There is a long history of Washington declaring gasoline-powered cars a thing of the past and subsidizing alternatives to replace them. It has never worked, but the Biden administration wants to give it another try. Its recently released infrastructure plan contains a number of incentives for electric vehicles (EVs). The only thing new is the amount of money being proposed, $174 billion, which far exceeds previous efforts to induce drivers to move beyond gasoline. Still, there is reason to believe even this sum won’t be enough to get a majority of Americans to make the switch.
History suggests that the federal government is not good at picking the next big thing in personal transportation. A decade ago, cellulosic biofuels were the hot new alternative that would replace tens of billions of gallons of gasoline annually. But despite a $1.00 per-gallon tax credit and a federal mandate requiring refiners to either blend it into the gasoline supply or pay a fine, the cellulosic industry has imploded. Algae fuels, one of President Obama’s favorites, was also a flop. Vehicles with engines modified to run on gasoline/ethanol blends of up to 85 percent ethanol (E-85) never caught on, despite a raft of tax breaks and regulatory measures supporting them. President Bush’s push for hydrogen fuel cell vehicles also went nowhere.
Reality wins in the end, and the reality is that these alternative fuels and vehicles couldn’t give consumers what a gasoline-fueled car or truck does. That may change in time, but probably not as a result of federal handouts.
Now the Biden Administration has settled on EVs, which despite very generous existing handouts, account for only around 3 percent of America’s 17 million annual new vehicles market. Will upping the ante by $174 billion be enough to take EVs beyond niche status?
The first reason not to buy an EV is that the sticker price can be $10,000 or more higher than a comparable gasoline-powered vehicle. For years, the federal government has offered tax credits up to $7,500 per EV (and some states sweeten the pot further), but the program is capped at the first 200,000 such vehicles per manufacturer, which Tesla and General Motors have already exceeded. Although short on specifics, the infrastructure package suggests more generous per-vehicle provisions—though creating sticker price parity will be difficult as the availability of tax credits inflates EV prices—as well as raising the cap beyond the first 200,000 EVs per maker.
However, such tax measures do not reduce the cost of EVs so much as shift some of those costs away from buyers and onto taxpayers in general. This raises fairness issues as EV buyers are significantly wealthier than average.
Higher up-front costs for EVs are not the only impediment. There are also issues involving range and charging times. A driver pulling into a gas station can get enough gasoline to go 400 or more miles in about five minutes. EVs take considerably longer to fuel up and have shorter range. In many parts of the country, public charging stations are few and far between, considerably less than the more than 100,000 gas stations across the U.S. The infrastructure package addresses the last problem by promising enough seed money “to build a national network of 500,000 EV chargers by 2030.” But charging times and range, though improving, are still very much a drawback.
EV sales have been rising but on their present course are not about to dethrone gasoline vehicles as the most popular choice for the driving public. The administration’s proposal to throw unprecedented amounts of money at them isn’t likely to change things.