#subsidies

Despite its visions of having a valuation on par with Apple within a decade, Tesla’s subsistence on subsidies may be hard for some to swallow.

In June, Nissan announced that Leaf owners could obtain a replacement battery pack for $5,500 upon trading in the old unit. While a boon to said owners, the automaker is losing blood on the deal every time a pack is sold.

Volkswagen appears ready to announce where its upcoming mid-size SUV — based upon the CrossBlue concept from the 2013 Detroit Auto Show — will be assembled.

Should the United Auto Workers win the upcoming election to represent workers at Volkswagen’s Chatanooga, Tenn. plant, the automaker may find itself shunned by state lawmakers as far as further subsidies are concerned.

Just a few short years after the Canadian and Ontario government bailed out General Motors and Chrysler, a familiar scenario is playing out along Highway 401. Chrysler is reported to be negotiating with both the Ontario and Canadian federal government regarding subsidies for their Windsor assembly plant that builds the Dodge Caravan and Chrysler Town & Country minivans.

While auto makers like Ford and Toyota have received government money recently, the size and scope of the subsidies are said to be unprecedented. And according to reports, Chrysler is threatening to leave if they don’t get what they want.

Toyota announced Monday that as of 2017, the automaker will no longer manufacture any of their vehicles in Australia, driving in the final nail to the coffin containing the nation’s local automotive industry following similar announcements by Holden and Ford.

A day before GM officially announced that the Astra production will be moved to Ellesmere Port, a move that is widely believed to seal the fate of Opel’s Bochum plant, we said that the decision won’t go down well in Germany, and that it will be very tough working with a doomed workforce. The workforce is already getting restive.

Ontario’s 2012 budget was released this morning, and while the United States under the Obama administration seems intent on boosting subsidies for alternative fuel vehicles, including EVs, those in the Great White North’s most populous province are able to see the writing on the wall with regards to EVs.

While U.S. Senators are wringing their hands and pounding their chests about EV know-how allegedly escaping to China, makers from other countries are doing business. The most recent EV entry is Honda. Honda will build an EV in China and sell it in China in 2012 “in limited quantities,” its R&D chief Toshihiro Mibe told TTAC in Chengdu. The electric vehicle will undergo tests this year. When ready, the EV will be launched under the Honda brand. When asked, Honda spokesperson Natsuna Asanuma was convinced that the Honda EV will qualify for Chinese subsidies.

Mibe dismissed know-how issues: “An EV is much simpler than a regular car. The only difference is the battery and the electric motor.”

The European Commission’s competition authority has a problem:

The Commission had to launch a formal investigation into aid for a large investment project by BMW for the manufacturing of electric cars. The formal investigation will allow the Commission to gain an insight into the emerging market of electric cars, a market for which it has not examined regional investment aid before.

A subsidy is a subsidy is a subsidy, right? Apparently not…

Cracks continued to in the ethanol industry’s once-impregnable political vanguard, as the San Francisco Chronicle reports that the Senate has voted to roll back the Volumetric Ethanol Excise Tax Credit (VEETC) as well as import tariffs on foreign-produced ethanol. This rollback of multi-billion-dollar ethanol credits failed earlier in the week, when the Detroit News reports automakers came out in opposition of a bill that would have required that 95% of all cars built in the US be capable of running 85% ethanol by 2017. The Senate did fail to pass a repeal of a government ethanol blending mandate that underpins the VEETC, however, and funding is moving forward for ethanol blending pumps. Still, the Senate’s repeal of VEETC alone means taxpayers could save over $5b per year on subsidies, and as one expert puts it

“Looks like we’re going to be relying on the biofuels mandates to make sure blenders use biofuels, rather than bribing them to use it with $6 billion,” [Bruce Babcock, professor of economics and the director of the Center for Agricultural and Rural Development at Iowa State University] said.

In fact, Babcock thinks killing the subsidy could help ethanol because it would come out from the stigma of being a subsidized industry. And removing the subsidy may strengthen support for the mandate, and the tariff on imports.

Over to you, House of Representatives…

Over the course of TTAC’s coverage of US ethanol subsidies, I’ve often wondered why nobody made a political issue out of slaying an ever-growing waste of tax dollars ($6b this year on the “blender’s credit” alone). And with the political rhetoric about America’s debt prices rising, I’ve been wondering with more and more regularity when someone will finally take the ethanol fight to the American people, who are already voting against ethanol with their pocketbooks. But just last December, Al Gore explained why not even he, an environmentalist standard-bearer, could oppose the corn juice he knew was bad policy, saying

It is not a good policy to have these massive subsidies for first generation ethanol. First generation ethanol I think was a mistake. The energy conversion ratios are at best very small… One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president.

The Iowa primary is a key early contest in the Presidential election, and because Iowans grow and refine a huge amount of corn ethanol, campaigning against ethanol subsidies in Iowa is a non-starter. At least that’s what the conventional wisdom was before today, when, with nearly nine months to go before the primary, the impossible just happened.

A massive study by the Government Accountability Office into “Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue” has turned up an interesting finding. It seems that the government’s desire to buy more “alternative fuel vehicles” (AFVs) may actually increase the amount of gasoline used by government fleets. Why? Because agencies largely buy E85 ethanol-powered vehicles to fulfill their AFV requirements, and there aren’t enough E85 pumps to actually fuel the fleet, forcing agencies to obtain waivers to buy regular gasoline. Hit the jump for the report’s full findings on this, the latest unintended consequence of America’s ongoing ethanol-subsidy boondoggle.

George Orwell’s warning, that “the first victim of war is the truth,” apparently applies equally to trade wars. On Friday, Senators Carl Levin and Debbie Stabenow (both D-MI) wrote the United States Trade Representative to express their concern over “reported draft regulations” of China’s New Energy Vehicle plan, noting

We are concerned that these draft regulations continue China’s long history of breaking international trade rules.

Given that the ongoing low-level trade war between the US and China, this was a predictable bit of saber-rattling. But if Levin and Stabenow’s political motivations are easy to understand, the logic that leads them to believe China’s New Energy Vehicle plan is a violation of international trade rules is not. Meanwhile, neither the Senators nor the USTR appear not to have heard about another, more serious possible trade issue arising from China’s headlong dash towards electric vehicles. Sounds like a job for The Truth About Cars…