20km. 30 years ago they were separated. Now housing has expanded from either direction along the Hume Highway such that the two towns are more or less connected by numerous new suburbs. The population is putting pressure on new housing.

Many public servants who work in the nation’s capitol, Canberra, now live in Goulburn, a country town some 45 minutes out. Shuttle buses now run between the two towns such has been the trend.

If the population keeps expanding at a 10% clip every 6 years, the infrastructure just won’t keep up. If Australia isn’t thinking about high speed rail for much longer, it will be too late. To think such rail infrastructure will take 20 years to execute.

The record tells us that the Japanese are the best partners to develop the HSR in Australia. Surely we have had enough bad experiences with the French to date to want to have them run another project. Trains or submarines. The Chinese have hardly ingratiated themselves by canceling visas of our politicians. They don’t have the safety record of the Japanese, either.

The Japanese build things to last. Is it any wonder the Japanese ensure the sleepers have higher volcanic ash content to ensure their long-life? Not in China. Hence why one of China’s high speed trains derailed in 2011 because of a cracked sleeper with lower ash content. Even worse the authorities ended up just digging a hole and pushing the crashed rolling stock in and burying it.

The Taiwanese have probably made the most sensible recent HSR investment. Ridership has grown from 15.5 million in 2007 to around 67.4 million today. Punctuality is also 99.8%. Sound familiar? It should do.

The Japanese-led Taiwan Shinkansen Consortium won the contract by a combination of soft loans and flexible structures. The Taiwanese government also introduced flexible depreciation, refinanced the debt terms and bought a majority of the publicly listed railway. It has now made capital gains on its investment! They bought Japanese rolling stock made by Kawasaki Heavy Industries which has been bulletproof.

So it is high time the Australian and state governments started to think about getting their act together on HSR. Japanese technology is the only sensible option. It is competitive, reliable and if you have had any friends attended the Rugby World Cup last year, they’ll all tell you how amazing the bullet train was.

Oh and the airlines should love the high speed rail as it will free up slots to use on better routes. Even better they could be partners to running the rail operating system.

Buhahahahaha

In 1999, CM was told by the pro-EV lobby that electric cars would be 10% or the market by 2010. In 2019 EVs are struggling to nudge 1.3%. If EV’s have managed to achieve much more than 10-12% by 2035 it will be a miracle.

10 reasons it will be highly unlikely:

1) Australia sold just over 1.15m cars in 2018. In 2008, SUVs comprised 19% of total sales. Today 43%. So much for the unbridled panic about catastrophic climate change if consumption patterns are a guide.

2) Australian fuel excise generates 5% of total tax revenue. It is forecast to grow from $19bn today to $24bn by 2021. If government plans to subsidize then it’ll likely to add to the deficit, especially if it lobs $5,000 per car subsidies on 577,000 cars (50% of 2018 unit sales in Australia).

CM has always argued that governments will eventually realize that moving to full EV policy will mean losing juicy ‘fuel excise’. Point 16 on page 19 for those interested.

Cash strapped Illinois has proposed the introduction of a $1,000 annual registration fee (up from $17.50) to account for the fact EVs don’t pay such fuel taxes. Note Illinois has the lowest investment grade among any other American state and has to allocate 40% of its budget just to pay outstanding bills. It is also home to one of the largest state pension unfunded deficits per capita in the country.

3) cash for clunkers? If the idea is to phase out fossil fueled powered cars, surely the resale/trade in values will plummet to such a degree that trading it on a new EV makes no sense at all. False economy trade where fossil fuel owners will hold onto existing cars for longer.

4) Global EV production is 2.1m units. Looking at existing production plans by 2030, it is likely to be around 12mn tops on a conservative basis. Australia would need want 5% of world EV supply when were only 1.2% of global car sales. Many auto makers are committed to selling 50% of EV capacity into China. So Shorten will be fighting for the remaining pie. No car makers will export 10% of all EV production to Australia without substantial incentives to do so.

Don’t forget Alexandria Ocasio-Cortez also intends to get every fossil fueled powered car off the road in a decade. The US has 270 million registered vehicles, the overwhelming majority being petrol powered. The US sells 16-17mn cars a year (sadly slowing). Therefore in the US, 16 years would be required to achieve that target.

5) Ethics of EVs. To save the planet, the majority of cobalt to go into making the batteries comes from African mines which use child slave laborers. There is a moral scruple to keep a virtue signaling activist awake at night!

Not to worry, Glencore has just announced last week it is closing its cobalt capacity in DR Congo which will flip the market from surplus to deficit (at 1.2% global market share). Oops.

6) EV makers aren’t happy. In Europe there are over 200 cities with EV programs but none are alike. In the quest to outdo each other on the virtue signaling front, car makers are struggling to meet such diverse requirements meaning roll outs will be slow because there is no movement to standardize.

7) EV suppliers aren’t convinced. Because of the above, many EV suppliers are reluctant to go too hard in committing to new capacity because global car markets are slowing in China, US, Europe and Australia. High fixed cost businesses hate slowdowns. Writing down the existing capacity would be punitive to say the least. New capacity takes a minimum of 2 years to come on line from conception.

8) The grid! In the UK, National Grid stated that to hit the UK targets for EVs by 2030, an entirely new 8GW nuclear plant would be required to meet the demands of EV charging. Australia can barely meet its energy needs with the current policies and doubling down on the same failed renewables strategy that has already proved to fall well short of current demand ex any EVs added to the grid.

9) in 1999 automotive experts hailed that EVs would make up 10% of all vehicle sales by 2010. In 2019 EVs make up around 2.5%. So 9 extra years and 75% below the target. The capacity isn’t there much less consumers aren’t fully convinced as range anxiety is a big problem.

10) charging infrastructure is woefully inadequate. Await another taxpayer dollar waste-fest. Think NBN Mark II on rolling EV chargers out nationwide. The question then becomes one of fast charger units which cost 5x more than slower systems. If the base-load power capacity is already at breaking point across many states (Vic & SA the worst) throwing more EVs onto a grid will compound the problem and drive prices up and potentially force rationing although people look to Norway.

Norway is a poor example to benchmark against. It is 5% of our land mass, 1/5th our population and new car sales around 12% of Australia. According to BITRE, Australia has 877,561km of road network which is 9x larger than Norway.

Norway has around 8,000 chargers countrywide. Installation of fast chargers runs around A$60,000 per unit on top of the $100,000 preparation of each station for the high load 480V transformer setup to cope with the increased loads.

Norway state enterprise, Enova, said it would install fast chargers every 50km of 7,500km worth of main road/highway.

Australia has 234,820km of highways/main roads. Fast chargers at every 50km like the Norwegians would require a minimum of 4,700 charging stations across Australia. Norway commits to a minimum of 2 fast chargers and 2 standard chargers per station.

The problem is our plan for 570,000 cars per annum is 10x the number of EVs sold in Norway, requiring 10x the infrastructure.

While it is safe to assume that Norway’s stock of electric cars grows, our cumulative sales on achieving plan would require far greater numbers. So let’s do the maths (note this doesn’t take into account the infrastructure issues of rural areas):

14,700 stations x $100,000 per station to = $1,470,000,000

4,700 stations x 20 fast chargers @ A$60,000 = $5,640,000,000 (rural)

4,700 stations x 20 slow chargers @ A$9,000 = $846,000,000 (rural)

10,000 stations x 5 fast chargers @ A$60,000 = $3,000,000,000 (urban)

570,000 home charging stations @ $5,500 per set = $3,135,000,000 (this is just for 2035)

Grand Total: A$14,091,000,000

Swedish study on EV CO2 footprint will surprise

The IVL Swedish Environmental Research Institute was commissioned by the Swedish Transport Administration and the Swedish Energy Agency to investigate lithium-ion batteries climate impact from a life cycle perspective. Let’s not forget the left leaning pro-climate change Swedish government promoted the study.

The 2017 report showed that battery manufacturing leads to high emissions. For every kilowatt hour of storage capacity in the battery generated extra emissions of 150 to 200 kilos of carbon dioxide already in the factory. Regular EV batteries with 25–30 kWh of capacity will result in 5 metric tonnes CO2, which is equivalent to 50,000 km driving in a regular, fuel-efficient diesel vehicle.

If we use those IVL metrics on the Tesla Type S 100D battery pack of 100kWh, the car has done 167,000km worth of CO2 before its left the factory. So that would mean 20 metric tons of CO2 per car without taking into account any charging from the grid which is largely fossil fuel derived in most countries.

A 2019 model year BMW 530d diesel emits 138g of C02/km. So it can travel 145,000km just to match a car with a 100kWh battery pack before it leaves the dealership floor.

Does Australia really want 50% sales in EVs if the metrics are this bad?

The irony is that despite the evidence provided by the study, PM Stefan Löfven wrote on a Swedish Government website, “No new petrol and diesel powered cars will be sold after 2030. So we reduce the large climate emissions from the transport sector.

So in order to stay aligned with the Paris Accord, promoted by a U.N. body that has been caught out in numerous climate data manipulation scandals and climb downs from countless hysterical claims, Sweden’s left-leaning government skips over reality.

Where have we heard this before? Martin Kinnunen, climate policy spokesperson for the Swedish Democrats said,

It is a very radical proposal and I think you should be careful about predicting technology development in this way. It is simply unrealistic to have a ban in place already in eleven yearsIt can be difficult for many people who live in some parts of the country to have a car, and it can be very costly for those who must have a car

Only goes to prove that virtue signaling ignores facts. Never mind that the industry can’t adapt that fast. Never mind the environmental footprint on a life cycle basis. Just change the starting point then promote themselves as one of the good guys saving the planet when all that is happened is to set in motion actions that will damage her more than they would have otherwise by allowing the industry to set the technological benchmarks instead.

Bill Shorten’s electric dreams are our nightmare

Image result for fuel bowser out of use

When will politicians wake up? How can they honestly believe their targets are remotely achievable if the industry is not even in the ballpark to being able to supply those promises? Take the ALP’s plan to make electric vehicles (EVs) 50% of new car sales by 2030.

In 2018, 1,153,111 new automobiles were sold across Australia. This plan is so easily destroyed by simple mathematics, something CM did in 2017 when Macron waxed lyrical about 100% EV sales by 2040. The only 100% certainty is that Bill Shorten won’t hit the 50% target by 2030. Do we need the government to tell us what cars we wish to buy?

The first problem he will encounter is overall consumer demand for EVs. Few suit the diverse needs and utilities (e.g. boat enthusiasts who require towing capacity unmet by all current EVs or parents who need 7-seaters to ferry kids to footy) of individual buyers. If the types of EVs available don’t match the requirements of the users then few will see the point to buy one no matter what the subsidy. In 2008, SUVs were 19% of Aussie new car sales. It is 43% today. So much for the climate change fearing public voting with their wallets! That is the first problem.

Why is the government meddling in an industry they know next to nothing about? Having a zero emissions (ZE) target is one thing they might aim for, however why not tell auto makers they need to attain that goal but will be granted complete technological freedom to achieve it? If the auto makers see necessity as the mother of invention, who are regulators to dictate the technology? If an internal combustion engine can achieve ZE does that not meet the goal?

It stands to reason we should question those with the least idea on the technology to dictate the future. The ZE appeal of EVs is an ineffective virtue signaling device to voters.

If we look at Euro emissions regulations introduced since 1993, substantial progress has been made in the last 20 years. Euro 6 started in 2015. For diesel particulate matter, emissions are 97% down on Euro 1 (1993) and NOx down by 95% over the same period.

The irony here, is that governments have these thought bubbles and then consult the industry afterwards to see if those promises can be fulfilled. CM spoke to multiple global auto suppliers in the EV space at the Tokyo Motor Show in 2018 and this is what was said,

“So haphazard is the drive for EV legislation that there are over 200 cities in Europe with different regulations. In the rush for cities to outdo one another this problem will only get worse. Getting two city councils to compromise is one thing but 200 or more across country lines? Without consistent regulations, it is hard for makers to build EVs that can accommodate all the variance in laws without sharply boosting production costs…

…On top of that charging infrastructure is an issue. Japan is a good example. Its EV growth will be limited by elevator parking and in some suburban areas, where car lots are little more than rental patches of dirt where owners are unlikely to install charging points…

…Charging and battery technology will keep improving but infrastructure harmonisation and ultimately who pays for the cost is far from decided. With governments making emotional rather than rational decisions, the only conclusion to be drawn is unchecked virtuous bingo which will end up having to be heavily compromised from the initial promises as always.

So the suppliers aren’t on board for a start. They know their car manufacturer clients rather well and if they aren’t buying it, auto makers can’t sell it. Slowing sales worldwide adds to reluctance to add to expensive fixed cost capacity at the top of a cycle.

We have proof of this. Note what we wrote in 2017:

It isn’t a big surprise to see national governments virtue signal over climate abatement. The UK swiftly followed French plans to ban the sale of petrol/diesel cars from 2040. However, let’s get real. Government proactivity on climate change may appear serious but the activities of the auto industry are generally a far better indicator of their lobby power. As a car analyst at the turn of the century, how the excitement of electric vehicle (EV) alternatives to internal combustion engines was all the rage. Completely pie in the sky assumptions about adoption rates…

…In 1999 industry experts said that by 2010  EVs would be 10% of all units sold. Scroll forward to 2019 and they are near as makes no difference 2.5% of total vehicle sales…talk about a big miss. 10 years beyond the prediction, they’re only 25% of the way there. Pathetic. 

CM also discussed in this report, 30 reasons Tesla would be a bug on a windshield;

“To prove the theory of the recent thought bubbles made by policy makers, they are already getting urgent emails from energy suppliers on how the projections of EV sales will require huge investment in the grid. [Mr Shorten, will we have all these cars recharging overnight using renewables? Solar perhaps?] The UK electricity network is currently connected to systems in France, the Netherlands and Ireland through cables called interconnectors. The UK uses these to import or export electricity when it is most economical. Will this source be curtailed as nations are forced into self-imposed energy security by chasing unsustainable products?

The UK’s National Grid said that the extra capacity required just to charge EVs would require another new Hinkley C nuclear plant to cover it. Will people choose between watching  premiership football on Sky Sports or charging their car?

Car makers can’t produce at the desired speed and energy suppliers don’t have the excess capacity required to charge. Slightly large problems. We don’t need to look at failed EV policy to show government incompetence. Germany totally fluffed its bio-fuel promise back in 2008 that even a Greens’ politician ended up trashing it.

“The German authorities went big for bio-fuels in 2008 forcing gas stands to install E-10 pumps to cut CO2. However as many as 3 million cars at the time weren’t equipped to run on it and as a result consumers abandoned it leaving many gas stands with shortages of the petrol and gluts of E-10 which left the petrol companies liable to huge fines (around $630mn) for not hitting government targets.”

Claude Termes, a member of European Parliament from the Green Party in Luxembourg said in 2008 that legally mandated biofuels were a dead end…the sooner it disappears, the better…my preference is zero…policymakers cannot close their eyes in front of the facts. The European Parliament is increasingly skeptical of biofuels.” Even ADAC told German drivers to avoid using E10 when traveling in other parts of continental Europe.

Starting with the basics for Australia.

If we take 50% of total car sales in 2018 as the target by 2030, Shorten needs to sell 576,556 EVs per annum to meet his bold target.

Let’s deal with the elephant in the room – note that petrol excise is currently around 4.7% of total federal tax take (c. $19bn) and likely to grow to c.$23bn by 2021. Even if we were to assume that we achieved Shorten’s targets based on a flat overall car market by 2030, Shorten’s tax receipts from the fuel excise would collapse and only be amplified by subsidies paid on 576,556 EVs. Throw the global average of $6,000-10,000  in incentives per EV and we’ve quickly racked $3-5bn per annum in subsidies.

Then will he offer cash for clunkers (C4C) for the poor owners of fossil fuel cars? Many car owners would require a hefty slug of C4C to offset the massive depreciation that would ensue on a trade in of a fossil fueled powered car. People are going to want decent trade ins, not 5c in the dollar of what they would have got had the government not attacked car owners. The changeover price matters. Shorten  may well get his 50% by halving the industry.

Should we also consider whether fuel taxes should be replaced by electricity taxes? If that ends up all we drive who is to stop it? Surely the maintenance of roads and related infrastructure which we’re told our fuel taxes pay for the upkeep will still need to be funded by heavier EVs.

Take the Tesla Model X 100D. It weighs 2,509kg, 49% heavier than an equivalent BMW 5-series. The heavier the car, the more damaging to the road. Such is the progress of the Nissan Leaf that the kerb weight has risen in the new model to 1,538kg on the original, or 400kg heavier than a petrol Toyota Corolla. EVs are fat.

Global EV sales units were 2.1mn last year. Total car sales were 79m odd. Let’s assume auto makers could conceivably increase capacity by 2m every 2 years (plants take 2 years to build and those poor Congolese child slave laborers will be run off their feet digging for cobalt to go in the batteries) then conceivably 30mn cumulative EV units could be built by 2030. Unfortunately VW gave the real answer on how they view EVs.

“Volkswagen makes an interesting case study. After being caught red handed cheating diesel emissions regulations (a perfect example of how little VW must believe in man-made global warming) they were in full compliance at the 2017 Frankfurt Motor Show telling the world of their $80bn investment in EVs out to 2030, 300 new EV models comprising 3 million units in 25 years of which 1.5mn would be sold in China. 3 million cars would be c.30% of VW’s total output today.”

However auto makers are faced with a conundrum. Chinese car sales are slowing. US car sales are slowing. European car sales are drifting and Aussie car sales are weak. Capex into EVs will be a very gentle process. They don’t want to plug in massive investments into new capacity if end demand is likely to remain soft. That is basic business sense. Note parts manufacturers need to be convinced that building new plants alongside makers is sustainable. Many are gun shy given the OEMs sent many parts suppliers into receivership the last cycle.

Ahh but EVs are less harmful to the environment. Are they?

The IVL Swedish Environmental Research Institute was commissioned by the Swedish Transport Administration and the Swedish Energy Agency to investigate lithium-ion batteries climate impact from a life cycle perspective.

The report showed that battery manufacturing leads to high emissions. For every kilowatt hour of storage capacity in the battery generated emissions of 150 to 200 kilos of carbon dioxide already in the factory. Regular EV batteries with 25–30 kWh of capacity will result in 5 metric tonnes CO2, which is equivalent to 50,000 km driving in a regular, fuel-efficient diesel vehicle.

Another study by the International Council on Clean Transportation (ICCT) showed that depending on the power generation mix, an all EV Nissan Leaf in the US or China was no better than a 2012 Prius. Countries with higher relative nuclear power generation unsurprisingly had lower CO2 emissions outcomes for EVs. By deduction countries with higher shares of coal or gas fired power negated much of the ‘saving’ of an EV relative to gasoline power.

So pretty much on all measures, Bill Shorten’s misadventure on EVs will be a complete dud. If only he’d consulted with the industry before celebrating how “woke” he is. He’s simply not.