Do tax credits for hybrids and/or plug-ins really make sense?
100 mpg+, but not worthy of a $7500 tax credit?
The legacy of oil dependence
If there is one thing that really worries me about the auto industry and foreign oil dependence, it’s the legacy effect. Quite simply, it takes decades to replace the current fleet of autos in the US today. Even worse, a Japanese study finds that extending the life of a vehicle, rather than quickly trying to replace chunks of it such as with ‘cash for clunkers’, is actually the more environmentally-friendly choice. So, countering the the legacy effect with as much ammunition – building the most fuel efficient as possible vehicles today – is critical to a better future two decades from now.
Thus, many believe that tax credits for hybrids, especially the plug-in kind, are key. But does this thinking really make sense?
According to John Lauckner, President of GM Ventures and co-creator of the Chevy Volt, volume of battery production is not the key to cheaper plug-in vehicles. Instead, it’s technological breakthroughs – a thought shared by the consensus of battery technology experts. To some extent, one could argue that the battery-powered vehicles of today are an inefficient utilization of resources. Consequently, in theory, it might be more efficient and productive to pump consumer tax credits into battery research.
Still, without pushing plug-in cars into the marketplace, it might be harder to promote such research. Likewise, there are other technologies, such as electric motors, that are being advanced by today’s plug-in vehicle production. Nevertheless, might not the same means be achieved with conventional hybrid cars?
I know hybrid cars are passe these days, but let’s try to objectively think this through.
Analysis from Carnegie Melon University, for instance, suggests that the current tax credits are too focused on battery size, but not electric range. Does that make sense? Essentially, the tax credits, CMU warns, are not rewarding the most cost-effective EV range for the buck – in a battery package that still needs lots of improvements. Isn’t that inefficient?
Even more confounding, if volume isn’t the critical issue, why a big rush to 1 million plug-ins by 2015? What is this accomplishing if volume isn’t the critical issue right now? Again, isn’t selling as many electric cars with battery packs that are not yet ready for mainstreaming a bit of a waste of resources, an inefficient pursuit, if volume isn’t yet critical?
Of course, some might argue such a path is good for fighting the legacy effect, and I agree. But are plug-in tax credits the right kind of battery response to the legacy effect?
With the amount of battery material used in one battery electric vehicle, roughly 10 hybrids could be produced. Consequently, if 10 percent EV penetration were achieved by 2020, 100 percent hybridization theoretically could be achieved by 2020 as well. Not only would 100 percent hybridization result in a bigger impact on both the legacy effect and reducing foreign oil dependence compared to 10 percent plug-in penetration, but such hybrid penetration could extend the life of this hybrid fleet by enabling these hybrid vehicles to become plug-in vehicles if technological breakthroughs are achieved in the battery industry.
So, does that mean that plug-in tax credits should be converted into hybrid tax credits?
Probably not as I don’t believe that automakers are ready for 100 percent battery penetration across the entire fleet any time soon, even if just mild hybridization, unfortunately. So, while plug-in tax credits might not be the most efficient path forward, they might still be the best battery-powered plan forward.
Then again, should the focus even be on batteries?
For instance, why not just focus on fuel economy? Wouldn’t a 60 mpg (city) tax credit require a lot of batteries, for example? In fact, the only vehicles being produced today that achieve such fuel economy are plug-in vehicles. However, it isn’t inconceivable that a smaller Prius, such as the Prius C concept already headed for production, could achieve such a number – and at far less expense.
Likewise, in addition to batteries, new vehicle designs, lighter materials, biofuels, etc. – represented by some of the vehicles at the Automotive X-Prize – might also achieve breakthroughs using a fuel economy-based tax credit. According to a recent Accenture study, this is exactly the kind of technological diversity required for America to win the automotive future.
By no means are plug-in tax credits a bad idea, but they are not a highly efficient way to deal with the legacy effect of foreign oil dependence. So, it seems natural to ask, is there a better path?
I’m not certain, but the science seems to suggest we can do better.
I agree with you general point doug, but the reason that automakers load these vehicles up with these features is because it helps subsidize the costs of the battery technologies. in a small car for instance, these features can help automakers achieve a profit. in a hybrid or plug-in, the extra profit margins these add-ons can drive is pumped into subsidizing the battery costs.
Oh, and JohnM, be careful about quoting anything from Peterson. He’s not exactly in the Friend Camp when it comes to the altfuel industry.
Word is he’s a shill for an auto/oil confab.
Battery development is still in its infancy. Who knows what will come around the bend in the next 3-5 years?
Ideally, subsidies for any of the auto manufacturers shouldn’t exist. You want the cars to stand, and sell, on their own merits. That being said, and as I’ve stated before, a hybrid could sell at a profit if only all the unneeded crap thrown onto it, in order to “pump up” the gee-whiz factor, were tossed out.
Make a hybrid without iPod connections, remove the little camera in the back, and stop loading the car up with nonsense like seat warmers, steering wheel warmers (good lord!), leather seats, GPS mapping, etc. Make all those ala carte options for those who want to pay for it, but otherwise strip the vehicle down to its basics and let it sell.
Remember old Henry Ford’s position was to sell a car his own employees could afford to buy.
[...] in Do tax credits for hybrids and/or plug-ins really make sense?, for example, I referenced GM’s Jon Lauckner stating that volume is not yet critical to [...]
Could tax credits make sense, straycat?
Personally, I believe that foreign oil dependence is an extremely huge problem for the US and we’ve done nothing to make ourselves more secure against this threat. The way to deal with this threat will be technology led by innovation. These innovations will power the future world. Shouldn’t we be trying to lead this effort since we have the most to lose when it comes to oil dependence, particularly foreign oil? Likewise, don’t we have the most to gain from such innovations?
Thus, we have to do something, don’t we?
Interesting, John.
Take, for example, the 4.4 billion gallons lost every year in congestion. A good chunk of this could be recovered via start/stop, add some combination of micro-mild hybrid and even more could be saved. Go full hybrid and now you’re saving a ton of fuel every year while investing in battery technologies without breaking the bank.
This stuff that can be done now and could theoretically be implemented across the entire fleet for a big savings in fleet fuel economy.
Why not take smaller steps that offer bigger legacy gains?
Over and over it has been said that volume is not the key to cost-effective lithium battery technologies today. The commodity prices alone guarantee the batteries will be too expensive to mainstream without technological breakthroughs.
Toyota, for instance, believes lithium is only an interim battery technology just like NiMH.
So, why not scale up to larger battery packs as the technology develops – if it develops? In some ways it seems we’re hoping for a miracle while ignoring what can be done today.
Still, as flawed as the plug-in tax credits are, is there any other path that can lead to real traction?
There just doesn’t seem to be any real interest in taking foreign oil dependence very seriously. It’s a talking point for most and that’s all.
(sorry, didn’t finish previous post)
Start-stop $10/gallon saved per year
Micro $25/gallon saved per year
Mild $20/gallon saved per year
Full Hybrid $25/gallon saved per year
Plug-in $46 /gallon saved per year
Electric $45/gallon saved per year
Subsidizing consumption is the most expensive option, especially since the US is just a few years from being have a Grease crisis.
Full electric is the most expensive per gallon saved. From John Peterson’s Seeking Alpha Jan 20 article:
Start-stop
Micro @10/gallon saved per year
Mild $20/gallon saved per year
Hybrid $25/gallon saved per year
Full Electric $45/gallon saved per year
Tax credit on plugg ins or otherwise wont make a difference the government is going to raise taxes elsewhere to make up the difference for their agendas not the people who are forced to pay them