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CBO on Electric Cars - Don't Buy Them!
The Congressional Budget Office (CBO) did a good job of shredding the electric car industry and the government's role in its evolution with this report (Link):
I'm not knocking electric cars, I'm knocking DC's role in this industry. Washington has provided the loot necessary for research on battery design, it has committed to up to $25Bn of soft loans to the auto industry and it is subsidizing every electric car that is sold. Without the massive support from our "rich" Uncle Sam there would be no electric car industry in the USA. The question is, "Is this money well spent?"
The government's role with electric cars goes back to the 2009 emergency spending program ARRA (American Recovery and Reinvestment Act):
ARRA provided $2 billion in funding to the Department of Energy (DOE) for grants under that program. Of that amount, $1.5 billion was awarded to battery producers, intermediate suppliers for those producers, and recyclers of vehicle batteries; the other $500 million was awarded to manufacturers of components for electric vehicles and intermediate suppliers of that manufacturing.
DOE’s Transportation Electrification Initiative has made commitments for $400 million in grants for demonstration, deployment, and education projects involving electric vehicles. (Party Time!)
I think it's important to note that the original objective of supporting electric car production was that it was a plain old economic stimulus. This was dropping money from a helicopter in the hope that it (and all the other money) would stabilize a rapidly declining economy. Another motivation for the federal investment/subsidy was that it created a back-door support package for the auto industry that was falling off a cliff back then.
Washington also agreed to provide $25Bn in cheap loans to the companies who make electric cars. So far, $8.4Bn has been committed. The rest of the money will be doled out before 2019. The money is being lent by the Federal Financing Bank (FFB). Because the loans are guaranteed by DOE, there is no risk of repayment to FFB. As a result, the loans are excluded from the calculation of the debt limit. The 25 'large' is all "off balance sheet". A very neat trick indeed!
Who is getting the billions of soft loans? What are the terms for these advances? From the FFB (Link):
The CBO has concluded that electric cars are not a "smart" choice for consumers. From the report:
Because of differences in vehicle design and technology, electric vehicles cost thousands of dollars more to purchase than conventional vehicles of comparable size and performance.
Okay, the cars cost too much. What does the government do? It subsidizes the inefficiency. It pays a cash incentive for each vehicle sold. The subsidy is based on the size of the battery; it ranges from $2,500 to $7,500. But the subsidy is still not enough to make electric cars competitive:
Given current prices for vehicles and fuel, in most cases the existing tax credits do not fully offset the higher lifetime costs of an electric vehicle compared with those of an equivalent conventional vehicle or traditional hybrid.
CBO concluded:
The tax credits would still need to be about 50 percent higher than they are now to fully offset the higher lifetime costs of an all-electric vehicle.
I know that someone is thinking that gas prices are going up, and when they do, electric cars will prove to be a smart thing. I'm not so sure. The CBO provided a breakeven on this line of thinking. If gas prices go north of $6, electric starts to make sense. When gas goes to $10, all of the vehicles break even to conventional autos. The problem I have with this line of reasoning is that if gas were to go to $8, the US economy (and the rest of the world) would come to an economic halt. In that environment a fellow would be grinning if he had an electric car, but he would probably be out of work, and most of the stores he would want to drive to would be closed. What good does the electric car create for him if things go very bad? Not much.
There is a final argument that could be put forward in support for the mega investment the taxpayers are making in electric vehicles. The environment. Electric cars are "good" for the environment because they don't produce CO2 gases, right? Actually, that's wrong. The conclusion from the CBO:
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In the short term, the tax credits are likely to have little or no impact on total gasoline consumption and greenhouse gas emissions.
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In the long term, the credits might decrease gasoline use and emissions, but how cost-effectively they would do so is unknown.
A larger tax credit is needed to make electric vehicles cost-competitive with higher-fuel-economy conventional vehicles.
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They've been around for a while. My nephew restored one from France that had been stored since 1979. Runs like a charm.
http://buyvintage1.wordpress.com/page-101-1958-new-hudson-restyled-model/
Electric bicycles are OK for China. They have yellow skin and slanty eyes. But they are wrong for red blooded Americans.
Did the pioneers ride electric bicycles on the Oregon trail?
/sarc
No, but haulin all that surface gold down the great wall of china, coulda slanted those eyes.
I work seven miles from home. I have both a gas hog F-150 Lightning and a motorcycle. Been riding the motorcycle to work for the last three weeks or so. Have not bought gas in that same time period, and have enough gas in the bike for another week.
So a month without buying gas. ;-)
Yeah it'll cost more when I eventually have to fill it, but in the meantime I am contributing to the decline iin gas usage.
No sparkies for this cat. NEVER! Don't care how much Uncle Sugar pays. I love the sound of internal combustion engines, music to my ears. Sparkies are about as exciting as a heart attack.
Personally thnk the gov should get out of the business of encouraging folks to drive certain vehicles. Most average folks cannot afford these plug-ins anyhow. Seven year payment plan, and then after you pay it off, you'll need a loan to pay for the battery replacement. F--k that! My bike is paid for, and my truck will be paid off this month next year, if not sooner. Then it will be a cold day in hell before I buy anything else.
"Sparkies are about as exciting as a heart attack."
and how many heart attacks have you had, to be able to make that comparison?
i would imagine heart attacks are pretty exciting, actually.
"Personally thnk the gov should get out of the business of encouraging folks to drive certain vehicles."
in principle that sounds good, but, giving money back to taxpayers is really not something the feds will do. and given the choice between spending the money on developing electric vehicles or doing something more destructive like giving loans to big banks or bombing brown people who sit on oil reserves, i would prefer the less destructive approach of subsidizing developing technologies.
" i would prefer the less destructive approach of subsidizing developing technologies."
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I agree with you to a point, but "less destructive" is still destructive. It pushes yet more misallocation of resources, or malinvestment as the Austrians would say.
I hope my kids don't try this argument.
Yeah Dad, we filled your gas tank with water and blew up the engine, but it could have been worse... At least we didn't burn down the house. Yet.
I have to admit that I sometimes vote "for the lesser of two evils" and am therefore voting for evil, but sometimes those are the only two choices we're faced with. It is a true dichotomy.
I think in this case it's a false dichotomy. Our choice is to either favor this type of waste, or to oppose it. It isn't to waste it on one boondoggle or spend it on something even more destructive.
Ditto -- I have a car and a 125cc motorcycle. The motorcycle gets about 180 miles / gallon. I do the majority of my driving on the cycle. Fill up for about 4 bucks and drive all week. Who needs electric?
10 buck a gallon gas? Bring it on.
Good for you man, and certainly it's an effective response for you.
If however you got a family, a bike is less effective.
I've been living out of the bus system a huge amount, aside from driving the car once a week because i want to keep my skills sharp and the car excercised, i really don't need it.
Does the weather effect your driving? Do you still have to have a second car/ truck? Motorcycles are fun, and cost is low. But everything has it's place.
Your right, some one put the cart before the horse here, they should have begun with trikes and bikes, rather than seein how long it takes a battery to heat up and catch fire goin up hill..
All the world's a stage,
And all the men and women merely players:
They have their exits and their entrances;
Are not exploding batteries a form of internal combustion?
The federal promotion for electric cars is as misplaced as making ethanol from a food source (corn). Defies logic but redistributes wealth quite well. Snake oil for the masses.
Shakespeare wrote As You Like It and we now all live within a pastorial comedy. Benank is printing "Too much of a good thing."
Indeed, all the world is a stage, and most of you are desperately under rehearsed.
The mandated use of corn is the problem, there are plenty of alternatives, but as you said, it redistributes wealth quite well, and it is snake oil for the masses.