Subsidies Beget More Subsidies

Posted by Joseph Y. Calhoun, III

Auto manufacturers can’t get people to buy electric cars despite huge government subsidies. Why? They have a limited range, charging them takes too long, the batteries need replacing too often raising the operating cost and the cars are expensive. In other words, the technology for mass produced electric cars just isn’t ready for prime time. An intelligent auto company would build cars that people actually want, but ours want more than anything to keep their masters in the federal government happy, so they ask for more subsidies:

WASHINGTON—Auto makers are pressing the Obama administration for more government subsidies to spur mass-market sales of electric vehicles, including new tax breaks for consumers, utilities and car companies.

The Obama administration has already committed billions to electric-car programs, including aid to auto makers to revamp plants and tax credits for car buyers.

Industry lobbyists say more government aid is needed if the industry is to achieve President Obama’s goal of putting one million electric or plug-in hybrid vehicles on the road by 2015. Auto executives are concerned that unless the government offers more subsidies, electric-car sales could stall because consumers won’t have enough places to charge their cars, or will balk at the relatively high cost of the new technology.

Auto-industry lobbyists presented a list of proposals to Ron Bloom, a senior Obama adviser on industrial policy, including tax credits for homeowners to install electrical outlets, more money to build public charging stations, and additional tax incentives for battery makers and car buyers. Also on the list: Relief from U.S. rules that reduce the credit car makers get under federal fuel-economy standards for selling electric vehicles.

The requests—outlined in an April 7 letter from top industry lobbyist Dave McCurdy—reflect concerns that the cars’ high costs and a lack of public places to recharge the batteries will damp their appeal among mainstream consumers.

“We have to acknowledge that there’s a little bit of a ‘Field of Dreams’ here, that if we just build the technology that the consumer will buy them,” said Gloria Bergquist of the Alliance of Automobile Manufacturers, a trade group whose members include the Detroit three auto makers and Toyota Motor Corp. “We hope that’s so, but we also need to look at all parts of the equation.”

So, here’s my question. What would have happened if Henry Ford had decided that he couldn’t make Fords because gas stations weren’t widespread? What if he had waited for government subsidies before moving to mass production?

  • Share/Bookmark

One Response to “Subsidies Beget More Subsidies”

  1. [...] Subsidies Beget More Subsidies | Contrarian Musings alhambrainvestments.com/blog/2010/04/14/subsidies-beget-more-subsidies – view page – cached Auto manufacturers can’t get people to buy electric cars despite huge government subsidies. Why? They have a limited range, charging them takes too long, the Tweets about this link Topsy.Data.Twitter.User['alhambralnvest'] = {”location”:”Miami, Florida”,”photo”:”http://a3.twimg.com/profile_images/255954559/Logo_normal.png”,”name”:”Contrarian Musings”,”url”:”http://twitter.com/alhambralnvest”,”nick”:”alhambralnvest”,”description”:”Keep up to date with our observations of the latest news and trends affecting the financial markets at our blog, Contrarian Musings.”,”influence”:”"}; alhambralnvest: “Subsidies Beget More Subsidies http://bit.ly/cpLqV2 ” 32 minutes ago view tweet retweet Filter tweets [...]