Overhyped bashing of electric car charging station subsidies in the Washington Post
With the new year came the ending of a long list of tax credits, among which were the electric vehicle tax credits we discussed last week. Today the Washington Post published an editorial blasting the necessity of the electric car programs, calling for ending the programs, while committing factual errors weakening their argument.
The U.S. government and other governments around the world have used tax credits and other subsidies for hundreds of years. Whether one subsidy or another is good or bad is usually a matter of debate depending on ones point of view. For example a new desperately needed technology, might be unable to compete against an incumbent technology it needs to replace. A government subsidy could make the difference, allow the related companies to survive long enough to become self-supporting corporations, and the common good would be served by a better technology supplanting older undesirable technology. Clearly not every stakeholder will appreciate such a government action. Those making older undesirable technology would be alarmed at the government tilting the market to help a new technology. Some will oppose it on ideology we hear reverberating around politics today, that government should be small, or government shouldn't meddle with the free market, etc. But what if the need for the new technology is huge?
For example in the 1860's the Pacific Railroad Acts of 1862 and 1864 were enacted by Congress, subsidizing the building of the Transcontinental Railroad with 30-year government bonds and massive land grants of government owned land, that are still in the hands of railroads today. Whether or not those government subsidies were a good thing, they did create a faster nationwide transportation system that was significant in developing the U.S. into what it is today.
With that in mind let us look at the Washington Post editorial.
There were three subsidies but the WaPo editorial focuses on the one for electric car charging stations. The other tax credits were for electric vehicle conversions and electric motorcycles. (see Electric Vehicle charging station tax credits a victim of US Govt budget battles)
Are "electric cars and plug-in hybrid electrics no more cost-effective than ethanol"? Before this statement the editorial had spent two paragraphs bashing the ethanol subsidies that also expired on Sunday. This is a rhetorical technique where you tarnish the reputation of one thing, then position something else next to that tarnished thing, and the stain tends to rub off the second thing as well. Ethanol has (perhaps rightly) gotten a bad rap over the years, but we're focusing on electric vehicles here. EV's are a different technology than corn-based ethanol, and have different characteristics and considerations. As a new technology with low production volumes, electric cars naturally have relatively-speaking high prices which we can expect to drop once production volume rises high enough so that mass production economies of scale kick in to lower the price.
And speaking of price, the WaPo editorial claims "only upper-income consumers can afford to buy an electric vehicle (EV)," later referring to the over $100k for the Fisker Karma as the price for electric cars, and then says "the charger subsidy is a giveaway to the well-to-do". In todays political climate with the Occupy movement calling attention to income disparities do we want tax credit programs that favor the ultra rich? Maybe not, but are electric cars really solely for the ultra rich? While the Fisker Karma's price is so high only the ultra rich could afford it, the other electric cars have more modest prices. At the lower end of the spectrum is the Mitsubishi i-MiEV with a base price of $29k and after the $7,500 tax credits its $21.5k price is affordable to most. Not far away in price are the Coda Sedan, Nissan Leaf and Ford Focus Electric all of which costing around $32k after tax credits. While that's a significantly higher price there are lots of gasoline cars in this price range suggesting there are many families who could afford this price.
Is this "a case study in upward income redistribution"? That rather technical phrase refers a government action that favors the ultra-wealthy, like the Bush tax cuts for the ultra rich. If their previous claim were true, that electric cars were only affordable to the ultra rich, then the benefit of these subsidies would only benefit the ultra rich, and would be upward income redistribution. But as we've already seen, some of the electric cars are priced affordably to those of normal financial means.
Are electric vehicles "an industry not ready for prime time" or were "sales of electric vehicles were disappointing in 2011"? Between the Nissan Leaf and the Chevy Volt there were 15,000 or so electric cars sold in 2011. Percentage-wise that's a huge jump over 2010 electric car sales. Both of the Leaf and Volt were in limited production volume which both Nissan and GM expect to increase dramatically in 2012, and further several other electric cars are coming on the market in 2012. (see A look at the electric cars coming in 2012) In other words, as a percentage of total car sales, sales of electric cars in 2011 were a blip, and sales in 2012 will be a bigger blip. But any new technology introduction has to start from zero, and the automakers are increasing production and are predicting much larger sales volume in the future.
Many make a comparison with the very successful Toyota Prius, saying the electric cars are unsuccessful because they can't even match the Prius in sales. Let's look at the facts, then. In its first year of sales in the U.S. there were 5,800 Prius's sold, in 2001 there were 16,000 Prius's sold in the U.S., 20,000 in 2002, and 24,000 in 2003. It wasn't until the GenII Prius that sales began to take off, and to their credit Toyota had enough sticktoitiveness to stay with the Prius until sales took off.
Are electric vehicles unsafe because of a single battery pack fire in an NHTSA crash test? The Washington Post editorial would have us believe so, and an especially ominous sign to them is that "Fisker has announced a recall of the cars because of a potential defect in its batteries". As we noted when covering this story (see Fisker announces recall of the Karma following A123's disclosure of battery pack mistake) the issue in question is a misaligned clamp on a coolant hose. While there was the potential it could cause a fire, this is hardly an issue of earth-shattering significance is it? It's a hose clamp, that got misaligned, which was caught by quality control on the assembly line. Is this really a sign of deep significant problems? For comparison GM recently issued a recall for a line of gasoline powered cars where they, uh, forgot to install some brake pads. And a couple weeks ago another recall was issued for a pickup truck where the gas tank could fall off. Why is the Washington Post focusing on minor problems in electric cars, when there are these significant problems in gas car manufacturing?
How likely are we to meet President Obama's pledge "1 million EVs on the road by 2015"? This of course depends on your precise definition of "electric car" but it does seem like an out of sight goal we're unlikely to reach. Does that mean something is wrong with electric cars? Nope. It does mean Obama got a little carried away and perhaps should have focused on a more achievable and realistic goal. If "electric car" were defined to solely refer to 100% electric cars like the Leaf, a "million" of them looks to be out of reach by 2015 but not so out of reach for 2020. But if "electric car" were defined to include the plug-in hybrids like the C-MAX Energi or the Prius Plug-in, doesn't that make the "million by 2015" goal look more achievable?
The last claim in the WaPo editorial is "Electric cars are not likely to form a significant part of the solution to America’s dependence on foreign oil, or to global warming" which seems rather damning, unless you notice the sentence fragment stuck on the end "in the near future". Yes, of course, if there are very few electric cars on the road, as is true today, they will not make much of a dent in either dependence on foreign oil or global warming. It's nice of the Washington Post to admit that gasoline cars are culpable in causing global warming, don't you think? A significant change in either of these issues requires there to be a significant change in the transportation system, including a lot more electric cars on the road. Will that happen in the near future? There is a large existing fleet of gasoline cars on the road right now, which will require years for electric cars to make a significant dent in the vehicle fleet. If we let that fact stop us from acting, then we are doomed to never solve the problems with oil supply, energy security and global warming.
About the reporter: After 22 years in Silicon Valley's software industry David Herron is now writing about green transportation (electric vehicles) from Silicon Valley. He also runs the popular electric vehicle discussion forum, visforvoltage.org, and is the author of the book "Node Web Development".
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