Gov’t subsidies for Chevy Volt up to $250,000 per car?

posted at 11:25 am on December 21, 2011 by Ed Morrissey

If you thought that the subcompact electric Chevy Volt was overpriced at an MSRP of $40,000 — which after a point-of-sale tax credit comes to $32,500 — you haven’t seen anything yet.  According to a Mackinac Center study of government subsidies throughout the manufacturing and distribution chain, the actual cost of the vehicle is almost $300,000 — with a quarter-million dollars of taxpayer subsidies going into every vehicle (via the Drudge Report and David Freddoso):

Each Chevy Volt sold thus far may have as much as $250,000 in state and federal dollars in incentives behind it – a total of $3 billion altogether, according to an analysis by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

Hohman looked at total state and federal assistance offered for the development and production of the Chevy Volt, General Motors’ plug-in hybrid electric vehicle. His analysis included 18 government deals that included loans, rebates, grants and tax credits. The amount of government assistance does not include the fact that General Motors is currently 26 percent owned by the federal government. …

GM has estimated they’ve sold 6,000 Volts so far. That would mean each of the 6,000 Volts sold would be subsidized between $50,000 and $250,000, depending on how many government subsidy milestones are realized.

If battery manufacturers awarded incentives to produce batteries the Volt may use are included in the analysis, the potential government subsidy per Volt increases to $256,824. For example, A123 Systems has received extensive state and federal support, and bid to be a supplier to the Volt, but the deal instead went to Compact Power. The $256,824 figure includes adding up the subsidies to both companies.

The $3 billion total subsidy figure includes $690.4 million offered by the state of Michigan and $2.3 billion in federal money. That’s enough to purchase 75,222 Volts with a sticker price of $39,828.

One would expect that the per-unit cost of the subsidies would decrease significantly if the car began selling in large numbers.  Unfortunately for GM and the Obama administration (a redundancy these days), USA Today reports this morning that the Volt has fizzled, as has the enthusiasm for electric cars in general:

A year after the first two plug-in electric cars from major makers went on sale, buyers appear put off by high sticker prices — even with federal subsidies — and, for the moment, by more-stable gasoline prices.

The Nissan Leaf and Chevrolet Volt also have had their own issues. For owners of the Leaf, and other electric-only vehicles, there still are relatively few places to plug in and recharge away from home, limiting use. And the Volt, which has a backup gas engine to run a generator for extended range, is under the shadow of a government safety probe of why its big lithium-ion battery pack could catch fire days or even weeks after suffering severe crash damage.

Meanwhile, some start-up makers of electric cars, including the Think City car and the egg-shaped Aptera, have gone bust. Others have hit pot holes and delays in their drive to get plug-in cars in front of buyers. Even some major automakers have had hiccups developing new plug-ins. …

But even some avid electric-car fans say they aren’t all that surprised at muted mainstream interest in the initial models of electrics. “I think the public is just not really ready for them — and I don’t think (the cars) are ready for the public,” says Art Spinella, an electric-car fan who is president of CNW Research, a tracker of auto-sales trends.

That isn’t stopping other manufacturers from getting in on the electric-car “boom”:

The report said General Motors    (NYSE: GM) has fallen well short of its goal of selling 10,000 Volts by the end of this year, and Nissan has sold less than 9,000 Leaf electric cars.

Despite the lower-than-expected interest in electrics, the report noted, Ford Motor Co.   (NYSE: F) and Toyota Motor Corp. (NYSE: TM) are moving forward with plans to introduce their own electric vehicles next year.

Now, why would two auto manufacturers jump into a market with almost no demand and a high failure rate?  Could it be because they’re looking for the same kind of subsidies that gives them somewhere around $250,000 per vehicle before the car is ever sold?

Update: I mistakenly wrote “Chevy Colt” in the first paragraph instead of Chevy Volt.  As one commenter recalled, the Dodge Colt was a pretty good car.  I should also note that when I wrote “high failure rate,” I was referring to the sales and not the cars themselves.


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