Administration looking to end subsidies for electric cars

The Trump administration plans to phase out subsidies for electric cars and renewable energy sources by 2021.  White House economic adviser Larry Kudlow said that "other subsidies that were imposed during the Obama administration, we are ending, whether it's for renewables and so forth."

The move would end consumer tax credits on purchasers of electric cars and taxpayer subsidies on so-called "green energy."


The tax credits are capped by Congress at 200,000 vehicles per manufacturer, after which the subsidy phases out.  GM has said it expects to hit the threshold by the end of 2018, which means under the current law, its tax credit scheme would end in 2020.  Tesla Inc (TSLA.O) said in July it had hit the threshold.  Other automakers may not hit the cap for several years.

Experts say the White House cannot change the cap unilaterally.  U.S. President Donald Trump last week threatened to eliminate subsidies for GM in retaliation for the company's decision.

Kudlow made clear any changes in subsidies would not just affect GM.  "I think legally you just can't," he said.

Democrats will take control of the U.S. House in January and are unlikely to agree to end subsidies for electric cars and many have been pushing for additional incentives.

Tesla and GM have lobbied Congress for months to lift the cap on electric vehicles or make other changes, but face an uphill battle make changes before the current Congress expires.

In October, Senator Dean Heller proposed lifting the current cap on electric vehicles eligible for tax credits but phase out the credit for the entire industry in 2022.  Two other senators in September proposed lifting the per manufacturer credit and extending the benefit for 10 years.

Also in October, Senator John Barrasso[,] a Republican who chairs the Senate Environment and Public Works Committee, proposed legislation to end the EV tax credit entirely.

The Obama administration ridiculously overestimated the impact the subsidies would have on electric car sales.  He predicted a million E.V.s on the road in the U.S. by 2015 – and missed it by 72%.  The biggest subsidies in the world wouldn't have mattered because no one wants to buy them.

This thought – Economics 101 – never crossed the minds of the dolts running the Energy Department program.  At present, there are about 1 million E.V.s on the road in the U.S.  Even with the subsidies, it seems impossible that the goal of 125 million E.V.s on the road by 2030 can even be approached.

A lot of people would buy electric cars if they performed equally to gasoline consuming vehicles.  But they can't even come close.  Even with a revolution in the battery packs that power E.V.s, their performance vis-à-vis gasoline cars leaves much to be desired.

The question has always been, is government interference in the market through subsidies helping or hurting the E.V. industry?  Selling more vehicles might drive innovation.  But there appears to be a limit to current battery technology.  Until alternatives can be found, E.V.s will likely remain a curiosity and not an important part of the auto industry.