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.
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?