Just the Facts

Chevy Volt

LEGISLATION WAS INTRODUCED last year in the Michigan Legislature that would grant a $20,000 credit against the Michigan business tax for gas stations that put in public charging points for electric vehicles. Washington has already provided tax credits of up to $7,500 for purchasing electric vehicles such as the Nissan Leaf and the Chevy Volt.

The New York Times reported that 20,000 people reserved a Nissan Leaf. Nissan expects the typical Leaf buyer to be affluent, college-educated consumers in their mid-40s. The federal government offers a $7,500 tax credit as well as a $3,000 home-charging unit to buyers. On top of this, Tennessee, where the Leaf is built, is offering free public charging stations along its freeway system and $2,500 cash rebates. Legislation has been introduced in Michigan that would also provide perks for electric car owners.

The market for electric vehicles is questionable, mainly due to their high cost and limited range. For most households, a vehicle is the second most expensive purchase next to their home. The economic reality is that most American households cannot afford to purchase an electric vehicle that does not meet all of their transportation needs. The average American family needs a vehicle they can pack up and drive to Disney World without experiencing lengthy delays to recharge batteries.

It is interesting to note that MIRS, a Lansing-based news service, reports that those groups lobbying for the tax credit were environmental groups and companies that would benefit, such as Consumers Energy and DTE, which would like to sell more electricity, and Dow Kokam-Midland, which would like to build more electric car batteries. Conspicuously absent at the committee hearing were the Michigan motorists who will have to pay the bill for this latest taxpayer-funded subsidy.  

A different note, however, was sounded last fall at the Custom Integrated Circuits Conference in San Jose, Calif., where a former beneficiary of similar subsidies stated: “The high cost of batteries will keep pure electric vehicles such as the Nissan Leaf and Chevy Volt out of the mainstream consumer market.” That came from Ian Wright, the co-founder of Tesla Motors, maker of the first modern electric cars.

“Today’s Chevy Volt is well designed, but will cost about twice as much as a similar gas vehicle,” Wright said in what was the keynote speech of the gathering. “Gas prices will have to soar above $10 per gallon to make such consumer EVs economical even at the lower battery costs.”

Wright believes that electric vehicles will remain only a “niche” market. “We can’t even afford to fix potholes in the road, so where are we going to get trillions for battery charge stations?” he asked. “The economics don’t work without massive subsidies.”

This push is not new. For example, in 1967, the Detroit Free Press proclaimed that “[C]ompanies are searching for a billion-dollar breakthrough in battery design. General Dynamics is working on a zinc-air cell battery. Ford is actively interested in a sodium-sulfur cell. Gulton Industries and General Motors are tinkering with lithium. ... All the activity is bound to pay off probably within the next five years. ...”