By on September 16, 2008

Toyota is not a happy camper. “On the same day the Chevrolet Volt was unveiled in Detroit, a Toyota executive told a congressional committee that lawmakers would be wrong to enact tax credits that benefit only one plug-in hybrid design,” Automotive News [sub] reports. The legislation that’s pissing off the world’s largest automaker would offer a $7500 federal tax credit for any hybrid with a battery pack rated at six kilowatt-hours of electricity or more. That would be the Chevrolet Volt. And only the Chevrolet Volt. Speaking to the Senate Energy and Natural Resources Committee, ToMoCo’s national manager of energy and environmental research said pending legislation “redefines plug-in electric vehicles to seemingly eliminate consumer tax credits for all but one plug-in vehicle design.” That would be the Chevrolet Volt. And only the Chevrolet Volt. “We believe consumer incentives should encourage all plug-in designs,” Robert Wimmer railed. “And allow the consumer market to select winners, not legislation.” Note to GM: you do NOT want to piss-off Toyota. If the gloves come off, you’re so dead. I mean, sooner rather than later.

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30 Comments on “Volt Birth Watch 89: Toyota: Where’s OUR G.D. Tax Break?...”


  • avatar
    Gardiner Westbound

    Toyota will outsmart and outmaneuver the GM dinosaur regardless as with the 1981 Reagan voluntary restraint agreement, imposed in response to U.S. auto industry pleas for import protection to grow strong enough to compete on the free market.

    Japanese automakers quickly realized American consumers had a relatively price inelastic demand for their products, Facing the combination of strong U.S. demand and a quantitative ceiling on allowable shipments, Japanese automobile exporters reacted in an economically rational manner. They raised sticker prices high enough to more than offset lost opportunities for increased sales volume. Next, they moved upmarket into the segments most prized by profit margin minded Detroit, first into mid-size cars and then into full size luxury cars. Far from sustaining financial damage from the restraints, they enjoyed windfall profits that increased their competitive threat.

    Then they did something unthinkable to a pay for performance obsessed American CEO. Instead of distributing their windfall profits to shareholders and reaping adulation and enhanced compensation, they increased research and development to produce cars more efficiently and with even higher quality. They enhanced their technology, added new models at a faster than usual pace, and installed flexible manufacturing systems to permit quicker responses to shifts in consumers’ tastes.

    Detroit’s success in convincing Washington to limit import competition was a pyrrhic victory.

  • avatar
    KixStart

    Toyota’s right. What is the strategic imperative for a $7500 tax credit for the Volt? Are we trying to conserve fuel? Encourage electric cars? Reduce CO2 emissions? None of these justify a $7500 tax credit for one barely marketable over-priced vehicle available in teensy quantities for the foreseeable future.

  • avatar

    Well, exactly, sign me up for a 5-seater Prius plug-in hybrid that’s made in the USA and can I have my fair share of tax credits, please?

  • avatar
    Alex Rodriguez

    I think Toyota should quit their whining, they already got tens of millions from the Japanese government.

  • avatar

    Excellent post, Gardiner Westbound! Very insightful. With another 226 words, you’d be at the magic 800 mark and could have been paid for your work. :)

    I don’t see what is wrong with GM’s approach here relative to Toyota. Wouldn’t it be in their best interest to encourage incentives that benefit their product and only their product, rather than wanting Toyota to share them? Why would Toyota be pissed off, since GM’s not approving the incentives – that’s what Congress would be doing.

  • avatar
    romanjetfighter

    Don’t make Toyota angry!! :( They’ll shut down the plants in KY and TX and we will all go hungry!! DO WHAT THEY SAY!!!

    As for tax incentives, why not just give tax incentives on all American-made vehicles if we want to help out GM?

  • avatar
    srh

    This complaint is laughable, coming from the company that benefited from the hybrid tax break (http://www.hybridcars.com/federal-incentives.html) while other competing fuel efficient designs (such as diesels) did not get the same treatment.

    However this does illustrate the folly of trying to legislate fuel economy through targeted tax breaks. The *only* way to improve fuel economy fleetwide, and encourage development of *numerous competing* fuel efficient designs is to increase the gas tax. $8 per gallon gas would go a long way toward improving fuel economy.

  • avatar

    romanjetfighter:

    Don’t make Toyota angry!! :( They’ll shut down the plants in KY and TX and we will all go hungry!! DO WHAT THEY SAY!!!

    That’s not the danger. If Toyota lowers vehicle prices and increases factory output/importation, they can eat GM’s market share for breakfast, lunch and dinner. And/or ToMoCo could starve GM’s of its last drop of high margin biz by selling Texas-made Tundras at a [theoretical] loss. (Anti-dumping federal retribution? Prove it.)

    As for tax incentives, why not just give tax incentives on all American-made vehicles if we want to help out GM?

    Does that include American-made Hondas, Toyotas, Hyundais, VWs, etc? If not, why not?

  • avatar
    tulsa_97sr5

    Wow, i took way too long with the reply below, hi RF!

    @romanjetfighter :

    Don’t make Toyota angry!! :( They’ll shut down the plants in KY and TX and we will all go hungry!! DO WHAT THEY SAY!!!

    More likely, a truly angry toyota would add shifts at all plants, do some incentive like employee pricing on all cars for the next 2yrs, and drop an extra 10k on the hood of all Tundras till their billions run out. There would be fewer car makers in 2 years for sure.

  • avatar
    Jerome10

    Oh, wow, am I really surprised about this one?

    Um, NO.

    srh has an excellent point. In the hybrid tax credit wars, Prius received the most credit with, say, Escape hybrids not getting as much (if I’m recalling correctly). In addition, certain arbitrary mileage requirements were also used to allow only hybrids with certain mileage to use the HOV lanes in states. Guess who qualified? Prius and Civic. Escape did not.

    Do I have a problem with this? Not a bit. The reward/credit should be larger given the improvement in efficiency. The better your efficiency, the better the credit. You meet the efficiency requirement, you get the same incentives. Simple as that.

    Toyota was the winner when Prius was on top of the mileage game. Now that they’re worried that they’re going to possibly be out-done, they’re crying “me-too!”. Would anyone here agree that a malibu hybrid should get to use the HOV lanes and a $3400 tax credit simply because it is a “hybrid”? No. So none of us should expect that just because a car has “plug-in” means it should get the same sort of incentives as the most efficient plug-in gets.

    Sorry Toyota. I really can’t sympathize.

  • avatar
    crackers

    If the purpose of the tax credit is to encourage stretch goals for plug-in hybrids, then setting the bar high makes sense. If the bar is too low then we will see companies playing games with pseudo plug in hybrids just like they play games with CAFE.

    As long as all car companies are eligible at the specified threshold, then what’s the problem?

  • avatar
    sparky

    OK Toyota…make a hybrid vehicle w/ at least a six kilowatt-hour battery. You’ve already got pluggin hybrids doing road trials over in Europe.

    Seriously, what’s the problem here? Yeah, this seems targeted at the Volt. But why can’t Toyota turn this to their advantage?

  • avatar
    blindfaith

    How much does Japan pay for our US armed services to protect their country.

    They do not pay a dime. And, folks think that the Japanese companies are brilliant. Do you know the price of everything made in US reflects the price of taxes to support US armed services for the protection of Japan. The US goverment pays a bunch in R/D to make sure we have the best.

    Consider the burden and hurdles that the US government puts on the US industries. I would love to let Japan have their own army. Let them go hog wild and attack China again.

  • avatar
    rtx

    “Seriously, what’s the problem here? Yeah, this seems targeted at the Volt. But why can’t Toyota turn this to their advantage?”

    Exactly,
    In all honesty when a vehicle already has a battery and an engine/generator to charge the battery is it really rocket science to think Toyota could add a transformer that would allow a 120/240 volt power source to charge the battery?
    Not only will this be a simple modification but I’m going to bet that Toyota blows the 40 mile range of the Volt right out of the water with the “plug in” Prius.
    They have consistantly beat Detriot to the punch for the past 10 years and will continue to do so until Detroit does something smart like introducing their superior European product to North America. There are too many chiefs in Detroit and each is struggling to maintain his small part of the crumbling kingdom.
    Toyota execs only answer to one master in Japan. The Toyoda family has managed to keep control of their company and their senior management put the companys interests first when making decisions.
    Ultimately this is why Detriot is doomed to fail and will soon be a minor player on the global field.
    JMHO.

  • avatar
    quasimondo

    Didn’t Toyota get tax credits for the past four years for the Prius?

    That’s not the danger. If Toyota lowers vehicle prices and increases factory output/importation, they can eat GM’s market share for breakfast, lunch and dinner. And/or ToMoCo could starve GM’s of its last drop of high margin biz by selling Texas-made Tundras at a [theoretical] loss. (Anti-dumping federal retribution? Prove

    How are they going to do that when they have enough troubles trying to build as many Prius’ right now? I think if they could increase output, they would’ve done that a while ago to meet demand.

    However this does illustrate the folly of trying to legislate fuel economy through targeted tax breaks. The *only* way to improve fuel economy fleetwide, and encourage development of *numerous competing* fuel efficient designs is to increase the gas tax. $8 per gallon gas would go a long way toward improving fuel economy.

    Instead of targeted tax breaks, why not across the board tax breaks? Incentives for any car that achieves 35+ mpg, no matter if it has hybrid or conventional drivetrain.

    I find it funny that you people are willing to let Uncle Sam dig into your pockets in this poor justification of forcing Detroit to up their mileage game. Even more ironic is how unwilling you all would be to have these proceeds go to Detroit so they actually can up their mileage game. I’ll lend my support to increased fuel taxes when you lend your support to that $50B loan.

  • avatar
    barely.working

    Honestly, if you were a company in any industry and one of your competitors was getting a free incentive from the government and you didn’t wouldn’t you be a bit pissed off too? What’s fair is fair. Any company who had the chance to get (mostly) free money would be chasing after it like a fat kid going after a hamburger. What’s fair is fair.

    As an aside, it’s not quite that easy to add in plugin capibilities. Think about laptops, they have an AC to DC converter. My Macbook Pro has a 60 watt-hour battery, whereas the current gen Prius has a 1,300 watt-hour battery. You would need a much larger power converter, which adds weight and complexity to the car. Hauling around an external converter would defeat the purpose. While semi-conductor based converters do exist now, they would be quite expensive at that size and wouldn’t be that reliable.

    Personally I don’t believe that even 240V would be sufficient to charge a battery that size over night, especially considering the charge rate of Li-Ion batteries has to be throttled after 80% charge so the battery doesn’t overheat and explode. Next everyone will be having 400V plugins installed in their garages along with step up transformers…

  • avatar
    KixStart

    quasimondo, “Didn’t Toyota get tax credits for the past four years for the Prius?”

    I believe they built enough to run out of tax credits for it by 2006.

    GM was also eligible for these credits, which were written to cover a number of vehicles. Their whybrids got a lesser amount of credit.

    Toyota used the credit to accomplish the expected objective… get a fuel-saving technology into mass-production.

    GM just pointed and laughed. Not the best plan.

    quasimondo: “Instead of targeted tax breaks, why not across the board tax breaks? Incentives for any car that achieves 35+ mpg, no matter if it has hybrid or conventional drivetrain.”

    Sure. Some sort of sliding scale that kicks in at high mpgs and greatly rewards higher mpgs. If the strategic goal is to reduce fuel consumption, this is a plan with some merit.

    But a fuel tax is much simpler and more effective. It also encourages car-pooling, cycling, walking, smarter planning of trips, moving closer to one’s place of work, etc.

  • avatar

    I recall Toyota initially scoffing at the idea of this car, and now they balk at a tax credit when their own product has benefitted from tax credits for years?

    If Toyota wants the credit that badly then they should use their sizable reserve of wealth and engineering talent to come up with a product that qualifies for it. It shouldn’t be that hard for them.

  • avatar
    quasimondo

    I believe they built enough to run out of tax credits for it by 2006.

    GM was also eligible for these credits, which were written to cover a number of vehicles. Their whybrids got a lesser amount of credit.

    Toyota used the credit to accomplish the expected objective… get a fuel-saving technology into mass-production.

    GM just pointed and laughed. Not the best plan.

    But they got tax credits, which along with the post-Katrina jump in fuel prices helped turn the Prius into a legitimate mainstream vehicle. So why should they care if GM gets these credits? With the amount of Prius’ sold since those
    credits ran out, do they still need them?

    But a fuel tax is much simpler and more effective. It also encourages car-pooling, cycling, walking, smarter planning of trips, moving closer to one’s place of work, etc.

    So ‘Big Oil’ gets their money, and Uncle Sam gets their money and everybody’s a winner! Everybody but you, the man on the street, of course.

    Personally, I’m in favor of controlling people through RFID monitoring instead of controlling them through selective taxation.

  • avatar
    KixStart

    quasimondo, “But they got tax credits, which along with the post-Katrina jump in fuel prices helped turn the Prius into a legitimate mainstream vehicle. So why should they care if GM gets these credits? With the amount of Prius’ sold since those credits ran out, do they still need them?”

    GM was also offered those tax credits. Just because Toyota delivered tech that we wanted in 2001 and 2004, doesn’t mean that they should be frozen out of 2010.

    Further, what’s the impact of a narrowly defined credit? That tends to “pick a winner,” in advance of the race. The Volt may be a bad choice… The Volt not only has a Cruze-sized engine, it also has a battery the size of a second engine good for a mere 40 minutes of travel at highway speeds… what’s the value of that if you’re going 700 miles that day, which we do? You’re dragging along 400lbs of baggage (so you won’t have much of a trunk) all day to no purpose, compromising your range and ultimate efficiency. And GM stole space from your gas tank, so your cruising range is limited. And, with tax credits, the Volt is still expensive. Unless the credits bring it to the price of a Prius, I don’t particularly want one.

    Not only is it narrowly defining which manufacturer gets the credit, it’s narrowly defining which consumer gets the credit. If this is intended to encourage early adopters, it should encourage as many early adopters as possible… not just the 8 people that fit the Volt’s unique perfect driver profile.

    TriShield: “If Toyota wants the credit that badly then they should use their sizable reserve of wealth and engineering talent to come up with a product that qualifies for it. It shouldn’t be that hard for them.”

    Which is why GM should encourage a more broadly defined tax credit… Toyota could probably field 20K vehicles that fit the narrow definition before the Volt’s first month is over, if they want. Lutz has been abusive and they might be stirred up as it is.

    TriShield: “I recall Toyota initially scoffing at the idea of this car,…”

    I don’t believe you recall that. I believe you recall Lutz saying others scoffed at the idea of this car. Lutz was, to say the least, exaggerating. Toyota did reassure their stockholders that their plan was best but they didn’t say GM couldn’t do it or that it wouldn’t work (as Lutz said, again, yesterday). Considering who’s got the experience and volume… I’d say Lutz should pay some careful attention to what Toyota says.

  • avatar
    ppellico

    TAX BREAKS!
    Consumers are getting tax breaks for buying cars!?

    People, do you remember what a tax break is and means?
    It means others will have to pay more to fill in for what they don’t.

    All of this social engineering is making me down right sick.

    I know!!!!
    Why don’t we give tax breaks to anybody that will sell their SUV?
    Let’s give a tax break to anybody who moves within 5 miles of their job?
    Let’s give a tax break to anybody that buys a car with a 55 MPH limiter?
    Let’s give a tax break to anybody who lives in Manhatten! They don’t even have cars!
    Let’s give a tax break to every bottle of dry red wine! (just slipped this porky one in like they do in congress).

    Finally…everybody is already penalized for gas.
    You drive, you pay.
    You drive a gas hog…you pay more.
    Its a simple user tax. Leave out all this goddamned social controlling feel-better madness.

    Let’s stop all this and do away with the entire tax structure and implement the 15 percent simplified tax.
    And stop all this pissing and moaning from these cry-babies.

  • avatar
    Adub

    Toyota should just bury the General. It wouldn’t take much in production or price cuts to do it. Hell, they could buy a controlling interest in the company for a few billion and announce Chapter 7 the next day!

  • avatar
    taxman100

    Domestic companies should get preferential treatment. They have millions of Americans who are dependent on them for retirement, health care, etc. They have pumped more wealth into this country than Toyota could ever dream of doing. They are part of our history, and part of our future.

    They provide far more to the public good than Toyota does. Not to mention, it is our auto industry we should want to preserve, not someone else’s.

  • avatar

    taxman100:

    They provide far more to the public good than Toyota does. Not to mention, it is our auto industry we should want to preserve, not someone else’s.

    Tell that to Detroit, who are busy building their new cars in Mexico, Korea, etc. And while you’re at it, have a look at the domestic content sticker on ALL of Motown’s products. THEN tell me I have a good reason to support on a Big 2.8 bailout on patriotic grounds.

  • avatar
    Jerome10

    Yes, because final assembly is the only true determining factor in how a vehicle affects the American economy?

    I suppose 10,000 assembly jobs in america somehow outweighs assembly jobs plus engineering plus R&D plus finance plus marketing plus plus plus?

    Don’t be fooled. Final assembly and component parts may be done in the US at a higher number, but make no mistake the vast majority of all behind-the-scenes work is still done in Japan by Japanese.

  • avatar
    DetroitIronUAW

    First, the volt doesn’t exist yet. And second, for a $7500 tax credit I’m sure that Toyota can come up with a battery pack to meet the 6kwh requirement.

  • avatar
    ppellico

    Again, please!
    Why are we all fighting over how much of a tax break any of these techs should get?
    The whole tax break philosophy is dead ass wrong.
    We should be yelling about any breaks at all.

    The whole idea is to let the consumer buy a car that promises less taxation at the pump.
    That is supposed to be the incentive…not an additional push by the government to help stear the decision.
    The incentive for the mfr is to build a better car that the consumer will decide is worth the purchase…NOT the government.

    This crowd is being misdirected with the entire story.

  • avatar
    quasimondo

    Why don’t we give tax breaks to anybody that will sell their SUV?
    Let’s give a tax break to anybody who moves within 5 miles of their job?
    Let’s give a tax break to anybody that buys a car with a 55 MPH limiter?
    Let’s give a tax break to anybody who lives in Manhatten! They don’t even have cars!
    Let’s give a tax break to every bottle of dry red wine! (just slipped this porky one in like they do in congress).

    I have a better suggestion. Since we’re all about forcing people to use less gas, I say we tie gasoline purchases in with those RFID driver’s licenses. Ration out a monthly limit that they can use any way they want. Nobody sees extra taxes, people use less gas, it’s a win-win for everybody!

  • avatar
    whatdoiknow1

    How much does Japan pay for our US armed services to protect their country.

    Have you had a look at the Japanese Self Defense Forces lately? They have grown rather strong ans safisticated in recent times. The issue is how much is the USA paying Japan to NOT become a world military power (Nuclear included)again.

    The USA does what is in its best interest. We like being an important player in that region of the world so that is why we “offer” up our “protection” services. It allows us to keep OUR fleet in their (China, Japan, and Korea’s ) waters.

  • avatar
    Raskolnikov

    Robert Farago :
    September 17th, 2008 at 8:56 am

    taxman100:

    They provide far more to the public good than Toyota does. Not to mention, it is our auto industry we should want to preserve, not someone else’s.

    Tell that to Detroit, who are busy building their new cars in Mexico, Korea, etc. And while you’re at it, have a look at the domestic content sticker on ALL of Motown’s products. THEN tell me I have a good reason to support on a Big 2.8 bailout on patriotic grounds.

    Peter DeLorenzo has said numerous times that 1 of 14 jobs in the United States is directly or indirectly dependent on the domestic automobile industry. Assuming this is true, then the dissolution of this industry is indeed scary and would have devastating economic consequences. Are they too big to fail? I would say “yes,” but that doesn’t necessitate a gargantuan loan from our government, which is already broke and cannot afford to make more committments (AIG, Fannie Freddie) when it can’t fund CURRENT committments (Social Security/ Medicare)!!!!

    So what is the solution? Sit back and hope its not too late for these guys to compete successfully? I don’t know.

    Another thing, our domestic manufacturers are also GLOBAL corporations with facilities all over the world. Personally, I’m fine with buying an “American” car assembled in Canada with an engine sourced from Germany and a transmission sourced from Japan.

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