Green Update: Where Are We Going with Electrified Cars?

January 3rd, 2012

The Ray: Kia’s first production EV

My old hometown paper, arbiter of liberal truth and exposer of Congressional dysfunction, has actually praised the recent move by Congress to abandon the tax credit for ethanol (and the import tariff). Still more astonishing, the Washington Post proposed abandoning the $7,500 tax credit for buying electric cars and the $1,000 credit to buy a charger.

And you know what? They were right. While the auto companies still keep pushing out new ones (see Kia above) and putting out battery fires, EVs and other electrified vehicles haven’t had a very good year. The Financial Times offered a good summary of the industry’s problems.

I would love to see a big chunk of money going to subsidize R&D for battery technology, for instance, or alternative fuels. The Internet and the Interstate Highway System are often cited as socially useful instances of government support. But it’s wrong to back products that people cannot or won’t accept.

More supply of better cars may be the answer in Europe, but it won’t do the job here. The demand equation is different, and people are not going to pay premium prices for cars that don’t deliver the U.S.-style performance/convenience they want. Meanwhile, Americans show little outrage at the story about Chevy Sonics delivered with missing brake pads.

Making Fisker Karmas in Finland

EVs, for most, just don’t cut it against gas-powered cars that have greatly improved and cost much, much less. So the buyer subsidies offered in the U.S., Britain and France haven’t worked for the industry. And what is the sense of giving a tax credit to buyers and “soft loans” to companies to sell basically undeveloped, under-performing, overly costly products?

The Truth About Cars ran a story about the WaPo editorial with a string of interesting comments. One of which (scroll down to dwford) was: “Subsidizing EVs is like subsidizing coffee makers that only make a 1/2 cup at a time, with an hour before you can get the other 1/2 cup.”

The long-term answers are, right now, politically impossible. They are, first, establish a workable 10-year energy policy to deal with the realities of the marketplace and global warming while creating eventual independence from oil. Remove all subsidies, especially those for the oil industry and other special-interest perks like the mortgage deduction. Institute a carbon tax. Accept the fact that all this will, short-term, cost massive amounts of money.

Oil prices, as we have said, are bound to rise. Our dependency increases tenfold the political instability in the world, as we are witnessing in the recent Iran situation. So, one of these days, U.S. consumers are going to have to pay the real market price of gasoline, not the pegged, subsidized, low-tax price we now enjoy.

Killing off the $7,500 tax credit for EVs is a drop in the deficit bucket. Short-term, Mr. Obama should convene a task force to get a serious energy policy underway and start preparing the American people to undergo some real pain in getting off their addiction.

The administration has really been practicing supply-side economics with these subsidies, which is a great irony. What they need to do is help the industry solve its R&D problems with EVs so that, finally, they may become a real value proposition for buyers.

EVs, finally, will be a big element in solving our transportation needs. Do you agree?

—jgoods

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  1. Randy
    January 3rd, 2012 at 14:50 | #1

    As with most market-manipulation by government, the EV subsidy is absurd because EV maker simply spike the price of hybrids and EV’s to collect the subsidy themselves. If you think most hybrids are overpriced, check the price, compare it to the conventional model, and then compare all that to the price of a popular non-subsidized model like the Prius. You’ll see why the Prius sells so well and others don’t.

    The major problem with EV technology, besides the price, is the lack of range. Between the two, few drivers are interested. I was interested in buying an EV like the Leaf because the range is more than sufficient for my daily driving needs, until I checked the price, which was rediculous for a crackerbox. Frankly, I could buy a very efficient vehicle that was actually luxurious compared to the Leaf and have plenty of money left to buy fuel, so why bother with the hassles of an EV?
    If you want to see the lack of future for the EV, look to Europe where cars are much smaller and ranges are short. There’s little interest in EV technology there, evn in countries with highly developed and cheap electrical grids.
    If the US wants to spend some subsidy money intelligently, they should spend it to get these 100 pound housewifes out of their Escalades, Hummers, Excursions and equally oversized gas hogs that they use to pick up their kids and get groceries. On second thought, making people pay a substantial penalty for fuel and registration for vehicles that they can’t justify might make more sense.

  1. January 4th, 2012 at 05:01 | #1