By on November 11, 2010

The Auto Prophet brings up a point that completely escaped our discussion of General Electric’s EV mega-buy:

By gobbling up EVs, GE certainly helps to jump-start the industry, but they also gobble up future tax credits that consumers would have gotten, unless GE opts to forego the EV tax credit. Which would be bad business.

Yup, GE’s huge EV buy will be good for GE… but it won’t be so great for the 25,000 Americans whose tax credit will slurped up in the process. After all, the credit expires after a manufacturer sells 200k qualifying vehicles, so every credit GE uses brings GM and Nissan that much closer to the day they have to ask consumers to pay full price for their pricey EVs. No wonder GM is already pushing for an extension of the credit past 200k units.

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18 Comments on “Could GE’s EV Mega-Buy Be Bad For Consumers?...”


  • avatar
    Mark MacInnis

    As a stockholder of GE, I think I want to see the CapEx proposal on that and the payback vs. the alternative….just sayin’.

  • avatar
    FleetofWheel

    Saying there is 200K unit limit on the number of tax credits available is like the public debt ceiling, it’s a meaningless fiction that can be changed at will (and noted in the article by GM’s actions to get extensions).
     
    So many analysts get sucked into the shell game of tax breaks. They lose sight of the offsetting and unintended permutations from these complex tax manipulations. Then propose more or longer tax tricks to rectify it.
    Even the NAR came out against further new home buyer tax credits, realizing you can’t force demand-pull when there aren’t enough truly solvent buyers out there.
     
     

  • avatar
    philadlj

    If the tax credit goes away after 200K sales, GE’s 25K Volts will constitute 12.5% of the total credit allotted. The question is, will Volt production costs decrease enough by the time 200K units are sold to offset the $7500 bump in price as a result of the credit going kaput? If so, there isn’t much of a problem.

    But because we don’t know how many consumers will be buying vs. leasing Volts, or how many Volts Chevy will be able to produce, we don’t know when sales will reach 200K…but I suspect it will be a long time.

    In that long amount of time, Chevy could conceivably reduce production costs. Or not. Or it could back down on the need for the Volt to be profitable…but it’s a bit late for that, as GM will be public by the time such a decision has to be made.

    • 0 avatar

      @ philadlj
      Ding Ding Ding. We have a winner!
      As philadlj has explained, the 200,000 cap on tax credits is a means to an end; the end being a time where people no longer need tax credits on EV’s. If the 200K (or 300K or 400K) cap on tax credits is exhausted and EVs aren’t competitive without them, then it will be time for all of us (GM, Nissan, SOCIETY) to move on…

  • avatar
    Steven02

    Interesting data here.  One question.
     
    Is GE eligible for the tax credit?  The Prius tax credits didn’t apply to many middle class buyers because they made too much money.  Anyone know if these restrictions are still in place for the Volt?  Do the credits apply to corporations?

    • 0 avatar
      mcs

      As far as I know, the same rules apply to the Volt and Leaf. A lot of people are going to get a surprise from their accountant at tax time if they’re expecting one of those credits.

  • avatar
    thirty-three

    In the case of a lease, does the leasing company (legal owner of the car) get the tax credit?  I guess it will have to be figured into the residual value some how.

  • avatar
    william442

    GE has had management, and identity problems for many years now. They just might not know what they are doing.
    “Are we locomotives, or appliances?

  • avatar
    Crosley

    This is what these tax credits are really all about, lining the pockets of big corporations. They’re the ones that have the high paid lobbyists to put in these special credit and breaks.
     
    It’s the same with all of this Ethanol subsidies, it’s all about lobbyists and agribusiness, not the small farmer or energy independence.

  • avatar
    MikeAR

    GE is just putting some of their TARP money to use propping up another ward of the state.

  • avatar
    Sigivald

    Bad news for consumers? Well, if they were hoping to get a handout for buying a car, I suppose. Well, the parts of the handout that the dealer and manufacturer didn’t already devour.
    Funny thing about a “credit” that lowers the end price; it makes it much easier to raise the starting price to get to about the same net cost to the consumer. Classic rent-seeking.
    Good news for taxpayers if the credits aren’t extended, or ideally if the program was shut off tomorrow morning.
    EVs can’t compete without a tax credit?
    Maybe there’s a lesson there – and the lesson isn’t “EVs need tax credits because EVs will save us all!”

  • avatar
    golden2husky

    The only good thing that GE does that is good, is good for GE only.  Whether its medical equipment or lighting products, GEs business practices suck for everybody but GE shareholders.  They epitomize all that is bad about Corporate America.  Plenty of other companies make boatloads of money without resorting to the slimy practices that are the hallmark of General Electric.

  • avatar
    newfdawg

    GE sees a potentially huge market in electric motors, batteries, recharging stations and the
    like as electric vehicles become feasible, this is simply about generating future profits for GE.

  • avatar
    Robert Schwartz

    Clearly the solution is to cancel the tax credits, that would be fair to the taxpayers.


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