Bleeding the Taxpayer: An Old Technology Dolled Up As New

On September 14, 1899, Henry Bliss stepped off a streetcar at West 74th Street and Central Park West in New York and got run over by a taxi. A plaque points out that it was the first automobile fatality in the “Western Hemisphere.” The taxi was an electric vehicle. As were 90% of the taxis in New York City and about 30% of all cars sold in the US. Electric cars aren’t exactly new. Yet, the government is bleeding the taxpayer to advance the technology, create jobs at a cost of $158,556 per job, and fund executive bonuses.

Today, Republican Senators Chuck Grassley of Iowa and John Thune of South Dakota lambasted the Obama administration for the $2 billion it handed to 29 companies to manufacture advanced batteries for electric cars. It was part of the bipartisan $787 boondoggle stimulus bill of 2009 that performed mind-boggling wonders in the US economy. The senators were particularly irked by the facts surrounding one of the major recipients, the poster boy for the program, battery maker A123 Systems, which filed for bankruptcy two weeks ago.

In response to the bankruptcy, the Department of Energy touted the results of its advanced battery program, claiming it had created jobs for “thousands of American workers.” When Grassley pushed the DOE for documentation, he found out that it had created 12,613 jobs—at a cost of “$158,556 per job, including jobs that were later cut,” Grassley explained. And the jobs at A123? They cost the taxpayer $317,435 per job.

“Adding insult to injury, A123 executives reportedly are seeking to retain $4.2 million in bonuses through the bankruptcy process,” he said. That’s why boondoggles are so popular; somebody does get the money.

Yet, the first electric car hit the road in Scotland in the 1830s. As the technology matured, electric cars gave rise to a whole industry. Their toughest competitors? Steam-powered cars: they had greater range and more power. And they set speed records—a marketing advantage.

Each technology had its advantages and disadvantages. Steam cars were great for longer trips, such as to the next town, at dizzying speeds, but brought with them some challenges, such as having to preheat the boiler. Electric cars were great for moseying around town, but they were handicapped by their heavy and costly batteries that only gave them a very limited range and took a long time to charge. Batteries were the problem in the otherwise ideal technology.

But by 1920, as the internal combustion engine had become a viable technology, formerly successful manufacturers of steam cars and electric cars receded into memory. It wasn’t government that made that decision, but customers.

However, electric vehicles became successful in hundreds of niche configurations such as forklifts and golf carts, without government boondoggles to support them, without tax credits or grants—because customers desired them and were willing to pay for them.

Then there was the Tesla Roadster. Tesla installed its electric drivetrain into cars it bought from Lotus sans drivetrain and sold them to cool rich people for over $100,000 a pop, losing money on each one of them. Its new models are assembled in the US, but whether or not Tesla can ever sell enough of them at a profit remains uncertain. Meanwhile, it has eaten up hundreds of millions of dollars from taxpayers and investors.

Fisker built its first model in Finland with help from US taxpayers. It plans to build its new models in the US, also with taxpayer support, but challenges are piling up. The Nissan Leaf remains the only mass-produced electrical car in the US, but it sold only 5,212 units through September, down 28% from last year.

The $2 billion the Obama administration plowed into batteries was part of the $5 billion it plowed into electric cars. The largest chunk, $1.4 billion, went to corporate giant Nissan for its Leaf. Its range: 73 miles per charge, according to the EPA, and less according to complaints by its owners. Just about the same range as the taxi that killed Henry Bliss in 1899.

A battery with a 100-mile range costs about $17,000. Huge advances have been made, but they’ve been met by the higher power demands of modern cars (acceleration, air conditioning, power seats, etc.). So the original challenges of electric cars remain: cost, range, and the time it takes to charge the darn things. The taxpayer has been taken to the cleaners. The government has bought some votes. But customers still don’t see the right product at the right price.

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  2 comments for “Bleeding the Taxpayer: An Old Technology Dolled Up As New

  1. MrJones says:

    While we are at it, lets cut all the government subsidies to big oil too. That includes our Navy patrolling the shipping lanes around Saudi. And lets point out that Grassley is from Iowa, one of the major corn producers in the country. I don't hear him lambasting about money from the peasants going to his agriculture friends. It's all rig and tilted to benefit the few.

  2. Fred says:

    To say that consumers alone made the choice for internal combustion engines is an over-simplification and there are counter-examples, as when GM bought up the trolly system in Los Angeles and then shut it down to force consumer to buy their crappy products. Furthermore if consumers had known at the start that cities such as LA would be covered in smog indefinitely because of the internal combustion engine, they might have supported taxes on non-electrics or subsidies for electrics to force one another to save their health and the environment.

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