Are
plug-in hybrid tax credits counter productive?
Wednesday, July 14, 2009
A
volt of reality?
In the next few years, if you're interested in a buying a
hybrid car to save gas, to fight foreign oil dependency,
or to reduce your CO2 footprint, you won't receive any
help from the government, unless you buy a plug-in hybrid.
Unfortunately, however, for the next several years, there
will be very few plug-in hybrids available for sale even
if cost is irrelevant.
Even more alarming, plug-in hybrids might not ever make
financial sense to either consumers or automakers. In
fact, according
to a new plug-in vehicle study, almost every plug-in
vehicle - both electric and hybrid - is taking the wrong
path to mass adoption, and economies of scale. Only
switchable batteries, this study finds, offer a path to
cost-effective plug-in vehicles.
Certainly, any plug-in development helps develop the
battery industry, which is incredibly essential. That
alone might justify tax credits for plug-in vehicles, even
if they are the wrong kind of vehicles.
Nonetheless, the research is clear. Americans will not pay
very much extra for conventional hybrid
cars or any other type of plug-in vehicle. Yet, even
with the government's plug-in tax credit, many - perhaps
all - plug-in vehicles still won't make financial sense.
Conventional hybrids, on the other hand, could be made
cost-competitive for most Americans today with tax
credits. Imagine the competition that could be created
today if the Toyota
Prius still qualified for a tax credit. Imagine how
many Fusion hybrids Ford could sell if the cost of a Fusion
hybrid equaled a conventional Fusion after a tax
credit.
And, if plug-in hybrids actually do make financial sense
in the future, the after-market for plug-in conversions
for old hybrids could extend the life, value and fuel
efficiency of these future clunkers. Thus, instead of cash
for clunkers, the government could offer cash for plug-in
conversions.
Ultimately, I'm not arguing against tax credits for
plug-ins. Still, isn't it the battery, not the plug, that
is most important at this early stage of the game? Thus,
shouldn't the goal be as many batteries in as many cars as
possible as quickly as possible?
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