Faulty Study Pegs Chevy Volt's Cost to Taxpayers at $250,000 Per Vehicle

By · December 23, 2011

2012 Chevy Volt

Including all subsidies, loans, grants, rebates and tax credits, James Hohman of the Mackinac Center for Public Policy claims that each Chevy Volt costs up to $250,000 in taxpayer support.

A calculator in the wrong hands is a very dangerous thing. Case in point: Number crunching about the cost of the Chevy Volt by James Hohman, assistant director of fiscal policy at Michigan’s Mackinac Center for Public Policy. Despite having a degree in economics from Northwood University (according to the Mackinac website), Mr. Hohman conveniently neglects any notion of research and development costs being amortized over an entire product cycle. He takes the full amount of all public funding offered to support the Volt’s development, and divides it by the number of Volts sold so far. Hohman thereby declares that the Chevy Volt’s cost to taxpayers is up to $250,000 per vehicle.

Hohman’s calculation was first reported on Dec. 21, on Michigan Capitol Confidential, a website published by The Mackinac Center. The Mackinac Center describes itself as having a focus on economics that “draws support from market-oriented libertarians, moderates and conservatives.” The organization's website further declares, “We look forward to the day when the myths and fears of free-market capitalism are dispelled, along with the misplaced faith in a benevolent, omnipotent state.”

Reality Behind Talking Points

Mr. Hohman said, “This might be the most government-supported car since the Trabant,” referring to the car produced by the former Communist state of East Germany. But when appearing this Wednesday on the Lou Dobbs syndicated radio program, Mr. Hohman seemed to backtrack on the $250,000-per-Volt figure. First of all, he qualifies the 6,000 sales figure used as the divisor in his calculation. “I’m sure they’re going to sell more as time goes by,” he said. “I understand the people that actually bought them really enjoy them.”

Furthermore, he admits that the actual taxpayer expense so far is well below $3 billion. Mr. Hohman's used a tally of pledged government support including state and federal assistance from 18 government deals that included loans, rebates, grants and tax credits. The $3 billion total subsidy figure includes $690.4 million offered by the state of Michigan and $2.3 billion in federal money. “If all $3 billion worth of incentives were tapped, and it’s not likely that they are, but it could range up to $250,000 per Volt,” said Hohman on the Lou Dobbs show. “Again, that’s not likely to happen. But if you just took the federal incentives that were being offered to this project and the incentives to buy so far, it would still be $50,000.” Some of the tax credits and subsidies are offered for periods up to 20 years.

In response to the reports, Greg Martin, director of Policy and Washington Communications for GM, wrote, “While much less than the hundreds of billions of dollars that Japanese and Korean auto and battery manufacturers have received over the years, the investments provided by several different Administrations and Congresses to jump-start the country's fledgling battery technology and domestic electric vehicle industries matches the same foresight and innovation leadership that other countries are exhibiting and which America has historically taken pride in."

Mr. Hohman replied to GM’s response, stating, “This [federal support] has been passed bi-partisan. Politicians on both sides of the aisle like to put their heads in front of projects that are already moving forward, and politicians on both sides of the aisle have said that electric cars are the wave of the future, and have rolled out billions of dollars.”

Political Hit Job to Garner Headlines

Despite all the caveats and backtracking, the figure that will stick is $250,000 per vehicle.

John Hayward, a conservative author commentator, writing for HumanEvents.com, said, “I’ve long been fascinated by the sad tale of the Chevy Volt, a heavily subsidized electric car nobody wants. It’s one of the purest, most perfect examples of government attempting to artificially create a marketplace, and failing miserably." Mr. Hayward’s own calculations pegs the “per-unit real cost” at $81,000. In the comments following Mr. Hayward’s post, a visitor to HumanEvent.com called into question the ability of the Volt batteries to function in cold weather. Mr. Hayward responded, “But remember, if it's REALLY cold out, your Volt can be quickly converted into a fiery oven to keep you warm.” Hayward was referring to fires that have occurred in lab tests well after the Chevy Volt is totaled in a rollover crash.

Dom Giordano, who as the fill-in host for the Lou Dobbs show interviewed Hohman, said “I’ve renamed this the Solyndra-mobile versus the Chevy Volt.”

As we’ve experienced throughout this year, it looks like electric cars will continue to be used as a political football in 2012, with EV critics using fear, uncertainty, doubt—and fuzzy math—to make their arguments.

Comments

· Callajero (not verified) · 2 years ago

I saw this "study" and agree with you 100%, I don't even think it should be called a "study", It was more like a oil company / EV hater backed article. Maybe we need to respond with a study showing the almost one trillion dollars we spend annually to burn up precious oil, trillions of dollars we sepnd indirectly and the many lives of our young people lost to get our hands on that oil! How come nobody talks about that?

· jim1961 (not verified) · 2 years ago

It's interesting how GM and Chrysler got bailed out but GM receives 100% of the hatred from right-wingers. In addition, conservatives don't like to hear the argument that if GM and Chrysler had failed it would have caused their suppliers to fail which would have caused a chain reaction that would have affected all automotive companies operating in North America including foreign brands who manufacture automobiles in North America. Here's what Ford CEO, Alan Mulally had to say about the bailout,

"The government’s intervention was absolutely key to helping create a chance for GM and Chrysler going forward. That’s why I testified on behalf of GM and Chrysler, as you know. The reason we did was that we believed—like two presidents [Bush and Obama]—that if GM and Chrysler would have gone into freefall bankruptcy, they would have taken the supply base down and taken the industry down plus maybe turned the U.S. recession into a depression. So I think we did the right thing by testifying on their behalf and I think that the government did the right thing for that critical industry at that time to step in and help."

Essentially, the GM/Chrysler bailout saved the entire North American automotive industry. Conservatives have two strategies they could use against Obama when it comes to the bailout of GM/Chrysler. They could say that McCain would have done the same thing if he were president. (That's what I believe, BTW) or they could say the bailout should never have happened. They chose the latter strategy and now they're stuck with it. If the North American automotive industry is perceived as successful conservatives believe it will reflect well on Obama. The Chevrolet Volt is very symbolic of the success of GM post bailout and that's why Republicans love to hate the Volt. Rush Limbaugh almost had a stroke when he heard the news that Motor Trend named the Volt 2011 COTY. I'm hoping for a lot of success for every EV but especially for the Chevy Volt. I want to see Rush Limbaugh's head explode, figuratively speaking.

· · 2 years ago

I've often wondered what the cost of getting out of bed in the morning was. Now I'm afraid to ask. :D

· · 2 years ago

Cute, the Right Wing idiots are using the same creative accounting argument that Left Wing idiots have used to kill defense aircraft programs (billion dollar bombers) with in the past.
I've got to hand it to Hohman though. He likely knows where the funding for "Michigan’s Mackinac Center for Public Policy" comes from and what they want to hear. This article is practically guaranteed to get a lot of people, especially in Michigan, to click on the "contribute" link on their website.

· · 2 years ago

Since he's so darn handy with that calculator, let's get him to figure out what gasoline really costs us tax payers.

· · 2 years ago

I take back my comments from the CS MPG metric article where I provided my math for why it costs less to add a small engine compared to making a car into a full EV. Obviously I was using the wrong calculator as proven by this genius.

PS. For those who don't recognize sarcasm, this is.

· Chris C. (not verified) · 2 years ago

Greaaaaat, a whole new meme that I can look forward to hearing wiseasses snicker to me about. Guess I'll be trotting out my boilerplate answer a lot more:

"Whoever told you that has an agenda that is not based in factual reality, they are lying to you for a reason, and you should ignore that story and actively avoid that news source."

· Charles (not verified) · 2 years ago

Thanks for including the rollover part of the Volt fire story. It is so often left out.

Remember that from now until the election the right wing nuts will be trying to make anything that Obama has been for (even if the GOP was also for it) look like it is bad and un-American.

These people have never learned to use a calculator. The GOP forgot math and stats before the TI SR-50 was invented.

· priusmaniac (not verified) · 2 years ago

Let’s do the math on using oil. As was mentioned, it has to include the wars for oil but that is just a start. It has to include the pollution cost, the health effects costs and the global warming cost. That last one is huge. It means more cyclone damage, tornados damage and at term a huge loss of valuable property and land. In the future global warming is going to melt ice to the point of not having inches of sea level rise but dozens of feet’s. That in return means goodbye NY, LA and many others. What’s the cost of LA?

· · 2 years ago

"Rush Limbaugh almost had a stroke when he heard the news that Motor Trend named the Volt 2011 COTY. I'm hoping for a lot of success for every EV but especially for the Chevy Volt. I want to see Rush Limbaugh's head explode, figuratively speaking."

Actually, Jim, I wouldn't mind seeing Rush Limbaugh's head simply explode in a non-figurative way. Perhaps if Motor Trend were to bestow similar COTY honors on another EV, it could happen all on its own. One can only hope.

The lesson of 2009 U.S. auto industry bailout is an excellent talking point for the upcoming presidential election, by the way. A failure to have that done back then would have been disastrous across and beyond the industry. Most - if not all - of that borrowed money has now been paid back to the government and we now see the industry on firm ground for the first time in many a year . . . and some of it, at least, now committed to advancing EV technology.

As for spurious "studies," such as the one advanced by James Hohman and the like, I'd say follow the money. Peel off the veneer and I'm sure you'll find the most egregious financial backers of things like the Marcellus shale field natural gas extraction and the Keystone XL tar sands oil pipeline project.

· Ward Mundy (not verified) · 2 years ago

Wait til they start adding up the costs for flying to the moon. Funny how these clowns (also on the public payroll) always seem to have a blind spot for Iraq and Afghanistan.

· Merlinus (not verified) · 2 years ago

What is offensive is the mindset that the government should be funding anything not directly related to the actual operations of governing. Both sides of the aisle loudly disparage it for anything not on their agenda while working feverishly for their own slice of the pie. This is just another example of the same. Did Mr. Hohman suggest an alternative? It's easy to criticize but hard to come up with a better idea.

· · 2 years ago

The media should do its job when it comes to fact checking folks before giving them airtime. Unfortunately, that doesn't increase ratings and profit.

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