Monday, June 23, 2008

Proper incentives for electric autos

Jalopnik has been keeping tabs on the escalating price of the someday-to-be released Chevy Volt. What they bring up, and what seems pretty clear, is that GM is angling to increase the tax credit for the car in order to raise the price of the vehicle. The consumer will still buy the car for around $30,000 after the credit is accounted for, but the sticker price will increase to account for whatever the credit ends up being. So the higher the credit the higher the profit on each car and no direct discount to the individual buyer.

All of this points to the dangers of poorly conceived incentives. If the price of gas is so high that people are buying super fuel efficient cars in droves it seems that no credit is needed. If the US government wants to subsidize electric vehicles, a direct payment to automakers to develop the electric systems makes far more sense than a per car tax credit. The Volt will likely suffer if the sticker price ends up being around $40,000 or more because GM accounts for the credit in the price, even if concumers "only" pay $30,000 or so. As a related concern, the government should not subsidize vehicles that do not contribute to the gas tax until some types of user charges are put in place to help pay for infrastructure (which should happen in any circumstance).
Post a Comment