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