Suppose you are offered a bargain on a pair of well-made shoes. You can have the new footwear at half price. The catch? They don’t fit and the discount is partially paid for through your tax dollars.
This is the kind of deal the public is being offered on some alternative energy vehicles. It is estimated that the Chevy Volt costs General Motors as much as $89,000 to manufacture, while it sells for $39,995. But the actual cost to the consumer is further reduced after a $7,500 federal income tax credit, and for California residents, another rebate of $2,500 from the state.
The Volt was introduced in 2010, with much ballyhoo, as the first plug-in U.S. hybrid. But Chevy has sold barely 20,000 vehicles. The public remains skeptical about this and other plug-in vehicles that take hours to charge, have short range and are served by few public charging stations. These cars don’t look nearly so good when their still high price — even after subsidies — is considered and they are compared with the newer more fuel efficient and reliable gasoline powered vehicles. The fact is that there is only a minuscule market for these plug-ins even when sold at below their cost to manufacture.
Some like to point to the all-electric Tesla as a success story, but a fully equipped model can cost north of $100,000 and even after heavy taxpayer subsidies, it is well beyond the budget of most of the motoring public.
Currently the Legislature is mulling over additional tax incentives of nearly a $1,000, to further stimulate the purchase of electric vehicles, which raises a question for taxpayers. As alternative fuel vehicle companies continue to flounder, how far should government go in committing tax dollars to subsidize technology that is not market ready? Those in government, who seem to be blind to the wishes of their constituents, as well as economic principals, will argue that they are merely legislating progress and that subsidizing behavior with taxpayers’ hard-earned money is appropriate.
However, it should be remembered that the gasoline powered automobile superseded the horse without being subsidized because it proved its advantages over time. As time goes on and the new transportation technologies are improved, refined, and shown to provide good value, consumers will embrace them and this market acceptance will not require the intervention of government bureaucrats.
Those in government should stop engaging in magical thinking and believing in the fallacy that they can legislate outcomes in both technology and the marketplace. If this were possible, then politicians could pass a bill to require manufacturers to produce gravity defying boots to improve our daily commute. At least these, at half price, might be a genuine bargain.