Uncle Sam joins car business with $250,000 Chevy Volt

The Chevy Volt, much like former East Germany’s Trabant, is a centralized government planner’s idea of what an automobile should be. The Trabant, incidentally, was dubbed one of the worst cars produced — ever. But what government bureaucrats believe is “good” for us generally has little to do with what consumers are looking for. The two concepts are as different as Barack Obama and Ronald Reagan.

The first Volt rolled off the assembly line in December 2010, and it was heralded as a green “electric vehicle with extended-range capability.”  If you get your electric service from a coal-fired plant (as do57 percent of the nation’s households), then you’re really driving a coal-fired automobile. Extended range? The Volt only gets its “extended range” from a small auxiliary gasoline engine. Traveling on its batteries alone, the Volt’s range is 40 miles, precisely the same as the 1896 electric-poweredRoberts. That wasn’t a typo – 1896 was the year the Roberts was produced. Ah, progress marches on.

The Volt’s assets are laughable, and they make for good fodder for cocktail party chatter. What’s not funny, however, is the enormous taxpayer-funded price tag associated with it, whether we purchase a Volt or not. According to Chevrolet’s website, a 2012 Volt’s base price is $31,645, including the $7,500 federal tax credit.

Despite its hefty tax credit, Chevrolet has never come close to meeting its sales goals for the vehicle. This prompted U.S. Sen. Debbie Stabenow, D-Mich., to propose legislation to convert the tax credit into a rebate. The thinking was that if consumers could take advantage of the credit at the time of sale rather than at tax time, this might spur sales for the vehicle. This proposal was soon dubbed “Cash for Clunkers II” and failed to gain any steam.

That $7,500 credit, paid by all of us, is only the most visible subsidy associated with the Volt. James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy, did some digging and found that the total of all government subsidies for each Volt sold can be as much as a whopping$250,000. Just like the Roberts’ production date, this is no typo — a quarter million dollars per vehicle.

Hohman arrived at this figure by dividing the sum of all state and federal developmental and production subsidies by the total number of Volts sold. To be fair, some of the government incentives are performance-based. For example, one may depend upon the number of new jobs created, whereas another may be based on some other factor. Whether GM will qualify for all of the subsidies hasn’t yet been determined. However, even at the very minimum, the subsidies per vehicle would total $50,000. This makes the Volt’s actual total cost somewhere between $90,000 and $290,000.

Invited to comment on Hohman’s findings, GM didn’t dispute his math, but it chose instead to say that other countries subsidize their own auto industries.

Whether it’s $16 for a gallon of bio-jet fuel or $250,000 for an electric car, subsidies remove competition as a factor from business models. Competition is what makes capitalism work. It forces business owners to constantly improve their product, create new ones and keep their costs reasonable. Subsidies stifle competition. They’re the government’s way of presenting a trophy to a 10th place finisher at a track meet. He didn’t earn it, but we’ll give it to him anyway. So long as his failure is rewarded, he’ll never learn to do any better.


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