Debunking A Biased Report On EV Subsidies – CleanTechnica

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After posting some thoughts on the new Cybertruck on Facebook, a friend of mine that is skeptical of electric vehicles (EVs) posted that he just sees the $50,000 subsidy when he sees the vehicle. Well, that was a new one to me, especially since the high-end truck isn’t even eligible for the $7,500 tax credit since it is more than the $80,000 price limit. The Heritage.org article this misinformation comes from is just a mess of poorly organized attacks on EVs, so I’ll address the October 2023 report the article is based on called “Overcharged Expectations: Unmasking the true cost of electric vehicles” by the Texas Public Policy Foundation. The Texas Public Policy Foundation is a conservative think tank funded by Chevron, ExxonMobil, and other fossil fuel interests, according to their Wikipedia page. So, I’m not expecting it to be fair, but since people are reading it, I should spend some time to quickly debunk any inaccuracies. The report is better organized, so it at least has organized sections that can be addressed.

Regulatory Credits

The report claims that these credits add $27,881 to the cost of each EV produced, which is paid by the makers of the gas vehicles. Doing a quick check on those figures (that are US based) with Tesla’s 3Q report, Tesla received $554 million in credit sales divided by 435,059 worldwide deliveries, which equals $1,273.39 per car or about a twentieth or 5% of what the report claimed. They have a lot of complicated calculations that show much higher costs, but if the fines are 20 times higher, automakers can just buy more credits from Tesla or other EV makes, which have plenty to spare since they don’t make any gas cars.

Here is a taste of their false calculations: “Therefore, an EV manufacturer whose MY2021 vehicles averaged 113 MPG would earn ($55 / 1 MPG) * (113 MPG – 37 MPG) * 6.67 = $27,881 in credits per EV. ”

Now, I’m assuming credits are worth the same globally as in the US (which is clearly wrong), but since Tesla sells about a third of its cars in the US, according to this recent estimate by Troy Teslike and reported by my editor Zach Shahan, there is no way Tesla can be getting $27,881 in regulatory credits on its US sales. If all of Tesla’s credit sales were from the US, they would be less than $4,000 per car, and I’ve read many other countries have credits too. They mention that Tesla’s reported credits are far less than the report’s assumptions, but they say maybe Tesla is trading credits for parts or other favors that don’t show up on income statements. As vertically integrated as Tesla is, can you imagine there is $26,000 in GM parts in your Tesla? This is just ridiculous. Anyone that has studied Tesla for 5 minutes knows this isn’t true.

So, I’m rating the first section 5% true, 95% false.

Next they have a section that states we are spending all this money and we are getting negligible fuel economy improvements. They state that since Tesla sold only 2% of the vehicles in 2021, that raises the economy of the existing US fleet of 281 million vehicles by 0.1 MPG. Well, that is true, but if competition between Tesla, Hyundai, and others cause gas and diesel vehicles to be uncompetitive by 2030 and most high-mileage owners to buy electric vehicles that get about 100 MPGe by 2035, we can dramatically lower the costs of fueling the fleet, the carbon emitted, and the other pollutants emitted. They are 100% correct electric vehicle sales in 2021 didn’t make a meaningful difference, but you can’t make a difference without doing what Tesla is doing — making vehicles that are wanted by consumers and then ramping their production quickly.

Direct Subsidies

The report lists the $7,500 federal tax credit most of us are familiar with and mentions many states have EV incentives too. I found this part fair (although it doesn’t apply to the Cybertruck I posted in Florida since Florida has no state incentives and the Cybertruck that I posted is more than $80,000, so not eligible for the federal tax credit either — but lower priced Cybertrucks will be eligible).

Next, they explained that electric cars don’t pay the fuel tax that funds our roads and made a snide comment that EVs are heavier (which some are and some aren’t). They did mention that many states have proposed or implemented an annual EV tax of $50 to $200 and a hybrid tax of $30 to $200. I tend to think the states will figure this out and it will be a wash in most states after it settles down.

I’m rating this section mostly true.

Indirect Subsidies & Socialized Infrastructure Costs

This is where they claim it will cost a fortune to upgrade our grid to support the charging of EVs in the worst possible way. Basically, they are assuming everyone will charge at once and the utility will provide no incentives to move the charging load to a time when excess capacity is already available. They ignore the tremendous benefits of the many EV owners that install solar and charge with their locally produced electricity. They ignore the virtual power plants (VPP) springing up all over that are disrupting fossil fuel peaker plants around the world. They ignore the reliability and stability benefits of using the widespread vehicle batteries in vehicle to grid (V2G) applications. If you only look at the costs of upgrading our grid the dumbest way possible and are blind to the many benefits available, of course costs are high.

I’m sure I could write a paper on how gas costs $20 a gallon if I think of how to refine it in the dumbest way possible. They suggest a $15/kW monthly demand charge for a 240V level 2 charger. This would double my $144 a month bill. I would just charge at 120V if they started charging that amount. Utilities around the nation are using EVs to efficiently use and pay for the smart meters and infrastructure they installed years ago. This recent report, presentation, and webinar discusses what investor-owned utilities around the nation are doing to use the power of prices to change consumer behavior. In a best case scenario, utilities could promote EV adoption, lower grid costs, promote economic efficiency, lower emissions of carbon and other pollutants, and distribute the benefits of EVs equitably amongst all stakeholders.

I’m rating this section mostly false since they ignore all innovation and only look at costs while ignoring significant benefits of EVs.

Conclusion

Overall, I found the sections on regulatory credits and indirect subsidies to be very biased, and they only looked at costs and not any of the benefits of EVs. I did find the information on the direct subsidies (tax credits) to be fairly accurate. As opposed to the $53,267 subsidy the study claims exists for each EV, I estimate about $10,000 in subsidies over 10 years. As I have written before, it is my belief that EV costs will drop by 48% by 2030 and therefore these subsidies aren’t needed to move the auto industry to EVs. On the other hand, with pollution causing 1 in 6 deaths worldwide and with many (including myself) concerned with carbon emissions, it seems to be a reasonable price to meaningfully accelerate the transition. I do think it will likely be repealed as too costly and wholly unnecessary once the average price of EVs drops dramatically below the cost of a gas vehicle in a few years.

Disclosure: I am a shareholder in Tesla [TSLA], BYD [BYDDY], Nio [NIO], XPeng [XPEV], Hertz [HTZ], NextEra Energy [NEP], and several ARK ETFs. But I offer no investment advice of any sort here. 

All images by Paul Fosse