An Electrifying Irony (False hopes and promises in the transportation market)
To those who have a memory that transcends more than a few weeks, recent events in the auto sector must induce a great feeling of irony.
Back in August of 2008, then-candidate Obama called for 1 million plug-in hybrid vehicles to be on the road by 2015.
To that end, then-candidate Obama called for:
*$4 billion in tax credits to American automakers to retool plants for the production of plug-in hybrid cars capable of 150 miles to the gallon;
*A $7,000 tax credit for consumers who bought early model plug-in vehicles; and
*Candidate Obama vowed that half of all cars purchased by the federal government would be plug-in hybrids or all-electric by 2012.
As both candidate and president, Obama has repeatedly raised plug-in hybrids as a vital technology for greening Detroit.
Fast forward to a recent item in the Wall Street Journal, which tells us that “In a five-page analysis of GM’s viability, the [Obama car] team critiqued GM’s marquee next-generation project, the electric-powered Chevy Volt, as “too expensive to be commercially successful in the short-term.”
Ah, the irony is palpable. And it’s not as if we hadn’t told them so because we did in a post at The American, “Stop the Green Carjacking”:
Consider the Chevy Volt. When it was first announced, the price estimate from General Motors (GM) was $30,000. That soon jumped to $35,000. Now GM’s president says that the actual price could be closer to $40,000, and that GM will still lose money on the sale. As for fuel cells, GM’s prototype fuel-cell car runs on hydrogen and emits nothing but water vapor. It’s hard to get greener than that—but it’s also hard to find a more expensive car: the prototypes cost $1.5 million to produce.
And add to this insurance costs:
Hybrids are also more expensive to insure. Online insurance broker shows that it costs $1,374 to insure a Honda Civic but $1,427 to insure a Honda Civic Hybrid. Similarly, it costs $1,304 to insure a Toyota Camry but $1,628 to insure a Toyota Camry Hybrid.
What explains the higher rates? According to State Farm, hybrids cost more to insure because their parts are more expensive and repairing them requires specialized labor, thus boosting the after-accident payout. Even conventional small cars are more expensive to insure than larger vehicles, because the former are involved in more accidents that produce extensive injuries. According to a recent article in The Wall Street Journal, the same driver would pay $412 more to insure a Honda Civic compact that gets 36 mpg on the highway than he would to insure a Honda CR-V (Honda’s mini-SUV) that gets 27 mpg.
Trying to make the uneconomic economic is not good public policy.