Opinion: Stop Subsidizing Electric Vehicle Programs

Matt Posky
by Matt Posky

Hoping to increase the United States’ electric vehicle charging infrastructure, the White House has announced $623 million in grants to build more charging stations. This plays into the Biden administration's goal of having 500,000 public chargers in the U.S., and see 50 percent of all new vehicle sales become electric, by 2030. However, the federal government has already poured billions into the cause and it’s looking like an incredible waste of money during a period where citizens are growing increasingly concerned about the economy.

According to the Department of Energy, the money comes via the $2.5 billion Charging and Fueling Infrastructure Discretionary Grant Program. The White House has said the program will fund nearly 50 EV charging and alternative-fueling infrastructure projects in 22 individual states and Puerto Rico. Of the total, $311 million is supposed to be reserved specifically for "underserved" rural and urban communities supposedly in need of public charging stations. The rest will reportedly be used to help shore up gaps pertaining to longer routes, hopefully reducing range anxiety and increasing EV sales as the Biden administration had hoped.

“This funding will help ensure that EV chargers are accessible, reliable, and convenient for American drivers, while creating jobs in charger manufacturing, installation, and maintenance for American workers,” U.S. Transportation Secretary Pete Buttigieg said in the release.

Your author would argue that the juice simply isn’t worth the squeeze. Not because there’s something inherently wrong with electric propulsion, but because the U.S. government has been funding the cause since 2011 and the current investments look like a colossal waste of money. Battery electric vehicles have been on the market for over a decade and there are now loads of companies focused on building charging stations.

It is past time to cut the umbilical cord.

The Biden administration has already invested $7.5 billion in EV charging subsidies via the trillion-dollar Bipartisan Infrastructure Law and spent another $783 billion on energy and climate change initiatives via the so-called Inflation Reduction Act — with billions in funding earmarked for building battery production facilities, allocating EV tax credits, and transitioning government fleets toward EVs.

Broken down into states and local municipalities, the country is also assumed to have spent nearly $14 billion on economic development subsidies on at least 50 electric vehicle or battery production facilities by the start of 2023.

The United States likewise already had financial incentives to help normalize all-electric vehicles and reportedly spent an estimated $20 billion in subsidies so far. That’s according to the latest data from the Texas Public Policy Foundation, which is skeptical of climate change and has a vested interest in pointing out faults that might make Democrat politicians look like they’re doing a poor job.

However, neither party needs help with that right now and both have allowed EV-related subsidies to continue or expand despite the original concept being sold to the public as a temporary measure. Even the most reserved estimates still have the U.S. spending billions just on EV tax credits and just about everyone is wondering where all this money is going. Left-leaning Politico reported last month that the Congress and the Biden administration decided in 2021 to spend $7.5 billion to build tens of thousands of EV charging stations across the nation — noting it had yet to install a single unit.

The plan to pivot the United States Postal Service (USPS) toward all-electric mail trucks likewise fell flat on its face. Leadership at the USPS demanded more money after saying the swap to EVs would be more difficult and costly than initially thought. This ultimately resulted in the post office getting more money and government contractor Oshkosh Defense seeing a larger payday for building the delivery vehicles.

Now, the Biden administration is putting up another $623 million in grant funding aimed at having at least 500,000 public chargers available by 2030. Though the units that fall under the latest grant approvals are supposed to be located within disadvantaged local communities and along major transportation corridors.

Unfortunately, the places the government is targeting aren’t the regions where EVs sell in meaningful volumes and public charging stations are almost universally loathed by EV today’s owners. The only real exception seems to be Tesla’s Supercharger network, which is quickly becoming the global standard. Meanwhile, it could be argued that the United States has burdened taxpayers by having them front the cost of all of the above while the financial benefits remain private. Despite how heavily EV charging firms are subsidized, they still get to keep the money they make — creating a weird public-private arrangement where the only way for citizens to benefit is to work for one of those companies or buy an EV themselves to take advantage of the relevant tax breaks.

The Heritage Foundation released a paper last year claiming that the entire plan has been forcing regular people to subsidize wealthy EV owners. Statistics back this up, as most EV transactions are significantly higher than the national average and the typical owner of an electric car earns over $200,000 annually. The Biden administration implemented measures to reduce the problem by taking into account income and vehicle pricing when it revised the EV tax credit scheme. However, it also made the program last indefinitely by eliminating production caps and has put billions more on the table for charging firms and companies vying to construct batteries domestically.

On the one hand, this is exactly what the country needs if it is to have any hope of adhering to the Biden administration’s goal of having half of all new vehicle sales be electric by 2030. But it’s also rather nebulous as to what happens with the money once it has been distributed by the government. It’s not abundantly clear what’s being done with the funds, especially since most of the programs haven’t yielded anything visible. The most fervent critics have even gone so far as to suggest EV subsidies might make a convenient way to launder money through energy companies, charging firms, construction contractors, and automakers.

While your author wouldn’t necessarily go that far, there are numerous examples of electric vehicle startups lying to shareholders to pump their stock price just long enough for the initial investors to yank out their money and run. There has been no shortage of financial shenanigans surrounding novice EV companies and alternative energy firms. Though nobody has managed to successfully implicate government grant or incentive programs in anything sinister. You’re welcome to speculate whether that’s because everything is above board or because governments are notoriously bad at holding themselves accountable. But there’s really not enough good evidence to make a sound decision on the topic.

There is a lot of suspect cooperation, however. Formed in 2021, the US-EU Trade and Technology Council basically serves as a way for Europe and America to be on the same page in regard to data acquisition policies, 5G, technology standards, corporate tax rates, and artificial intelligence regulation. But it’s been criticized as effectively serving as a cartel driving public-private monopolies and allowing foreign influence to shape domestic policy on two continents. Case in point, the European Commission was unhappy that the electric vehicle subsidies outlined in the Inflation Reduction Act wouldn’t benefit European companies as much as EU leadership had hoped because the Technology Council was assumed to guarantee trans-Atlantic cooperation.

Regardless of how defensible you find the above, it’s still very obvious that very large sums of money issued out for the electrification cause haven’t been put to the best use. It could even be argued that it’s counterproductive as accelerating EV adoption at this stage basically guarantees battery pricing will outpace what’s feasible for the average driver. With the raw materials used for battery production (e.g. lithium, cobalt, nickel and graphite) already difficult to source in large quantities, the global push toward EV adoption may result in sustained demand that drives up prices. Though we did see battery material prices falling through 2023 as production increased and demand for EVs declined.

That could remain the case if adoption rates stay measured and the world has time to continue ramping up the mining, material refinement, and production efforts required to make batteries. But electric vehicles themselves didn’t get any cheaper and it’s very difficult to envision any scenario where prices are made comparable to internal combustion vehicles if the former is to comprise half of the market in just six years. It’s likewise impossible to see how any this advantages the United States in the short term.

Despite the White House making moves to spur domestic battery production, it’ll be years before that shift takes place in a truly meaningful way. Meanwhile, surging EV sales would disproportionately benefit China in the immediate, as it currently dominates the battery market by a staggeringly large margin. However, if the United States doesn’t get the lead out and bend over backward to ensure a swift transition to all-electric vehicles, then all of that government spending leading up to now may have been for nothing.

[Image: ZikG/Shutterstock]

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Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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2 of 155 comments
  • Bd2 Bd2 on Jan 16, 2024

    So, Posky is OK with just handing over BEV manufacturing to the Chinese, just like we have done for solar panel manufacturing.

    While outright bans on all ICE (particularly if it includes HEVs and PHEVs is silly), like it or not, BEVs will make up a significant % of the automarket, so it is prudent to try to make sure that the US is a major player in the market.

    But right now, the US is significantly behind the Chinese and if we don't take steps to support BEV manufacturering, we will never catch up and basically cede this strategic industry to the Chinese.

    Now, in terms of how much we offer by way of tax credits, etc. - that can certainly change, but remember that we offer huge tax benefits to buyers of gigantic SUVs, so it seems silly not to offer similar support for what will be an important part of the auto industry going forward.

  • Dav65772610 Dav65772610 on Feb 01, 2024

    isn't Volvo Chinese?

    Volvo, An Early Electric Car Adopter, Cuts Off Funding For Its EV Affiliate

    Move follows other retrenchments by big automakers as sentiment turns against EVs

  • Bd2 Probably too late to do anything about it for the launch, but Kia should plan on doing an extensive refresh of the front fascia (the earlier, the better) as the design looks really ungainly.
  • Namesakeone Since I include SUVs and minivans as trucks, I really cannot think of a brand that is truly truckless. MG maybe?
  • Sobhuza Trooper Subaru, they were almost there with the BRAT. --On a lighter note, where the hell is my Cooper Works Mini truck?
  • Mike Evs do suck, though. I mean, they really do.
  • Steve Biro I don’t care what brand but it needs to be a compact two-door with an ICE, traditional parallel hybrid or both. A manual transmission option would be nice but I don’t expect it - especially with a hybrid. Don’t show me an EV.