Congress Quietly Considers A De Facto Bailout For Tesla And GM - Forbes

TESLA SUPERCHARGER — A Tesla Inc. Model 3 electric vehicle charges at the Tesla Supercharger station in Kettleman City, ... [+] California, U.S., on Wednesday, July 31, 2019. Electric vehicles have been adopted rapidly in California, compared to the rest of the U.S., accounting for about 44% of total sales in 2018. Photographer: Patrick T. Fallon/Bloomberg
© 2019 Bloomberg Finance LP

As many of us scramble in the next few days to finish our holiday shopping, Congress is also scrambling to make up for a year of legislative inaction with its own Christmas presents for some important constituents. The items on Congress’s wish list include a new budget deal, President Trump’s new North American trade deal, and re-authorization of the National Defense Authorization Act.

Also quietly included in those budget considerations is potentially an expanded carve out – effectively a bailout – for a few electric vehicle (EVs) manufacturers like Tesla and General Motors.

When President Obama announced during his 2011 State of the Union address that the United States would see 1 million EVs on our roads by 2015, that prediction came with heavy payouts to EV owners and manufacturers, to the tune of as much as $7,500 per vehicle. But even with that added incentive, dozens of new EV models, and frequently reduced pricing, that promise fell far short. Only about 400,000 EVs were on American roadways by the end of 2015.

EV sales have increased in the years since, but they still account for less than 2 percent of all U.S. vehicle sales. Historically, Americans’ reservations about EVs typically include range anxiety from batteries that limit some vehicles to less than 200 miles on average, lack of EV charging infrastructure, and high price tags.

Obama’s deal with auto manufacturers was limited to the first 200,000 vehicles sold by each manufacturer. After that limit is met, the payout phases out over the following year. Popular brands like Tesla and General Motors, who makes the Chevy Bolt and Cadillac ELR and CT6, have already hit their limits, meaning people who want to buy these models will now only be eligible for a smaller taxpayer handout.

That’s where Congress is trying to step in. Despite the fact that major auto manufacturers like Ford, Honda, and Toyota, among many others, have not hit their limit, some in Congress are proposing an extension of the EV tax credit, bumping up the manufacturer limit to 600,000 vehicles and reducing the overall payout to $7,000.

Put in plain English, what Congress is considering is a bailout for Tesla and GM, one that overtly discriminates against these other automakers. Setting aside the fact that the last government bailout of GM wound up costing taxpayers $11.2 billion, Congress’s current bailout plan seems incredibly short-sighted since data shows the EV payout system is deeply flawed.

For starters, the vast majority of these tax breaks are going to the top 20 percent of income earners. About 80 percent of federal EV tax credits went to those earning $100,000 or more, according to a Congressional Research Service study. These are individuals who can and should buy an electric vehicle with their own money, not yours and mine.

About half of all EV sales in the United States take place in California, where additional government funding and perks like free parking and HOV-lane access are often added on top of the federal payout. A complicated Zero Emissions Vehicle (ZEV) mandate which “requires that EVs be a certain percentage of sales” in California also helps to drive that percentage up.

A recent Maryland study found that most of its state’s EV owners are white (85%), male (75%), well-educated, and affluent, according to Morgan State University Professor Andrew Farkas, who serves as director of the Baltimore school’s National Transportation Center and Urban Mobility & Equity Center.

Unfortunately, the problems with the EV payout system don’t end there. Because these vehicles rely on electricity for fuel rather than gasoline, their drivers don’t pay the gas tax, which is the mechanism by which we fund road and transportation infrastructure repairs and upgrades across the country. With no equivalent tax for EVs, these drivers are using our roads and bridges and not paying for their upkeep. As more of these vehicles appear on our roads, less and less money is going into the Federal Highway Trust Fund, and our crumbling transportation infrastructure will continue to deteriorate.

Meanwhile, the EV tax credit program itself is being badly mismanaged and abused. A recent Treasury Department Inspector General’s report indicated that there’s significant waste and possible fraud involved in the EV tax credit program. The IRS simply doesn’t have the ability to verify that each EV payout claimed is legitimate.

Electrification may very well be the future of transportation, or it may wind up being the Betamax of the automotive industry. A cheaper, more efficient, developing technology could supplant the lithium ion battery and all of this may become moot. But until we fix the inherent problems in our system today – payouts going to the wealthy and those trying to game the tax code, and zero contributions to transportation infrastructure from EV drivers – Congress should not pour good money after bad into this program.

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