I’ve long been fascinated by the sad tale of the Chevy Volt, a heavily subsidized electric car nobody wants. It’s one of the purest, most perfect examples of government attempting to artificially create a marketplace, and failing miserably.
At the time of the Volt’s launch, when rebates brought the consumer price down to $33,500 (which is still horribly high for such a tiny, unappealing car, and doesn’t factor in the enormous maintenance costs of the electrical system) I decided to total up all the subsidies pumped into the vehicle’s creation, divide them by projected sales, and came up with a per-unit real cost of $81,000.
Very few Volt buyers had any awareness of the vehicle’s true cost, because other people paid the difference between the $33,500 they were plunking down and the $81,000 true cost. That’s an appalling corruption of the vital financial information stream. Cost is data. Nobody knows what anything really costs anymore, due to the vast machinery of subsidies and penalties thumping and groaning away just out of our view, but the Volt was an especially egregious example.
A year and a half later, after a few Volts burst into flames, James Hohman of the Mackinac Center for Public Policy did an exhaustive evaluation of the Volt’s current true cost. He included state and federal assistance spread over “18 government deals that included loans, rebates, grants, and tax credits.” This was measured against the roughly 6,000 Volts sold to date.
The result of Hohman’s calculations, as reported by Michigan Capitol Confidential, is that “each Chevy Volt sold thus far may have as much as $250,000 in state and federal dollars in incentives behind it.” That’s a worst-case scenario, as some of the companies involved in producing Volt components might not meet the targets necessary to receive the subsidies. On the other hand, Hohman did not include the massive taxpayer bailout that made it possible for Government Motors to exist and push out those unloved little electric firecrackers, or the incentives paid to companies that lost bids to provide Volt batteries.
The Michigan Capitol Confidential article garnered a laughably weak response from GM:
Greg Martin, director of Policy and Washington Communications for GM, wrote in an email, “While much less than the hundreds of billions of dollars that Japanese and Korean auto and battery manufacturers have received over the years, the investments provided by several different Administrations and Congresses to jump-start the country’s fledgling battery technology and domestic electric vehicle industries (not just specifically for the Volt as Ford’s offering will also use LG Chem batteries and Fisker will use the A123 system for example) matches the same foresight and innovation leadership that other countries are exhibiting and which America has historically taken pride in.”
Martin added that the Mackinac Center’s math was “simple and selective.” However, he offered no data or specifics to support his assertion.
Once again, compulsive force is used to “transform” the economy – “jump starting the country’s fledgling battery technology and domestic electric vehicle industries” as Martin put it – and the result is an unmitigated disaster. The only way to finish the job and force customers to buy Volts, as General Motors CEO Dan Akerson openly speculated last year, would be to artificially jack up the price of gasoline until “green” cars become reasonable alternatives. Akerson had an extra $1 per gallon of extra federal gas taxes in mind at the time, although I’m not sure that would be enough anymore. Maybe $2 or $3 per gallon would do it. That would also give the government more cash to spend on its wise Solyndra-style industrial policies.
Well, at least the $3 billion in taxpayer subsidies we’ve been forced to pump into the Volt are putting sustainable cars in the hands of the poor, right? Er… not really, no. Here’s what Akerson said about Volt buyers in an interview he gave last week:
Q: Are you moving past the early technology adopters on the Volt at this point, or has any data surprised you on who is actually buying this vehicle?
A: The average purchaser of a Volt is earning $170,000 a year. About a third of the customers haven’t been in a Chevy store in more than five years and half have never been in there. They aren’t just early adopters.
Some of them – I think roughly half – are either Prius or BMW owners. So one, you could say Prius owners were probably early adopters in the olden days, but that’s kind of passed through. But BMW people want styling, good design, and an innovative powertrain, or power source, and I think Volt is a game changer.
So all that money pulled out of your middle-class wallet has been subsidizing the boutique car purchases of people who make $170,000 a year, and might otherwise be looking at a BMW! Wonderful! Behold the magic of government subsidies.