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“There Was No Electricity”

September 26, 2012

It looks like the big, wet kiss that Chevy is trying to give the US isn’t working, even if the governmenet thinks we’re perfect for each other.  Hot Air has the details of the CBO report on EV’s.

We’ve been pretty tough on the Chevy Volt, GM’s entry into the electric vehicle/hybrid market, over the government subsidies that have been piled onto it for production and sale.  Maybe it’s time to give the government a hearing on the efficacy of the subsidy programs.  Late last week, the CBO analyzed the outcomes of the green-tech subsidy programs aimed at promoting EVs like the Volt, and concluded that they’re not exactly successful.  In fact, the programs have a lot in common with other Barack Obama economic policies — they subsidize sales that would have taken place anyway, and end up with perverse outcomes that actually make the concerns that the programs intended to address worse.

Essentially, the subsidies going to electric vehicles appear to be going to people who probably would have bought them anyway, and the overall effect on the automobile market is to allow the auto makers to keep producing large vehicles since they’re selling these.  It helps reduce the pressure on CAFE standards.  All told, this appears to be a “perfect storm of suck,” that makes the taxpayer the butt of the joke.

I have to admit, I don’t think electric cars are a bad idea, but I certainly think that forcing them down our throats is.  There are a number of people who can afford to have a car that has limited range that doesn’t need gas to get there.  I don’t think we’ve really comprehended the impact of this approach on the power grid, but that’s a different post.  But choice is good, and there will be increased market demand for an all-electric vehicle fleet over time.

Now is not the time to do it in volume, however.  For people who want to pay the extra to get the benefit, there are lease and long-term payment options that would probably make them happy.  Tesla seems to be going that way, for instance.  It’s more a question of whether a business model based on a very narrow subset of players works.  It does for Ferrari, but that’s a very different customer base.

For now, I’d expect that the government will continue to push this on us, and we’ll continue to suck up paying for vehicles that other people can already afford.  These days, that seems to be the American way.

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3 Comments leave one →
  1. September 26, 2012 11:07 am

    I’ve been pleased with the Prius that my wife bought in 2004. We still have it, and she’s now on a cross-country trip. It has never had major maintenance, and has around 130,000 miles on it. It still gets about 48mpg, which can drop down to about 40 in mountain climbing and when ripping along at 85 miles per hour.

    But it was our choice. And the combination electric/gas means that no special fueling arrangements are needed; about every 500 miles we stop for gas, just like other cars (though the tank in this case only holds 11 gallons).

    The Volt takes a somewhat different approach, though Priuses are also available with charging ports. (You can do this in reverse, also; use the Prius to run your house in an emergency.)

    And the full electric approach, requiring a replacement of the infrastructure private industry spent a century building, is a massive endeavor that would guarantee bad economics for a long time even if the underlying ideas were sound.

    The Prius was introduced at a loss, but this was an investment by Toyota, not the US taxpayer. (There was some misguided US involvement, which was small.) Now it is profitable, as they planned.

    The Volt is a massive loss per vehicle in excess of $20k, and the cost is borne in part by US taxpayers — an effect doubled by the fact that many sales are to the US government in the form of fleet sales, partly to prop up the company and postpone the next failure until after the election.

    Let the market make these decisions, and keep the distortion of government intervention out.

    ===|==============/ Keith DeHavelle

    • September 26, 2012 12:25 pm

      All that said, Nissan hasn’t appeared to be suckling at any massive government teat to pull off the Leaf. Maybe we’re seeing a trend here…

      • September 26, 2012 1:02 pm

        A scientist friend/client has recently purchased a Leaf, and is quite happy with it. His lab and home are relatively close, so it works very well for him. It’s not a desert car (120° harms it, I am told) nor does it do well in cold weather, so his California location is pretty close to ideal.

        And as you said, it’s not heavily taxpayer-funded, through US taxpayers contribute $7,500 in rebates for Leaf purchases. Interestingly, the chart in the Leaf article below indicates that the Prius is cheaper than the Volt for trips of 100 miles or more.

        And the repayment time is interesting, according to Wikipedia:

        The newspaper also reported that according to the March 2012 Lundberg Survey, gasoline prices would need to reach US$8.53 a gallon for the Leaf to be competitive with a similar gasoline-powered car in the 6 years an average person owns a car, while the Chevrolet Volt plug-in hybrid requires a gasoline price of US$12.50 a gallon to break even.

        That’s after figuring in the $7,500 tax rebate, as well. The Prius was not out of line for a small, nicely equipped car when we bought it — so for us, the savings were immediate. And have continued for most of a decade since.

        ===|==============/ Keith DeHavelle

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