Buyers of Tesla and GM electric vehicles will soon be ineligible for the federal EV tax credit. Meanwhile automakers (GM most recently) are grappling with production locations and long-term labor negotiations amid uncertainties over how EVs will play into new federal emission and fuel economy rules.
It might be time to revisit how the federal government can give American-built electric vehicles a boost.
Senator Chuck Schumer, in an op-ed published Friday in the New York Times, revealed his plan for that—involving federal spending in industry, charging infrastructure, and a consumer incentive-and-buyback program that could be the biggest of its kind since Cash for Clunkers.
Schumer says the $454 billion plan—over 10 years—is supported not just by environmentalists but by labor unions and large automakers. GM and Ford are specifically called out as supporters.
2021 Volvo XC40 Recharge
Schumer’s plan would apply to “American-made” electric vehicles, which would include Tesla vehicles, the Chevrolet Bolt EV. Next year it would also include Ford’s upcoming Mustang-inspired electric crossover and the Volvo XC40 Recharge, among others.
The plan, Schumer says would result in 63 million fewer gas-powered vehicles on the road by 2030 and put us on a path to going 100-percent “clean”—meaning zero-emissions at least part of the time—by 2040.
Two other important plan points would support a strong market. Grants to states and cities would help build charging infrastructure, with an emphasis on rural and low-income. And secondly, the plan would provide grants to existing manufacturing plants in the U.S. (and build new ones) “to establish the United States as the global leader in electric vehicle and battery manufacturing.”
Senator Chuck Schumer
“Critics have long said that bold action on climate change would cost America money and jobs. This is not true,” said Schumer. “My plan is estimated to create tens of thousands of new, good-paying jobs in this country and should re-establish the United States as the world leader in auto manufacturing.”
Schumer said that if Democrats win control of the Senate in November 2020, he will introduce “bold and far-reaching climate legislation” as majority leader, and that the clean-cars proposal “would be a key element of the bill.”
The inevitable Cash for Clunkers parallels
The consumer side of what Schumer is proposing sounds a lot like Cash for Clunkers—otherwise known as the Consumer Assistance to Recycle and Save (CARS) program. Cash for Clunkers was a $3 billion federal program, and over just two months (in July and August 2009) gave buyers up to $4,500 cash to be used toward the purchase of a program-approved new, more fuel-efficient one with the trade-in of a less fuel-efficient one.
The points behind Cash for Clunkers, as stated by President Obama in 2009, were to boost the economy and sell more fuel-efficient vehicles.
That program, in retrospect, was only mildly successful at best. It did for a very short period replace more gas-guzzlers with fuel-efficient vehicles, and it created tens of thousands of additional jobs on the short term, when the U.S. was on the verge of a recession, but there was no depth of the program to follow through and support green tech or the permanency of the jobs.
Cash for Clunkers covered 677,842 transactions, and it benefited Toyota the most among brands, with nearly 18 percent of new cars bought under the program. Some early critical analysis of that program had argued that it merely “pulled forward” sales that would have occurred in the following few months.
A 2015 paper from the MIT Center for Energy and Environmental Policy Research found that the program, through its restrictions, shifted purchases toward less-expensive vehicles, actually reducing new-vehicle spending overall.
Obviously there would be a long list of details to be carefully worked out with such a program to make sure it actually reduces carbon emissions and pollution. Some studies found the environmental impact of CARS to be higher than it should have been, partly because it didn’t have requirements for how vehicles be recycled. Also, Schumer’s op-ed didn’t mention hybrid vehicles, but other outlets, including Reuters, have reported that it would.
Cheaper doesn’t mean more efficient anymore
Ten years ago higher-mpg vehicles were often cheaper (and smaller). Today there’s a very different dynamic with electric vehicle pricing. Such a program might be useful as, even after the tax credit and other incentives, many electric vehicles still cost $5,000 to $10,000 more than equivalent gasoline vehicles.
One of the most significant challenges is that EVs have become an issue of the haves and have-nots. Schumer’s plan would give more of an incentive on new clean vehicles for low-income families.
Volkswagen ID 3
Outside of Tesla, Volkswagen, and perhaps one or two others, automakers aren’t all that serious about making a fully electric vehicle that’s priced around the average new vehicle price of $37,000.
Perhaps such a program might actually incentivize an electric vehicle that sells below the average new-vehicle price. But just to get EV pricing on par with gasoline pricing—for inexpensive cars—would be a very good start.