GM Wrestles With Chevy Volt 'Political Controversy'

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It seems that General Motors is sticking to its guns as they continue to blame lack of supply for low sales of the Chevy Volt. A story by the Detroit Free Press quotes GM Vice Chairman, Steve Girsky, as saying that market demand for the Volt will not be known until around June as "...there are still dealer orders that are getting filled and there are customers that are still getting out there."

GM's president of North American operations, Mark Reuss, addressed criticism of the Volt by adding, "The worst thing we could do would be to back off of that technology in the wake of political controversy." Funny how GM was sensitive to having its Chevy Volt hype considered politically driven, but now that demand for the vehicle is not living up to the hype anyone who dares criticize the taxpayer subsidization of the Volt must have a political agenda as excuses are made for the poor sales performance. Sound like "Government Motors" to you?

So, politics aside, how valid are claims that the Volt low sales figures are a result of low supply and not an indication of "true" demand? We can look at some figures to get an answer to that question. Currently, 2,600 Chevy dealerships nationwide have at least one Volt available. Total inventory has increased to near 5,000 vehicles. GM reported measly sales of 992 to individual consumers along with fleet sales of 537 to cronies at companies like GE (which makes money selling charging stations) in December. If there were actually significant waiting lists for the car, wouldn't GM be able to sell at least one vehicle at each dealership per month as supply hits a three month level? The clear answer is that GM has been deceitful about Volt demand since the rollout. The fact that GM cancelled plans for a second shift to produce the cars is further evidence that the demand for the vehicle is not there. But all of this is just misdirection from what should be the primary question. Should taxpayers be paying wealthy buyers of Chevy Volts $7,500 each for buying the vehicles?

GM has stated that consumers that buy the Volt (whose average annual income is $175,000) are very happy with the vehicle. A number of Volt buyers have spoken out to confirm that they love their new cars. So, since buyers of the Volt are both wealthy and willing to pay over $40,000 for the cars, why should taxpayers be on the hook to subsidize the purchases? The EV tax credit absurdity is even more blatant when you consider that purchasers of $100,000 Fiskers and Teslas are also getting $7,500 from those that could never afford to buy one of the vehicles. And state credits push the subsidies to around $10,000 per vehicle.

Rep. Mike Kelly of PA has introduced a bill to end the EV tax credit. Congress should have the courage to address the bill in a non-partisan manner (unlikely) with a debate as to what the subsidies are actually doing to benefit America. If demand is as strong for EVs, like the Volt, as supporters claim, the credits are not needed to drive sales; especially given the fact that buyers of the vehicles are wealthy enough to buy them without subsidization.

Up to now, all we have heard from supporters of EV subsidies is that America must lead in the pursuit of EV technology so that we will be less dependent on foreign oil while strengthening the domestic auto industry and saving our planet from global warming. Let's move from this generalization and debate the specifics of what the expectations are for EV benefits and how tax subsidies will get us there.

First of all, getting a million EVs on US roads in four years (President Obama's goal) does practically nothing to lessen oil consumption. Even a 10 year goal of 6 million pure EVs (not hybrids like the Volt) would lessen oil consumption by less than 1% given the fact that close to 300 million passenger vehicles will be on the roads accounting for less than 50% of all US oil consumption. If only half of those EVs receive the $7,500 subsidy, the cost to taxpayers would be $22.5 billion. That's $22,500,000,000. Tack on more billions of dollars for state subsidies. Is such a small reduction in oil consumption worth the billions of dollars that will go to wealthy buyers of EVs who would most likely buy the vehicles without subsidies?

Supporters of the Volt also point to a desire to help the US auto industry by promoting the car. The two most important facts to consider are that GM has already agreed to transfer production for the next EV platform to China and the vehicle loses money for GM. From a strictly monetary standpoint, both GM and taxpayers would be better off without the Volt. Profitability comes from production of less fuel efficient vehicles. It's fine to debate the need to move to more fuel efficient vehicles, just don't try to make a false argument that you are helping profitability of US automakers by promoting cars like the Volt.

Taxpayers have been bilked for billions of dollars for ethanol subsidies (supported by both Republicans and Democrats beholden to lobbyists) for years. It remains to be seen if EV subsidies go the same route as politicians take a seemingly politically correct stance as wealth redistribution takes place from all taxpayers to crony corporations and wealthy EV purchasers. Automakers seem to be willing to play along as they try to meet rising cafe standards by producing cars like the Volt. Worse yet, GM has admitted that subsidized cars like the Volt serve as a "halo" vehicle that help drive sales of other conventionally powered vehicles like the Chevy Cruze.

It would seem that America would be better served if automakers were allowed to write off investments in fuel efficient technology rather than have subsidies go directly to wealthy buyers of EVs. Alternate technologies that can succeed in a free-market like natural gas vehicles may be a viable option that is not currently being pursued. The environmental impact of lithium (mined in foreign countries) based batteries should also be studied along with the ability of America's power grid to deal with the increased drain resulting from EV charging, something I am sure GE will attempt to profit from. Both the Republicans and Democrats in power should be held accountable for spending billions of dollars on subsidies whose benefits have not been justified. It is not a political issue; it is an issue of common sense.

Mark Modica is an NLPC Associate Fellow.