Extend the EV Tax Credits - Why the Washington Post Editorial Team is Wrong

By · January 05, 2012

Nissan LEAF

After more than a decade of uninformed electric car bashing from certain segments of the population—with the last two years especially seeing an incredible spike as EVs have curiously become a political pawn piece—it's not surprising that there is a veritable smorgasbord of bad will towards the otherwise innocuous vehicles. To listen to some of the punditry talk, supporting electric cars is the equivalent of throwing your mother overboard on a cruise vacation.

But I wonder if those same EV-hating pundits would have pulled out the unwavering ideological argument that supporting any kind of industry with government money is anti-American and will turn your babies into helpless, socialist wards of the state back when the government poured money into our fuel and highway system? Would they go back and say that tax breaks to help oil companies drill more were a bad idea? Would they argue that government funding of the electrical grid, nuclear powerplants or any of the innumerable technologies that wouldn't exist today without government programs to support their development was the wrong decision?

Clearly EV-hating extremists aren't new news, so why is this an issue again? As PluginCars.com readers likely know by now, with the New Year a few tax credits for EVs expired: namely the 30% Federal Tax credit for the installation of a charging station. Along with this came news of a new Republican-led assault on the existing $7,500 federal tax credit towards the purchase of an EV.

And then, sensing an opportunity, over the weekend the Washington Post published an editorial that basically said EVs aren't ready for prime time and that all tax credits for them should be taken away, warning that "Backers of the charger tax credit may lobby Congress to renew it when lawmakers tackle the payroll tax extension issue again in the new year. We hope that Congress says no."

Here's Why the Washington Post Editorial Team is Wrong:

The Washington Post editorial has made the typical mistakes and assumptions that so many influenced by the propaganda machine have started to take for fact when really they are, at best, half truths or, at worst, blatant lies:

"As a means of reducing carbon emissions, electric cars and plug-in hybrid electrics are no more cost-effective than ethanol."

This claim is bogus. Electric cars are about five times more efficient (depending on what study you use) at converting energy into movement than a combustion engine of any type, whether it runs gas, diesel or ethanol. In fact, the simple act of making a gallon of gas takes just as much energy as it does to drive an electric car 40 miles. So not only is there 40 miles of energy in that gallon, it takes roughly 2 more gallons to drive the same distance as an electric car on the energy it took just creating those two gallons of gas. I suspect his argument has to do with numbers of vehicles on the road. There aren't many EVs (yet) so of course their impact is small. That's why it's important to encourage more of them onto the road (with subsidies, policies, etc.).

"Only upper-income consumers can afford to buy an electric vehicle; so the charger subsidy is a giveaway to the well-to-do."

New technology is always more expensive initially. And, while it's true that the base price of an EV is currently more expensive than that of a combustion car, the difference is not so large that only the "well-to-do" can afford them. It's about comparing apples to apples. Take the gas-powered Ford Focus; it's about the same size as the LEAF. A base Ford Focus can be bought for less than $20K, but when you add in all the equipment that makes it comparable to a LEAF it will cost you $26K. A LEAF can be bought for $35K. Factor in the $7,500 federal tax credit and the cost effectively comes down to $27.5K; a difference of $1,500, which will more than be made up for in fuel savings over 5 years. Also, the LEAF can be leased for around $380 per month with a $2,500 down payment. That is not "well-to-do" pricing, that is middle class pricing (or used to be before a free market gone wild ruined our economy—thanks largely to the uncharacteristically unconservative policies of the so-called modern conservative).

"Get rid of the $7,500 tax credit too."

The editorial goes on to say they feel similarly about the $7,500 tax credit, but that reasoning is circular. If the writers mean, as they imply, that the tax credit would be better if it was for "average Americans," then the $7,500 is what is leveling the playing field and making the technology affordable for average Americans. Of course if you take the $7,500 away then you start making the cars inaccessible to average Americans so the writers' case gets stronger. It's self-fulfilling prophecy.

"Given the price of eligible models, like the $100,000 Fisker Karma, that rationale sounds an awful lot like trickle-down economics."

Only a thousand of the Karmas will be sold this year if they're lucky, and a $7,500 tax credit on a $100,000 car is meaningless to those buying it. Compared to expected sales of about 50,000 to 100,000 of all the other plug-ins that are consumer priced in 2011, the amount of tax credit going to the Karma is negligible. The only reason the Karma is brought up is to further a false narrative. It's a cheap shot that has no bearing on presenting a successful argument.

"Sales of electric vehicles were disappointing in 2011, with the Volt coming in below the 10,000 units forecast."

Firstly, the writers ignore that the Leaf hit its sales target of 10,000 units. Secondly, it's no surprise that sales of EVs were slower than expected in 2011. Given the amount of misinformation being strewn about by the majority of uneducated media, the picture being painted of EVs is that they are stupid, suck money out of the government, re-distribute wealth, destroy the free market, are anti-American, don't protect your freedom, are more polluting than gas cars, and will actually cost you more in the long run-not to mention you're a sissy if you drive one. All of which are unequivocally and provably wrong.

The reality of our sad situation is that success of anything is tied into marketing, and the EV is an easy target for bad marketing--and the effect is a completely twisted consumer impression of what they are and what they can do. It's no wonder they aren't selling more. It's another self-fulfilling prophecy.

"The ethanol credit was on the books for 30 years before it finally died. Let’s hope Congress can start unwinding the federal government’s bad investment in electric vehicles faster than that."

The general insinuation throughout the editorial is that the government has no right meddling with the free market, a mantra that the right wing often espouses with increasing aggressiveness these days. Yet it's a hypocritical one. The modern car didn't come into being simply because some companies struggled on their own without government support. Highways, bridges, and fuel stations were all paid for (at least partially) with government funds. Our electricity infrastructure was also paid for in the same way.

The U.S. government has a solid and successful tradition of propping up new technologies for a few decades before they become as second nature as having a fridge or flipping a switch. To claim otherwise is sheer stupidity. The electric car can kill several birds with one stone: pollution, oil dependence, national security, and fuel price shock. It is a great solution to our needs as a nation and, with the right support, is the best thing we can do to help our nation's transportation needs in the future. Without that support it will never come, but then again, neither would have our nation's electricity grid or system of highways. We'd clearly be in a better position today without those, right?

------------------------------

Notes: This article came about as the result of a conversation with Jocelyn Fong, the Energy and Environment editor for Media Matters for America and I thank her for providing the impetus. One of the other things we talked about resulted in my back of the napkin calculations showing that the amount of money the government has spent on EV tax credit so far, and likely will in 2012 is a relative drop in the bucket. The following are those calculations.

$7,500 Federal Tax Credit Breakdown for 2011:

  • Chevy sold ~8,000 Volts
  • Nissan sold ~10,000 LEAFs
  • There were less than 1,000 other eligible vehicles sold (Transit Connect Electric, Tesla Roadster, Smart ED).

19,000 vehicles x $7,500 = $142,000,000

2011 Charging Station Credit Breakdown:

 

This one's a bit trickier b/c not every electric car owner will use it and there are actually two different versions of it: one for consumers and one for business. The consumer one is for 30% up to $1,000. The business one is also 30%, but up to $30,000. Say 95% of all EV buyers used the tax credit, you have roughly 19,000 stations so:

19,000 stations x $1,000 = $19,000,000

Businesses installing stations is somewhere in the realm of 2,000, of which the median commercial installation price would be about $15,000, 30% of which is $4,500 (tax credit is for 30% up to $30,000).

 

2,000 stations x $4,500 = $9,000,000

All told the charging station tax credit has probably cost the U.S. government somewhere in the realm of $28,000,000.

Both programs together have cost the government somewhere around $170,000,000. Let's round up to $200,000,000 and it's still a tiny slice of money from the overall federal budget. If electric car sales increased to 50,000 this year, that amount would go up to roughly $500,000,000 for 2012, still a small amount considering the $4.4 BILLION we spend on tax credits for oil companies each year.

Comments

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

The $7500 is not "meaningless" to me (on a 100k Karma or 80k Model S), but it's true that I can afford the cars without it.

Even so, a whole lot more LEAFs will be sold (and those buyers will want, need, and use that $7500). Of course if one is to gripe about tax credits and deductions, how about those hefty depreciation allowances for buying $60,000 SUVs? If you incorporate yourself and sell some contracting services, you can write off $11k on your new Lincoln Navigator. (There's a limit of $25k but that is for trucks; it looks from a quick glance at the numbers that it's still around $11k for SUVs.)

I'm much less concerned about the tax credit on home Level 2 chargers now that they have dropped below $1k.

· · 2 years ago

upper-income consumers???
Mitsubishi i at $21,625 after tax credit is probably the chippest total cost of ownership car (when you consider the cost of fuel and maintenance).

· · 2 years ago

Yegor: Yeah the Mitsubishi MiEv with it's MPG and post rebate price, minus oil changes, minus gas, minus the engine/transmission dying at 100k-190k miles, is a very cheap car. It doesn't go far, but if you want to save money, I don't think you could beat it.

As far as the Washington Post, I've subscribed to the San Francisco Chronicle since 1992. So my hands are clean. hehe. If the Chronicle ever posts something like this, I can't believe they would, but if so I would pick up the phone. :)

· VoltSkeptic (not verified) · 2 years ago

"Sales of electric vehicles were disappointing in 2011, with the Volt coming in below the 10,000 units forecast."

I think Nick's misses the most obvious point, almost every car made was sold. The sales issue is lack of supply not lack of demand. Limited geographic availability also contributed. Was the Chevy Cruze available in only three states for three months before (slowly) expanding market availability? I don't think so. The Post is not comparing apples to apples when it comes to sales.

That doesn't mean I believe 100,000 EVs would sell if that many were made, but I think most would say that the sales numbers would have been at least triple if all markets were supplied from the start. The number manufactured and geographic availability were disappointing, not the demand for them.

· · 2 years ago

"Why the Washington Post Editorial Team is Wrong" - Being the Washington Post Editorial Team seems conspicuously absent ;)

Re: Carbon emissions - Back of the envelope math tells me we can reduce oil consumption by something like 10% by just burning the crude oil to make electricity and driving EVs, rather than making gasoline out of it. Of course the reality isn't so simple since gasoline is one of many products made from crude during refining, but I think that illustrates just how big the gap between ICEV/EV efficiencies are. Plus you can't fuel an ICEV off of sunlight or wind.

Re: Fisker Karma nonsense - that isn't even an EV in my opinion. It's a hybrid. A pretty crappy one at that. 20MPG in charge sustain mode? Bleh.

Re: Sales. GM has handled the Volt poorly IMHO, and they have a history of doing that. I can't help but wonder if someone at GM wants EVs to fail (not that I think the Volt is an EV either, but GM certainly is marketing it as such). Meanwhile Nissan hasn't been able to keep up with demand and sold more despite having production curtailed by the tsunami last year. I think the lack of Volt sales is clearly not so much an issue with the technology or the public's perception thereof - it's with GM's marketing.

There guys should open a pie business with all the cherry picking they do.

· · 2 years ago

Smidge204: Yeah, I forgot about that one. Gasoline electric generators can run 24/7 at 55mph with no wind resistance. Plus the fumes can be sequestered and processed in an industry-grade muffler. :D

The problem with EVs is what to do with all the shares in oil, the oil infrastructure. Plus you don't want to be the last one driving a gas car looking for a station when the gas music stops. When that happens there will be no place to fill up and no one wanting to buy your old bricked car. hehe

I guess in fairness there's a lot to be afraid of, from gas obsolesce, but they kinda had it coming.

· · 2 years ago

Why are we subsidizing oil and gas again?

Neil

· · 2 years ago

Well expressed, Nick! I sure wish the Washington Post would publish this as a guest rebuttal to counter its editorial --but that would constitute "fair and balanced" reporting. NOT gonna happen.

I can't help but wonder if there is a concerted movement afoot to undermine EVs. The recent surge in naysayer articles, editorials, and posts seems too great to be mere coincidence. And they all echo the same old, worn-out arguments, i.e., "long tailpipe," subsidies are anti-free market, only the rich, sluggish sales, dangerous battery fires, etc., etc. Gotta admit: the petrolpuppets sure know how to spread the misinformation thick and wide. And John Q. Public swallows it hook, line, and sinker.

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

@Smidge204: people who actually have the Karma report that they are getting about 24 mpg in charge sustaining mode (which is not great either, but compares OK with the competition, e.g., Porsche Panamera at 18/27 = 25 average). Because they mostly drive electric, the few reports I've actually seen say they are getting "marketing numbers" of 80+ mpg, i.e., they 45 miles on electric, then another 19 miles on gasoline, burning 0.8 gallons to go a total of 64 miles = 80 mpg.

(Had they bought a Panamera, they would have gone the same 80 miles and used roughly 2.6 gallons of gas, instead of 0.8. This saves roughly $3 in gas, and the two cars are priced about the same, given the options one tends to get on the Panamera.)

(Yes, I know someone who bought a Panamera. But he changed his mind because apparently he was convinced it was a "chick car". I think he swapped it for a $120k Mercedes.)

· Perylous (not verified) · 2 years ago

I second Yanquetino's comments, Nick. You should write the Post and ask for a guest rebuttal editorial. You never know you might get one.

The major issue with the criticism of EVs today is the result of the the politicizing of GM. GM's credibility took a huge hit when they were bailed out. Suddenly the Volt is not just an EV, but it's "the car that will save GM". Also problematic is the first year number of 10,000 cars. GM should have followed the old management adage---"under promise and over-deliver". What if GM had set the first year number for the Volt at 6,000 cars? The media would report that the Volt is a success instead of a failure, because they beat their first year number by 25%! It's all about managing expectations and the expectations for the Volt were set way to high. It's natural that there is some public backlash.

When hybrids were first introduced, I don't remember any such criticism. People loved them because they saved gas when gas prices were shooting upward and you didn't have to do anything different. There was no direct government involvement other than rebates. Unfortunately, the auto bailouts have dragged GM and the Volt into our daily political quagmire.

· · 2 years ago

Yanquetino and Perylous: Appreciate the kind words! I may just send the WaPo a note. Crazier things have happened :)

· Anonymous (not verified) · 2 years ago

So why exactly should our govt pay 7,500 per car when we are running about a trillion dollar per year deficet?

If this technology is so wonderful then it should be able to live on its own merits.

I am not against the volt or any other EV car - I just don't feel the need help pay for your choice to buy one.

· · 2 years ago

@Anonymous - Our trade deficit is such a drag to our economy it is one of the reasons we run a deficit at the federal government level. Our trade deficit would nearly disappear if we powered our cars with domestic energy sources. Electric cars would allow us to do that. But in order for electric cars to compete with existing combustion cars, EVs have to go through an awkward period when they are made in lower quantity production than ICE cars and so cost more per car. This $7,500 tax credit is a temporary measure to correct for the higher low volume initial price of EVs so that they can get up to the high volume, low production cost levels. At that point the subsidy can go away and the many advantages of EVs (known to anyone who has driven a good EV) will allow EVs to slowly take over the market and our trade deficit will go away, leading to a much better US economy.

It is not about giving early EV buyers something. It is a strategic move in the US national interest. And it will also decrease our dependance on foreign oil which leads to war. And it is better for the enviornment. And it creates more US jobs.

But it will only be going on for a short period of time to get this new industry started. As a result, it is not actually all that expensive. There where less than 20,000 cars subsidized in 2010, which is around 50 cents per US citizen. If that number goes 10 times higher that would be only $5 per US citizen per year. For a short number of years. To steer us away from things like the Iraq war such as perhaps a future Iranian war. And to get rid of most of the trade deficit. Which is a lot more than $5 per citizen per year and has been around for a lot more than a few years.

· Sandy (not verified) · 2 years ago

So if some tax credits expired after the New Year will there be new corporate tax credits available in the coming months? If depreciation allowances are made for fuel guzzling SUVs, I would hope their would be some positive benefits (rewards, incentives, etc.) for purchasing electric cars.

· Anonymous (not verified) · 2 years ago

If you take the average miles per gallon for the avg. US car of 23 mpg and the avg. miles per year driven of 15,000 miles, then an avg. of 652 gallons of fuel are needed per car per year.

10,000 avg cars would require about 6,520,000 gallons of fuel per year.
At $4.25 per gallon, this is $27,710,000 per year in direct fuel costs avoided.
The avg car lasts more than three years.
In three years this is $83,130,000 in direct fuel costs avoided.
Add to this the environmental costs avoided per year.
Add to this the medical costs avoided per year.
I calculate the payback at between two to three years.
This is an excellent ROI per tax incentive dollar to the nation.

Besides this, how many good men, will this non-purchased fuel, avoid in having to fight in another war?
The ROI in human capital PRICELESS!

· Mancy J. (not verified) · 2 years ago

After 31st Dec 2010, Purchasing EV vehicle are not eligible for this tax credit. You can see full details here which is government trusted sites : http://www.fueleconomy.gov/feg/tax_hybrid.shtml.
Regards,
45L

· · 2 years ago

@Mancy J., A new EV tax credit was passed by Congress several years ago. The credit is based on battery size and phases out after a manufacturer has produced 200,000 eligible cars. The tax credit is $7500 for most BEVs and a PHEV like the Chevy Volt. The credit isn't refundable so one needs a $7500 tax liability to claim it all. However, when leasing a car the leasing company can claim the credit and use it as part of the down payment.

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