NEWS

Why Romney Is Wrong to Give Up on Electric Cars

In the first presidential debate, Mitt Romney ridiculed President Obama for backing “loser” companies like electric-car makers Tesla and Fisker, which both received low-interest loans from the Department of Energy in the first year of the Obama administration. The loan program for alternative-energy vehicles was actually created by the Bush administration, but never mind that. And Romney was wrong to tag the companies as “losers” when they are both solvent and growing, but never mind that either. The interesting question is whether he will be proven right in the long run. Will the U.S. government’s investments in electric cars jumpstart an industry and power a renaissance in the nation’s auto manufacturing sector? Or will those investments go to waste, as the cars of the future are built overseas?

In theory, electric cars offer a rare opportunity for the United States to reassert its place at the center of the auto-manufacturing world. The technology is still in its infancy, and so far the companies at the forefront of electric-car innovation are startups like Tesla rather than established players like Ford, Honda, or Mercedes. Because electric vehicles have a fundamentally different powertrain than gas guzzlers, a young electric-car company needn’t necessarily set up shop near existing automotive hubs such as Detroit, Stuttgart, or Nagoya. The field is open.

In many other industries, globalization has rendered American manufacturing uncompetitive, because it’s cheaper to build things elsewhere and import them. But unlike clothing or iPhone components, vehicles tend to be produced in high-income countries with expensive labor. That’s because labor isn’t the most important input in vehicle manufacturing, especially on today’s highly automated assembly lines.

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