America needs to Focus on more than plug-ins
The latest word coming out of China suggests that significant changes to tax policies for new energy vehicles are coming. Instead, of focusing on plug-ins, China is preparing to incentivize hybrid sales, and other fuel efficient technologies.
Should the US consider a similar, and possibly more competitive, policy? For instance, would a $2000 clean vehicle tax credit be better than just a tax credit for plug-in vehicles?
For instance, what if all vehicles that achieved at least 40 mpg combined, qualified for a single $2000 tax credit, plug-ins included?
While plug-in fans probably wouldn’t be over-joyed, might not overall emissions and foreign oil dependence be reduced much more and much sooner than just relying on plug-ins? And shouldn’t that be the primary goal?
Add a $2000 tax credit to 2012 Toyota Camry pricing, and the Camry hybrid might become the top selling Camry — the top selling car in the US. That would be a game-changer. Imagine the competition between the Camry, Ford Fusion, Hyundai Sonata, Honda Accord, Chevy Malibu, etc. if the Camry hybrid achieved 41 mpg combined and qualified for a $2000 tax credit. Sure the Camry LE would still be cheaper upfront, but not by much after the tax credit, and the fuel economy savings would be too massive for a significant percentage of consumers not to realize.
Plus, long term, all those Camry hybrids could be converted into plug-in hybrids if a battery breakthrough is achieved.
Similarly, according to current pricing models, GM’s mild hybrid technology, or eAssist, adds about $2000 to the price of a vehicle. Thus, GM could add this technology to numerous models to bring fuel economy up to 40 mpg combined, such as the Chevy Cruze, without any additional costs to consumers.
And I bet a $2000 discount on a Toyota Prius or a Honda Insight would also drive sales a lot higher as well.
But, it’s not just battery powered vehicles.
Small cars, such as VW’s Up! would qualify. So too might the natural gas Honda Civic, if some kind of mpg equivalent were created.
Likewise, maybe a similar tax credit for pickups could be offered for those pickups that achieve a combined 30 mpg — Ford’s EcoBoost and a few other tweaks could probably get full-sized pickup trucks close today. Minimally, EcoBoost would get the Ford Ranger and other smaller pickups there. And a $2000 tax credit might be enough incentive to push pickup truck consumers to make the switch, to downsize their hps a little. Money does talk.
And once automakers have embraced such a path forward, could they really go back, especially when 2025 CAFE regulations will require such vehicles? Besides, since we’re already heading in that direction, why not let consumers help drive the way there? We’d probably end up hitting 2025 requirements long before 2025.
Of course, if we really wanted change, we’d devise some kind of gasoline tax, but that’s not going to happen. So, we’re stuck with regulators and tax incentives.
While plug-in tax credits are a good idea — barring a gas tax — they don’t go far enough. If we wait for plug-ins and CAFE to change the way America drives, it’ll still require decades to replace the legacy fleet that will already be on American roads in 2025. Achieving foreign oil dependence by 2030 is simply impossible based on the current trajectory.
Yet, by 2030 there will be more cars in China, based on today’s growth, than there was in the entire world in 2000. Add India and emerging markets, and heavy dependence on foreign oil in 2030 could be extremely volatile based upon today’s oil markets. And, I’ll bet we’ll experience serious oil spikes before 2020 — spikes that will be far more devastating than the last few.
Today, the world is between a rock and a hard place. Economic growth requires more energy, yet greater energy consumption is stifling economic growth.
The only way forward is serious change, and that starts by making the current fleet as fuel efficient as possible as quickly as possible, and a focus on plug-in tax credits and 2025 CAFE just won’t get the job done. Every resource available will be needed, as will a fundamental change in consumer psychology, and that’s why the US needs to reconsider plug-in tax credits and instead favor a more robust, competitive subsidy that encourages the greatest change across all segments in the quickest period of time.
The future begins today, not in 2025.
