2012 Chevy Volt, picture copyright GM

$250k Chevy Volt subsidy claim bogus says TheStreet.com

Conservative policy think-tank playing loose and fast with the numbers regarding government spending on the Chevy Volt.

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?

As is typical in every industry the cost to develop technology and production facilities for every product is covered not by the first unit sold, or the first 6000 units sold, but over the lifetime of that product. The absurd analysis by Hohman would have given even more alarming numbers if they'd thought to publish their piece 6 months ago when only 3000 Volt's had been sold, at which time the "subsidy per car" at that time would have been $500,000. Going the other direction, pick an arbitrary day in the future like the end of March 2012. GM will plausibly have sold another 10,000 more Volt's by then, bringing total sales to 16,000 Volt's, and the subsidy per Volt will have dropped to $94000. If GM is successful with their sales goals, total Volt sales at the end of 2012 will be 66,000, dropping the subsidy per Volt to $23000. And that isn't even counting the electrified vehicles Ford will have sold in the same time frame, also using cells manufactured from the same LG Chem plant, the cost for which Hohman wants us to assign solely to GM's Chevy Volt.

The article on TheStreet doesn't stop there, it addresses another myth about the Volt, namely those who derisively call the Chevy Volt Obama's brainchild. Anybody with any memory for recent history knows that GM's then-CEO, Bob Lutz, started pushing for the Volt in 2006 and that the majority of design decisions had been made by late 2008, including the selection of LG Chem to supply the battery cells. The production version of the Volt was unveiled in September 2008, with actual production slated for November 2010. The Volt was already in the pipeline by the time the Obama Administration was elected, and most notably before GM's bankruptcy.

Anton Wahlman, the author of the TheStreet article, describes himself as a conservative commentator "somewhere to the right of Rush Limbaugh on the subject of Government involvement in the economy". While he is rather opposed to this sort of Government spending, he describes this particular case as an example of absurd reasoning and calls the Volt as an "outstanding car" that may be "the best car in the market today".

There are factors here that even Wahlman's excellent analysis does not note. There is a bigger picture than just one car, and a few factories.

First, the push for cleaner cars started years before Obama came to office. The Bush Administration did a fair bit in this direction including the Advanced Technology Vehicles Manufacturing Loan Program, which is still a source of clean vehicle technology funding.

Second, the batteries being produced by LG Chem, A123, EnerDel and other companies are not just going to electrified vehicles. There's a huge market opening up for grid-scale energy storage systems, and the battery companies are all developing products for that market in addition to electrified vehicles.

Third, is the Sputnik Moment meme the Obama Administration has talked about for a couple years. There is a race underway to develop clean technology, and the U.S. runs the risk of being left in the dust. Do we want to wean ourselves from a dependence on foreign oil to only develop a dependence on foreign batteries?

Any way you slice it, the analysis pushed by the Mackinac Center is weak and misleading.

See:

Setting it Straight: Chevy Volt vs the Government

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Comments

How many units did the world governments buy, that's including the USA? If I had the power that most of us see Obama has I would invest in horse drawn buggy's . You don't even have to plug them in. And like the Volt, they don't pay any road tax either. By the way , how are we going to pay for the roads, bridges and all of those hookups if we go total electric cars. Why of course, raise the electric bills. And if our electric bills go to high we simply do with out having any power in our homes. My Grand Parents did and they lived a long life. Isn't America great! My Grand Kids may not think so though, they will have to somehow pay for all this mess. Thanks Chevy, you can keep your apple pie!
That makes tons of sense. Get sanctimonious about a car because it's exempt from a road tax as it hardly uses gasoline. My friend, and I'll call you that because I sense you might be a fellow Republican, the government has NO PROBLEM thinking of new ways to tax money from you to them. Don't fear about that. Also, even I am sick of hearing about how Obama invested in the Volt. He didn't do anything of the sort. The entire line of electric vehicle supply chain tax credits was Bush's idea. Obummer barely had anything to do with it but you can be sure that years later we'll all have to hear how did. He's set up other programs sure. But other than the grant money allocated for charging stations and the bloody bailout itself, his administration didn't have that much to do with this. And especially the car. Seriously. You're picking on one stinking vehicle when there's tons more to come. What kind of people do that anyway? There ARE OTHER ELECTRIC VEHICLES PEOPLE!
At present the numbers are correct (500,000.00) per Volt. That number is subject to change as more units are sold. However, looking at the numbers, this may be the last year for the volt as we know it. It appears production may have been cut back since the inventory has about frozen. It is difficult to continue producing some 600 units per month and lose money on each unit. Somewhere there is a logical breaking point.
Your numbers are as unverified as your identity on this site.
The defense of the Volt would appear to be more overwrought than the original study. True, factories can be useful for 25 years. Having sold 6000 volts the first year does not augur well for their BEING a second year, much less a 25th. The CURRENT subsidy is based on the current number that have been sold. Of course that will go down as more are sold. What's the "flaw" here? At this point, it looks like $500K per car in gubbemint munnie. It just is what it is. You're railing against so feebly is what is absurd...
Once and for, PLEASE STOP using the fallacious argument that electric vehicles will "wean us from foreign oil"! Tell me, EXACTLY HOW is that electricity GENERATED??? Fully half of it is by COAL FIRED plants, with no prospect of this changing in the foreseeable future. So, what we are doing is creating high-tech coal-fired cars. If you REALLY want to "wean us from foreign oil" approve the Canadian oil pipeline and open ANWR and US offshore oil fields to drilling.
Oh, PLEASE! Even if all U.S. electricity was produced by burning coal, how does that negate the foreign oil motivation? Are we importing coal from OPEC? NO! I, for one, want to stop sending our GNP to OPEC. While I prefer not to burn coal, I like sending money to OPEC, along with the associated national security issues it brings. Secondarily, I want to wean us from burning ANY fossil fuel merely for transportation. Neither will happen over night, and without research and development. Doing nothing, aside from burying our heads in the sand and continuing to advocate burning oil in cars, is short sighted, and dare I say, stupid.
What's stupid is building expensive electric cars before we develop green energy sources. It's one thing to conduct R & D, and another to introduce the mass production of vehicles that have no hope of providing the convenience, life span and low cost of gasoline internal combustion engine. The fact is that the electric side of the hybrid car cannot travel far after a full night of charging, and after discharging on any trip of over 40 miles will still use fossil fuel produced gasoline to go much further. Fact: The Volt doesn't meet the needs of most citizens today and the only people who can afford to own one, the very well off, are being subsidized to the tune of thousands of dollars from the taxpayers for the privilege. This is morally wrong as well as addle headed. It is not a good beginning for green energy, but a premature and wasteful dead end.
"Fact: The Volt doesn't meet the needs of most citizens today" Please don't call things "Facts" when they are patently wrong. The FACT is that the vast majority of Americans commute fewer than 40 miles per day. Look it up. And stop murdering the word "fact." It makes you look ridiculous. "no hope of providing the convenience, life span and low cost of gasoline internal combustion engine" Convenience? You can either plug it in OR use gas. You literally never have to plug it in. This is just ADDING another option. That makes something LESS convenient? And when the car is in gas-only, it gets 35/40 mpg. What do you get? Low cost? It costs $1.40 to charge a Volt for a 40-mile trip. Full charge, from empty. And again, even gas-only gets more than whatever you are driving. Life span? The fact that you spout off about this when you could literally have no clue (unless this is Nostradamus, in which case, congratulations) just shows the emptiness of your argument. If you are just going to make stuff up, you probably could have been a little more spectacular than this. Just a total failure of a post.
An Engineer as you claim to be should understand that coal != gasoline. Electricity is primarily generated from Coal or Natural Gas, while transportation fuels are primarily derived from fossil oil. They are different resources with different supply sources. Primarily fossil oil is imported which means our Gross National Product is being sent overseas to buy oil, while Coal and Natural Gas are primarily from inside the U.S. keeping that slice of the GNP within the country. The other issue is that supplies of oil, coal and natural gas are all susceptible to a peak of production. This effect is popularly known as "peak oil". THe peak of U.S. oil production occurred in 1971 and its simply not possible to make any significant increase in U.S. oil production. Also the Canadian Tar Sands are owned by a foreign country, namely Canada, which would mean again gross national product being given to a foreign country to buy oil. Also the tar sands oil from the keystone XL project was not meant for sales within the U.S. but instead for export into the global oil market. The point of bringing up peak oil and peak natural gas and peak coal is - that - fossil fuel supplies are going to enter a period of declining production capacity. Think that through please, what is the economic result when demand exceeds supply?
We are no where near peak oil. People have been claiming this for years, In the past 10 years, due to a variety of innovations estimates of domestic reserves have mushroomed. It is estimated that we have 200 to 300 years of reserves in this vountry
"The other issue is that supplies of oil, coal and natural gas are all susceptible to a peak of production. This effect is popularly known as "peak oil". THe peak of U.S. oil production occurred in 1971 and its simply not possible to make any significant increase in U.S. oil production. Also the Canadian Tar Sands are owned by a foreign country, namely Canada, which would mean again gross national product being given to a foreign country to buy oil. Also the tar sands oil from the keystone XL project was not meant for sales within the U.S. but instead for export into the global oil market." Until you stop tying the hands of the oil companies to determine just how much oil we have, your statement is ludicrous. It's easy to make such statements if you accept the premise that certain areas of the world are off limits to oil exploration. Recent discoveries and development of technologies have already made a mockery of environmentalist claims about our oil and gas supplies, so the credibility of your argument is much less than it once was.
Are you so dumb you don't see the difference between oil and coal? And where does coal come from... say it with me... the USA!
Generally speaking, those who are critical of vehicle electrification are either uninformed with respect to the technology, short sighted, or most likely both. In any event, whatever information that can be lifted from the media and twisted to defame President Obama certainly will be. Such is the lack of critical thinking skills so many people exhibit. FWIW, I'm not interested in the Volt. My first car is a fuel efficient long range gasoline burner. When I replace my second car it is likely to be a low maintenance all electric 100 mile range EV that I'll charge overnight at low utility rates. My cost for that car will likely have to include $2-$3000 to upgrade my home service to 200 amps and run a 240 v circuit to my garage. No big deal.
Just wait until that battery set deteriorates to the point that it needs replacement. It'll cost you thousands. That's a huge difference between gasoline engines and electric. Modern gasoline engines will last the expected life of the care, maybe a couple of hundred thousand miles. Your battery will likely conk out far sooner, costing you beaucoup dollars, long before the body and electric motors will die. That's a fact of life foe all electric cars. Their internal resistance will build up over time or their electrodes will deteriorate to the point where battery output is seriously affected. At least with gasoline cars you can make repairs that will extend engine life. When a battery deteriorates, all you can do is replace it.
The number of totally uninformed commentors about the subjects of both electric cars and the Volt in particular, is always amazing. Nontheless, being uninformed, illiterate and irrational doesn't stop them from commenting, even when presented in advance with facts which contradict their comment. But, I guess they are entitled to be "against" something, whether they know anything about it or not...
What a shame, that this should be a two sided discussion and not a monologue, where Obamabot bobble heads congregate?
My volt is the best car I have ever had. Am getting over 1000 miles per gallon, Thanks to American engineering and general motors
Hah, only 1000? My wife is getting over 2200 MPG with her Volt! (According to the GM site MyVolt.com.) She has burned about 1.6 gallons since buying the car back in June of '10. The odometer reported a half gallon was already used before we took delivery, probably during assembly line testing, so really only 1.1 gallons used driving almost 5000 miles, so far. The gas engine has only been used four times while driving, but of course the advanced technology in this car is amazing. It's programmed to start the gas engine ever couple of months to keep it ready for when it's needed. That's happened a few times, or so I hear, it's never happened while I was driving. See voltstats.net for the results of over 380 Volts driving over 2.2 million miles...
Too bad that your wife's car is a big polluter, more so than a pure gasoline powered vehicle, as the electricity that's put into her battery is produced from coal! Green, my ass!
This article is the most misconstrued. confusing and just misleading as any I have read. He states they were right and wrong at the same time!! Huh?? Thank you for wasting my time!! Joe Kelly
How are batteries "green" technology? The vast majority of energy put into a Volt battery today comes either from coal or nuclear power, neither of which is considered by the Left as "green" energy. Only a very small part of this nation's electric power comes from hydroelectric, photovoltaic, photothermal, wind or tidal generators, and that will be the status of power generation for decades to come. Building electric cars that effectively run on coal, as that is the primary source of electric power today, actually produces more pollution than gasoline power vehicles, as it requires that more coal, a far greater pollutant than gasoline, to be burned. This president is lying when he calls electric cars "green", and refers to the jobs that produce them, "green".
This is oh-so-almost-right, but not really. The mix of coal versus natural gas etc varies from state to state, and here in California we don't get coal based electricity, it's all natural gas or hydro or nuclear. Well, because we're nearing the Fukushima Anniversary we should throw in a reminder that nuclear energy isn't exactly clean. In any case study after study has shown that electric cars are cleaner than gasoline even when run on coal-fired electricity. However there was a recent study from CHINA that is getting a lot of attention about how CHINA's coal plants and CHINA's electric cars are dirtier than gasoline equivalents. CHINA's coal plants are regarded as being very dirty. Doing the same study on USA coal power plants gives a different result. I totally agree coal is something to be avoided, and when President Obama talks about "clean coal" we have to roll our eyes, mumble something about lies, and remember that he is from a Coal state (Illinois). There's a truism that the grid gets greener over time, whereas a gasoline car gets dirtier over time. The latter observation is easy to see because as a gasoline engine ages it becomes less reliable, runs less well, and is probably dirtier. But what about the grid getting cleaner? This has to do with regulations and new equipment that can be installed to make the power plants less dirty.
As if I care what "the Left" thinks... "Green" isn't the only motivator behind buying a Volt. Some of us don't like the idea of buying ANY oil from Arabs, even if it does mean burning more coal. Don't like the Volt? Don't buy one. We LOVE ours.
Then you'll love spending thousands when the batteries give out.
@George, Expert that you are, why don't you tell us when our battery will give out? Don't know? Of course, but that doesn't stop you from spreading Fear, Uncertainty and Doubt (FUD). Our Prius now has 211,000+ miles on it and is still going strong, averaging 48-52 mpg, depending on the weather. The car seems to be wearing out before the battery is. But, we are certain the Volt's battery is going to need to be replaced before the useful life of the vehicle. Fine, DON"T BUY ONE, George! You seem pretty well set on being "against" things. What are you "for"? It would appear you are for oil. Don't want to see anything that might reduce the demand for oil. Maybe you can find an "against change" site to post on, where your posts might actually gain a following... Whether you want to keep burning oil just to move around, and don't want to see electric vehicles succeed or not, I've got news for you: They are here to stay. Take a look at all the hybrids and electric vehicles being introduced this year alone, all over the world. Why? Because everyone is tired of spending their hard earned money on gas. Everyone except you, evidently. Look at it this way - the less gas everyone else burns, the more left for you to burn, and the longer it will last before there is too little left to use for everything but burning. That should make you happy.
In my first point, I claim that the author makes some comparisons which are questionable. Comparing the push for “clean energy” to Sputnik, and the Apollo response is perilous. The Apollo program was not plagued by as many competing and contradictory goals as is the current clean energy attempted revolution. Some decry and some embrace technology, as is suitable to what ever the clean energy goal may be; cleaner energy, or severe limits to technology. There are more examples. One only has to look for them. This illuminates my second point; that of confusing a primary energy source with technology. Batteries are not energy, but a way to transport energy inefficiently. Saying, “Do we want to wean ourselves from a dependence on foreign oil to only develop a dependence on foreign batteries?” is a good example of this kind of thinking. A primary energy source is utilized by technology, not created by it. He may be good at arithmetic, but needs to revisit exactly what energy is and where it comes from, IMHO.