Auto buybacks: Cash for ICE -- Accelerating the Transition to EVs (and AVs while we are at it)

Apr 1, 2021

One of the undiscussed features of transport electrification is the large number of internal combustion engine (ICE) vehicles that will remain on the road in the absence of prohibition.

There are many stranded incumbents like service stations and their upstream suppliers who will continue to provide fuel for the remaining vehicles, and that fuel will have a lower and lower market price (sans taxes), as demand will have dropped and the supply will not, and existing producers will have huge incentives to pump fuel while it still has some market value.

Consumers with older cars will be reluctant to replace their working vehicle when low fuel prices abound. Many just like their cars, and the smell of gasoline is an attractant for some.

To accelerate the transition, governments will step in and buy back older cars for recycling. At first this will be voluntary, then it will be mandatory.

Governments won't simply confiscate property, that goes to far. Instead governments will refuse to register vehicles that pollute above some threshold, for instance, (a threshold that rises over time) and thereby keep those vehicles off public roads, only a few antiques will be permitted in the end, and then only for limited parades and displays. This will be the UK's Scrappage Scheme or US's Cash for Clunkers on steroids.

Some back of the envelope math follows: There are say 300,000,000 cars in the US by the time this gets going. (There are 286 million now!). Assume all new vehicles, and 50% of extant vehicle are electric (so this is circa mid 2030s, since by 2025 most new cars will be EVs and by 2030 essentially all new cars will be EVs). There remain 150,000,000 ICE cars left. At ~$5,000 per used ICE car, that would be $750,000,000,000 ($750B). To be clear, $750B is apparently not what it used to be, and since it would probably have to be phased in over time (say 10 years), it is only $75B/year for 10 years. (Or ~$250 per US taxpayer, or less than $1/day for 10 years to pay for an accelerated all-electric fleet).

I imagine this is implemented as $5,000 credit for trade-in toward an EV, but this would vary by vehicle of course, and rules would have to be in place about only registered and operational vehicles would be eligible to avoid paying for the wrecks in people's garages or on their front lawns.

Those turned in cars could be recycled, scrapped for parts, or converted if EV conversion technology becomes feasible, though I suspect recycling will be more cost-effective.

This transition would have many environmental and economic stimulus benefits, since these remaining ICEs would, on average, be inside older more polluting vehicles.

Whether this is economically worthwhile, or the best means to reduce carbon emissions, is another matter. However will this happen? Yes, in some form. The 2031 recession, or the 2037 recession at the latest will result in a program just like this.

[Those new EVs, by the mid-2030s, will also be Level 4 AVs for all intents and purposes, so this has numerous other safety benefits].