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Congressional Budget Office: Electric Cars Are A Waste Of Money: ‘Existing tax credits do not fully offset the higher lifetime costs of an electric vehicle’

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Via Business Insider 9/24/12: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:

· In the short term, the tax credits are likely to have little or no impact on total gasoline consumption and greenhouse gas emissions.

· In the long term, the credits might decrease gasoline use and emissions, but how cost-effectively they would do so is unknown.

DC is on all sides of this mess. It is paying subsidies for inefficient and over priced cars. It is creating free grants to support an uncompetitive product. It is lending very big money (with long maturities and at low rates) to industry players. Please don’t tell me that car companies don’t go bankrupt. These loans go out to 2034.


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