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Taxpayers shouldn't be asked to fork over $7,500 per vehicle sale for cars most can't afford themselves
View related content: Environmental and Energy Economics
For the first time in a few years, electric cars are mostly an afterthought at the auto show in Detroit.
To be sure, electric cars and hybrid electric models are on the show floor and still being promoted at various intensity levels by Detroit’s automakers as well as Japanese companies and upstarts building — but not selling many — high-priced, electric sports cars. But the niche vehicles are not as prominent this year as in past years.
That’s a good thing.
Electric vehicles aren’t the answer to curbing America’s dependence on foreign oil or putting a dent in climate change.
That is evidenced by lackluster sales of the vehicles that came propped up by generous taxpayer subsidies and corporate purchases that distort the actual demand by everyday consumers.
General Motors Co., for example, sold 7,671 Volts, far fewer than its goal of 10,000 and the company didn’t break down how many of those sales were to showroom shoppers or to government or corporate fleets. Nissan Motor Co., another big promoter of electric vehicles, sold 9,674 all-electric Leafs, according to Autodata Corp.
“Costs have not dropped to become competitive with gasoline-powered vehicles and the environmental and economic benefits of electric cars are likely to be relatively modest.”–Mark J. Perry
By now, you’d think that the government would have stopped forcing American taxpayers to subsidize the electric car. It really never should have picked one automotive technology over another in the first place.
Subsidizing the electric car has been a devil’s bargain, making the development of other alternative technologies such as conventional hybrids and advanced gasoline engines all the more difficult.
Though it’s certainly the case that electric cars and trucks are part of our automotive future, taxpayer subsidies for EVs should be phased out as an unneeded cost at a time of enormous federal budget deficits. The national debt has surpassed $15 trillion.
There seems little doubt that the Obama administration’s prime justification for subsidizing electric cars and plug-in hybrids — the fear that U.S. oil imports would keep rising — was way off base.
Oil imports were down to a 16-year low of 45.4 percent of domestic consumption in 2011, from a high of 60.3 percent in 2005.
And American refineries are so flush with gasoline, diesel oil and other petroleum products that the U.S. became a net exporter of fuel last year for the first time since 1949.
Subsidies for electric cars were also supposed to lower their operating costs so that popularity of the vehicles could reduce global warming. President Barack Obama predicted that 1 million electric cars would be on the road by 2015.
Sales lagging badly
But electric car sales are lagging. Costs have not dropped to become competitive with gasoline-powered vehicles and the environmental and economic benefits of electric cars are likely to be relatively modest.
And, everyone knows that electric cars are too expensive.
The average American can’t afford an electric car, no matter what the model is. Even with a federal tax credit of up to $7,500, the $40,000-plus price of a Chevy Volt is about double that of a comparable gasoline model.
That’s not to suggest that consumers don’t care about fuel efficiency. They do. GM sold 231,732 Chevy Cruzes in 2011. The compact car gets close to 40 miles per gallon and the Eco version gets 42 mpg on the highway, according to the Department of Energy. It also costs far less at a starting price of about $17,000.
Revealingly, most of the Volts are sold in California, where buyers receive an extra tax credit of $1,500 and an additional bonus — electric cars can drive in HOV lanes on California’s clogged freeways.
It is highly unlikely that GM will double or triple those sales this year. In December, GM CEO Dan Akerson said the company planned to sell 45,000 Volt’s this year.
Let market decide
The case for subsidizing electric cars was questionable from the start and is now a boondoggle.
Like many green initiatives promoted by the government and paid for by the American taxpayers, the electric car is more politically than performance or economically driven. Its subsidies and the government-imposed green energy mandates are contrary to the free market principles that undergird our economy.
What emerges most forcefully from experience with the electric car is that subsidies are a waste of taxpayer money. Although the government has provided plenty of help for electric vehicles, there remain major barriers in technology, cost and performance.
As battery technology improves and charging stations proliferate, we will eventually move to an electric-car future.
But the outcome of EV development needs to be like that of the internal combustion engines: the government doesn’t have to subsidize regular cars because long ago, it became worthwhile for companies to do it themselves with rebates, discount pricing, and other promotions.
Fed support unnecessary
Private businesses will fund new technologies when there is a reasonable chance of commercial success. The private sector is entirely capable of developing EVs and other new automotive technologies without the need for subsidies.
When a new technology is economically viable, then government support is not needed. But if a technology isn’t capable of surviving on its own, there’s no amount of taxpayer support that will make it so.
It’s time to pull the plug on politically motivated taxpayer subsidies for electric cars and see if they can survive on their own in the marketplace.
Mark J. Perry is a scholar at AEI
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