All else being equal, a lower price means more sales. That's economics 101. That's why tax credits and other financial incentives are a great way to give a boost to a young industry like electric cars. There's no doubt that over time, as economics of scale take over and incremental technological improvements in battery technology lower prices, EVs will be able to compete on their own with gasoline and diesel vehicles. But incentives can bring that day forward, and help level the playing field since traditional vehicles and the oil industry have received hundreds of billions, if not trillions, in direct and indirect subsidies over the years. So to those who say that electric car tax credits should be removed, I say "sure" if you can first figure out a way to remove help retroactively to oil companies (including money spent on wars to protect oil supply) and government help to car companies. If we did that, maybe a gallon of gasoline would cost multiples of what it costs now (especially in the US) and many carmakers might not have survived bankruptcy...
It's too bad that every time I bring up EV incentives I have to first defend them, but it's sadly necessary to preempt the same old short-sighted criticism. Now that we've got this out of the way, let's get to today's story: Senate. Majority Leader Harry Reid gave a speech where he told congress that more needed to be done to boost the sales of electric cars, and to help make that happen he's proposing that the federal tax credit on electric vehicles be increased from the current maximum of $7,500 to $10,000.
This might help supercharge sales, which are growing fast, but from a small base:
U.S. sales of full-electrics and plug-in hybrids in 2013 jumped 84 percent over 2012 to more than 96,000; price cuts and new models helped spur additional sales. In 2013, automakers sold nearly 49,000 plug-in hybrids, up 27 percent over 2012 — and 47,600 electric vehicles, up 241 percent — according to Ward’s Automotive. That’s a big jump over the 18,000 sold in 2011. (source)
The important thing is to reach critical mass as soon as possible. The fast we move a big chunk of the transportation sector away from oil and to electricity (which is cleaner and more efficient than the internal combustion engine even as things are today, but will keep getting cleaner over time as clean sources like solar take over).
What about you? Would a $10,000 tax credit make it more likely for your next vehicle (if you drive) to be a plug-in?
And to be clear, this isn't to say that the taxpayer should support an unprofitable sector forever. Most investments into electric car technology are done by the private sector and the current trajectory of the industry makes it quite clear that in a few years plug-ins will become quite mainstream and should be as profitable, if not more, than gasoline cars (once the battery gets cheap enough, the rest is a lot simpler in an EV than gas car -- a lot fewer moving parts and fluids). The idea is to take the early-stage period of the industry and shorten it as much as possible so we can get to the mature stage quickly and make a real difference out in the world (CO2 emissions, air pollution, the geopolitics of oil, etc).
Via Detroit News