Miracle Revealed: How To Make EVs Nearly Affordable
Whenever a new technology comes to market the process is fairly simple. Ridiculously expensive for the first year, then slowly the price comes down as the customers become less willing to pay the original RRP, then competition kicks in which drives the price down even further. It happened with mobile phones, big screen TV’s, DVD players, etc. But what happens if the technology is something the government wants to implement? Then, you skip step 1 with the help of tax payer money.
International Business Times reports that Nissan and their Leaf are going to enter a price war with Chevrolet and their Volt. And it’s all on the taxpayers! The Nissan Leaf will start at $32,780 and that doesn’t include an unspecified destination charge. But with a wave of the US Government’s wand, that price comes down to $25,280 via a $7,500 federal tax credit. Over at GM, the Volt starts at $41,000, but once that magic wand is waved, it comes down to $33,500 via the same tax credit. The US government has also instigated a rebate program whereby vehicles that do not emit tailpipe emissions qualify for a rebate. And it is because of this rebate program that in California, the Leaf qualifies for a $5,000 rebate and the Volt $3,000. If you lease the Leaf, Nissan will pass the tax credit savings onto the customer. And if you buy the Leaf, your charging equipment will qualify for tax credits, too. Blimey! If Nissan isn’t careful, they might start getting a bunch “Federal Government bailout” jokes aimed at them…
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The linked article (and this post) is misleading: It says that GM and Nissan may start a price war. No such thing. Governmental incentives are hardly "a price war". And we've known about these incentives for what, a year or two now?
«It happened with mobile phones, big screen TV’s, DVD players, etc.» These technologies became affordable because electronics got cheaper at exponential rates. Battery technology, on the other hand, has not been shown to become exponentially better nor cheaper. Instead you see steady but moderate improvements over time. Government is engaged on a race: will the techologies of these new tech cars become cheaper and better faster than the government subsidies that prop them? In the Carter administration, billions were spent to create gasoline from coal. Process efficiencies were gained. But the improvements were too slow to ever make fuel-from-coal competitive with gasoline, so in the end all the taxpayer money was wasted and the project was killed.
Consumer electronics products don't get magically less expensive due to economies of scale and competition. There has to be some real savings somewhere that reduces cost. Higher volumes can help a little by spreading the development cost over more units. In semiconductors, process changes that increase the number of chips per wafer and increase wafer size can reduce the price per chip. A decontenting race to the bottom can trade off the number of features in exchange for performance and quality. Think smart phones that run aps but drop phone calls. The point is some part of an electric car, probably the battery pack, needs to significantly drop in price due to some material or process change that reduced cost. Government subsidies to goose up volume won't get you there on increased volume alone.
Government subsidies are not new to the auto business. Reagan's tax bill allowed three year write-offs of "business" vehicles, and it was remarkable how many were then used in "business". Similarly, the ability to fully expense >6000lb SUV's and trucks amounted to government subsidies of large and fuel-inefficient vehicles. At least with subsidies of all-electric or hybird cars, the nation at large is improving technology while reducing fuel usage.