$250k Chevy Volt subsidy claim bogus says TheStreet.com
Yesterday the Mackinac Center for Public Policy posted a statement claiming that each Chevy Volt is subsidized to the tune of $250,000 or more. That's caused a cluster of blog posts trumpeting this as if it's a failure of the Obama administrations green technology program, but not so fast says an article on TheStreet. Instead the Mackinac Center's analysis is overly simplistic and downright absurd.
The Mackinac Center's James Hohman identifies a $3 billion figure as the total amount of "subsidy" going to GM and other companies to produce the Chevy Volt. What they're calling "subsidies" are the loans and grants awarded to GM, and several other companies, by the Federal government and several local governments. Some of the awards went to GM for the factories directly used to build the Volt, and some to other companies building factories for electric car battery packs and other parts. For example Compact Power Inc, the U.S. subsidiary of Korean battery manufacturer LG Chem, received a grant to help them build the factory which manufactures the battery cells used on the Volt. GM's assembled the battery packs in their own factory, with Compact Power only supplying the cells. The extent of the Mackinac Center analysis is to name the $3 billion figure derived from adding up the total figure for all grants and loans they could find, then divide by the 6000 Volt's that have been sold.
An article on TheStreet.com, after quibbling a bit over the $3 billion total, says it simply doesn't matter what the total grants and loans package is. The quibble is that $3 billion divided by 6000 is $500,000 per car, not the $250,000 per car they cite, making us wonder about Hohman's abilities with basic math. The flaw in Hohman's analysis, says TheStreet, is to divide by the 6000 Volts that have been sold, rather than the total number of vehicles which will be built in these factories. The grants and loans Hohman points to were for factories that will be operating for many years, some of which will be building components used by multiple manufacturers. For example the Compact Power (LG Chem) plant mentioned earlier manufactures cells not just for the Chevy Volt, but for Ford's electrified vehicles such as the Ford Focus Electric. It would be incorrect to assign the grant for LG Chem's plant solely to the Volt, as Hohman's analysis does.
What's the typical lifespan of a factory? Would these factories built by grants and loans recipients be used only for one year then torn down? That false line of reasoning is what Hohman's analysis suggests. Instead, the TheStreet article suggests considering this as an investment over a 25 year lifespan. How many electrified cars will be built over the next 25 years?