Central Planning Fails Again: Electric Cars Edition

SCMP: Is China’s electric car dream turning into a zombie nightmare?
The company, founded six years ago, had planned to be churning out 100,000 small and mid-sized battery-powered sedans a year by now – twice as many as Tesla produced last year – but only a few dozen workers can be seen at the factory, where a handful of finished sample cars sit on display stands in a corner.

That’s not much of a return for millions of yuan in provincial and city government assistance, but is symptomatic of the plight of many Chinese cities frantically searching for hi-tech white knights capable of rescuing local economies from collapse.

...Scott Kennedy, a director at the Centre for Strategic and International Studies, a Washington-based think tank, said subsidising a new electric car “makes no sense”.

“There are likely dozens, or hundreds of similar useless efforts occurring throughout the country, not just in electric vehicles, but in semiconductors, renewable energy, robotics, big data, and other high-priority technologies where subsidies are flowing faster than water through the Three Gorges,” he said.
In many, if not most of these cases, the failed projects are local initiatives. Central planning is a horrible idea for any complex system, but at least in the case of a steel mill or coal mine, the technology and process are known. With technology, there are too many unknowns and too much failure. Local Chinese governments want guarantees, not uncertainty, and the result is massive capital destruction. At least in a free economy, the capital destruction serves a purpose because new companies try new approaches, teaching the next company what not to do. In China, many governments choose the same path of failure, the result is total destruction. Even if they're wedded to the idea of central planning, a better approach is to create low cost factors of production, overproduce on something that at least has marginal demand, such as electricity. For example, if I wanted my roads filled with electric cars, I would build several advanced nuclear reactors first, enough to produce an oversupply of electricity. Then even if the cars fail, the locals might be able to earn money doing something else, like mining Bitcoins.

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