Subsidies

Chevy Volt is on the Road to Nowhere Fast, Say Washington Post Editors

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The president test drives his subsidies

Yesterday, the Washington Post's editorial board published an tough op/ed basically mocking President Obama's pretensions (1 million all-electric vehicles on the road by 2015) about subsidizing an electric car industry into existence. The Post op/ed notes:

The Energy Department study assumed that General Motors would produce 120,000 plug-in hybrid Volts in 2012. GM never came close to that and recently suspended Volt production at its Hamtramck, Mich., plant, scene of a presidential photo-op. So far, GM has sold a little more than 21,000 Volts, even with the help of a $7,500 tax credit, recent dealer discounting and U.S. government purchases. When you factor in the $1.2?billion cost of developing the Volt, GM loses tens of thousands of dollars on each model.

Some such losses are normal in the early phases of a product's life cycle. Perhaps the knowledge and technological advances GM has reaped from developing the Volt will help the company over the long term. But this is cold comfort for the taxpayers who still own more than a quarter of the firm.

The Energy Department predicted that Nissan, recipient of a $1.5 billion government-guaranteed loan, would build 25,000 of its all-electric Leaf this year; that car has sold only 14,000 units in the United States.

As these companies flail, they are taking the much-ballyhooed U.S. advanced-battery industry down with them. A Chinese company had to buy out distressed A123, to which the Energy Department has committed $263 million in production aid and research money. Ener1, which ran through $55 million of a $118 million federal grant before going bankrupt, sold out to a Russian tycoon.

No matter how you slice it, the American taxpayer has gotten precious little for the administration's investment in battery-powered vehicles, in terms of permanent jobs or lower carbon dioxide emissions. There is no market, or not much of one, for vehicles that are less convenient and cost thousands of dollars more than similar-sized gas-powered alternatives — but do not save enough fuel to compensate. The basic theory of the Obama push for electric vehicles — if you build them, customers will come — was a myth. And an expensive one, at that.

In my 2010 column, "Revving Up Electric Cars with Government Cash," I reported about my visit to the brand spanking new Ener1 lithium battery plant in Indiana, funded by an $118 million grant from the Department of Energy.

As my colleague Tim Cavanaugh reported, the company went bankrupt last January. Cavanaugh also noted Obama's State of the Union doubling down on subsidized batteries:

In three years, our partnership with the private sector has already positioned America to be the world's leading manufacturer of high-tech batteries. Because of federal investments, renewable energy use has nearly doubled….

I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here. We have subsidized oil companies for a century. That's long enough. It's time to end the taxpayer giveaways to an industry that's rarely been more profitable, and double-down on a clean energy industry that's never been more promising.

Never been more promising? The Post called this a "myth," but it really seems more like a delusion.

See also my colleague Shikha Dalmia's take on the reports that GM is losing $50,000 per copy of the Volt.

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  1. The market distortion of tax credits more than cancels any positive benefit of someone being “taxed less”.

    Tax credit: not libertarian.

    1. That should read, “Tax credit: Not helpful.”

      It shouldn’t be the goal to figure out what is “libertarian enough” but, instead, what works.

  2. I bet the resumption of Volt production depends entirely on the outcome the election.

  3. So far, GM has sold a little more than 21,000 Volts, even with the help of a $7,500 tax credit, recent dealer discounting and U.S. government purchases.

    They sold 21,000 Volts? Where the hell have I been? I was pegging the number somewhere in the low four digits.

    Man, 21,000 is way, way… WAY more successful than I gave them credit for.

    1. I live in LA, and I’ve seen more movie stars than I have Volts.

      1. I live in Seattle, and I’ve seen more movie stars than Volts.

        I do occasionally see the “struggling” Nissan Leaf, though.

      2. I *cough* have a friend who owns one.

        1. I notice you didn’t put “friend” in scare quotes…

          1. or “owns” for that matter.

    2. Uncle Sam is buying some – with your tax dollars.

      1. Does he give himself a tax credit?

  4. What the fuck is a “Chevy Volt”?

    1. Roughly equivalent to the static charge surrounding most politicians, yet unlike a normal static charge, it always repels rational thought and attracts stupidity.

    2. It’s everything you’d expect from years of government oversight and subsidies.

    3. It was supposed to be the precursor to this before Pelosi and Company’s plans were so rudely interrupted.

      1. Fantastic! I’m applying for a loan I can’t afford right now!

    4. By definition, it is the amount of hate caused by asingle dollar moved from your wallet to GM’s to cover the subsidy cost of an electric vehile.

      For example, the Chevy Volt (the unit namer) carries a charge of at minimum 10,000 CV’s.

  5. Longer extension cords.

  6. investment

    They keep using this word.

    1. That’s because they don’t subscribe to the Austrian School and therefore believe that all investments must be doubled down when going bad.

  7. Well, we know where we’re goin’
    But we don’t know where we’ve been
    And we know what we’re knowin’
    But we can’t say what we’ve seen

    And we’re not little children
    And we know what we want
    And the future is certain
    Give us time to work it out

    1. Is ‘Road to Nowhere’ the Anthem of the Millenial generation?

  8. One hundred twenty years since the dawn of the automobile, and electric cars face the same short comings that caused them to lose out to gas and diesel. Weight, limited range, long recharge time, diminished performance as the batteries are discharged, poor cold weather performance, battery disposal. More than a century of development, and the same hurdles. And yet the solution is just around the corner. Sure.

    1. I keep hearing on HuffPo and Slate that that is just because of all the undefined and unexplained “subsidies” we’ve given to the internal combustion engine. I guess by not taking 100% of the profits generated from it.

  9. Where’s Joe to tell us how Chevy made money on each Volt sold? I’d love to shove the math in his face again.

    1. Math is racist.

  10. Pretty impressive for the Post to put out an article like that before the election, rather than after.

    1. Joe M| 9.14.12 @ 2:05PM |#

      Pretty impressive for the Post to put out an article like that before the election, rather than after.

      Har. This resonates with my comment below…only I was saying they were more playing catch-up with the green-energy scam… but I agree – at least they’re not giving him a pre-election stroke job

    2. It would have been a lot more impressive if they’d done it within a couple of weeks of election day.

      One of two things is happening here:
      1. They’re being critical now and the puff pieces will be overwhelming the last few weeks before the election.

      2. They’re so fed up with being ignored that they’re actually going to treat the Obama administration the same as Romney (up until they endorse Obama, of course).

      1. I’m going with (1). Note that this article wasn’t hot news, and could have been published basically any time. They waited until the news cycle was consumed with Romney causing riots across the Middle East, when it will be lost in the, erm, static.

    3. “Pretty impressive for the Post to put out an article like that before the election, rather than after.”

      Picked a good time for this since most people should be more concerned about US embassies going up in flames.

  11. When you factor in the $1.2?billion cost of developing the Volt, GM loses tens of thousands of dollars on each model

    Good enough for government work.

    How is it the idea of a ‘electric car’ ever got concieved of as something that would be ‘green’ and ‘energy efficient’? It strikes me as horribly naive and uninformed.

    I mean you dont have to be a rocket scientist to realize demand for electricity – if it were to become the primary source of energy for transportation – would consequently multiply manyfold…and that multiplied electricty production would have to be produced *somehow*, *somewhere* – likely by hundreds of newer, smaller, local, ‘next generation’ power plants… now in your backyard! and that the transmission infrastructure would have to be significantly fortified and expanded… and that coal natural gas demand would explode…

    It dawns on me that we are as a nation so economically illiterate, that even the concept of “substitution costs” is apparently too complicated for our president.

    While I appreciate the Post’s editorial, I’d be happier if someone actually had the balls and foresight to call something a boondoggle *before* the public spends billions on it.

    1. Well yeah, that’s what always blows me away about this nonsense. Cars burning fuel, these days, are pretty damn clean. Electricity is still mostly coal-generated, in ancient, filthy factories. How the hell switching from the former to the latter makes sense is beyond me.

      1. I think people desperately need big, overarching grand meta-narratives to explain the world they live in, and the flavor of malthusian-environmentalism du jour has it that oil, more so than any other substance known to man, is the poison-lifesblood of The Great Satan of Global Capitalism, and that any efforts to reduce consumption of oil, are good in and of itself, completely apart from any consequences or costs. It is neither an economic nor environmental calculus that drives this framework – it is Mythic and Moral. You normally learn this when you find a True Believer, and one by one undermine every detail of their initial ‘environmental’ argument… when they finally pull the “it is *important we try*”…because fighting teh Big Oils is ultimately a moral choice about WHOSE SIDE ARE YOU ON!?

        Yeah, in about 5 seconds they’ll be like, “What, do you work for Halliburton or something?!? Shill for the Koch brothers…. GET HIM!!”

        1. How do I ‘like’ a comment here?

          1. You buy it a beer. +1x

      2. Yes, but the self-righteous, Whole Foods-shopping, eco-conscious, yuppie dweeb Chevy Volt driver does not live anywhere near a coal plant, so therefore, it makes perfect sense. It’s all about appearances.

        BTW, I finally saw a Volt the other day, driving on the Beltway in Northern Virginia.

        1. Not technically true. I have seen at least two driving around western PA, within 1 miles of several coal fired power plants. The driver of one was shooting a Century Arms AK with a Cok-can-sized red dot sight on top.

    2. Once again, it comes down to the fundamental misunderstanding of just how energy-dense gasoline (oil) is.

      People literally can’t wrap their minds around it.

    3. When I last looked at back of the envelope calculations for Texas’s power grid if electric cars were a sizable percentage of road vehicles, you’d have to increase the power generation and grid capacity anywhere from 25-40%.

      It wouldn’t be trivial by a long stretch. Hell, we can barely keep the lights on now during a heat wave.

      1. On the tax credit, when we were talking about it a few days ago, didn’t we come up with the conclusion that the only people who could use a 7500 USD non-refundable, non-carryover tax credit were urban upper middle class, socially conscious people without kids? Who pretty much vote lock-step Dem anyway?

        Like most of what this Administration does, it was another gift to one of his voting blocs.

  12. Interesting that Tesla has managed to get 10000 people (maybe more now?) to put down a $5000 deposit on an $80000 electric car.

    Maybe electric cars haven’t sold yet because no one has made one people want? Tesla seems to
    be making one with fewer compromises.

    (Full disclosure: Yes I know Teslas have the tax credit and have received government loans).

    1. “The Tesla Brick. Drive it now, before you can’t!”

      1. Which one explodes? The Fisker?

        1. I believe a few Volts have also spontaneously combusted. Unexpectedly!

          1. “Unexplained fires are a matter for the courts.”

    2. Tesla has been an unmitigated disaster.

      1. I read a good review of the sports car, but that was just a review, not the business itself. Pretty pricey.

      2. Are you sure you aren’t talking about Fisker?

        Tesla, from everything I’ve read, is succeeding. Whether I can say that in two years or not, I have no idea, but they are seemingly about to launch a serious, new American car company.

        The electric component provides them buzz, but pretty much everything else about it is a negative, or at best, a serious challenge to overcome.

        The Tesla S, at this early stage, seems like a vehicle, competitive at its price range, with some very unique features that make it stand out. It certainly has potential, and I for one applaud Elon Musk for injecting some new ideas into the market, regardless of my general opposition to electric cars.

        1. Just look through the archives at Jalopnik. Massively underdelivering, losing money hand over fist, serious design flaws that turn the cars into bricks, restricting what reviewers can do with their cars and how much time they get, etc.

          1. Here’s the article about bricking.

  13. “…more than 21,000 Volts,…”

    Answer to the of what should be given to anyone who even suggests subsidizing an electric car.

  14. “We have subsidized oil companies for a century. That’s long enough.”

    Oh yeah?

    Prove it with unequivocal and absolute definitiveness, Obummer.

    All the leftist fluff brains who keep claiming this are all counting taxe deductions (which companies in all industries get for the most part) as “subsidies” – which they most certainly are not.

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