Bush signs bill for hybrid tax credit: Thoughts?

[Sam_Stone]

@even sven

This seems like a cheap concession to me.

The people that will apply this credit are the people who were considering small fuel efficient cars to begin with.

No. In the end, people will go where the value is. If Ford can offer a pickup truck that offers the same utility, power, and convenience but in hybrid form that gets 30% better mileage, then people will buy it if the gas savings over a reasonable period of time pay back the increased cost of the vehicle.

The reason hybrids haven’t entered the general market is that this equation still does not favor the hybrid. When you factor a purchase cost maybe $5,000 higher, plus the need to replace the battery in 8-10 years perhaps and the unknown reliability of hybrid technology, it just doesn’t make financial sense. So the people who buy hybrids now are those who gain added value just from the notion that they’re doing something for the environment. They’re the early adopters.

But if you bring out a subsidy that’s calculated to push the value curve even slightly in favor of the hybrid, you can create a mass movement towards them.

The thing is, the market is pretty good at pricing things. If people aren’t buying hybrids, there could be a good reason for it. Maybe the risk premium is reasonable, and if we push people into hybrids we’ll find that we just made a huge maintenance nightmare when systems start to fail prematurely. Or perhaps the subsidy actually causes people to go, "You know, I really wanted a Hummer, but that 12mpg sure scared me. But now with the new hybrid Hummer that gets 18, along with that tax incentive, I’m finally going to move up from my F-150 (that gets 22).

So it’s hard to predict how this subsidy will actually play out, and whether the law of unintended consequences might have something to say about it.

The SUV trend began in a time of high gas prices and isn’t really slowing down despite the fact that it’s pretty much acknowledged tht gas is just going to get more and more expensive.

Actually, the SUV trend took off in earnest during a period of historically low prices, and now that gas prices are high SUV sales are taking a real nose dive.

If people were interested in saving money, they’d already be buying fuel-efficent vehicles- an SUV costs a hell of a lot more to run for a year than a smaller car. It seems that for the large part Americans just arn’t enticed by money (quite yet, at least) to boost fuel efficientcy.

That’s because SUVs offer people utility they can’t get in small cars. We have a small car and a mid-size SUV, and the SUV just has WAY more utility. It can carry people better, I can load it with tools or take the lawnmower in for service with it or haul a new TV home. The kid’s bike fits inside, which is great for trips to see Grandma. If we go skiing, we can actually load the skis inside the vehicle with all our luggage and still have room for four people. It never gets stuck, and if I have to go off-road for any reason, I can.

That’s why people buy SUVs, not because they are evil monsters who like threatening people on roads with their behemoths while raping the environment. If you want to get them out of their SUVs, just give them a better alternative. A hybrid SUV is a pretty good alternative.

[Sam_Stone]

@even sven

Let me add on that I would much rather see this money go towards workable mass transportation systems and building transport friendly cities. This sort of investment will solve the real problem- that individual transportation is an extremely inefficent way to move around and in much of America it will eventually become an unviable system.

You are never - never- going to move Americans away from mass use of personal transportation. Do you have any idea what it would cost to re-shape all our cities so that mass transportation could be used everywhere? It’s simply impossible. It’s pie-in-the-sky. Mass transit is already price competitive with cars. In fact, it’s more than competitive. I can get a mass-transit pass here in my city for something like $65/mo. I pay more than that just for my downtown parking, let alone gas, depreciation, interest, insurance, and maintenance on a car. Yet our LRT trains run half empty almost all the time. Why? Because for most people it’s REALLY inconvenient. Subsidies won’t change that. You can build trains all over the suburbs, and they’ll all lose money and run mostly empty. They just don’t fit in well with the suburban lifestyle, which is largely built around the car.

[Metacom]

@ExTank

One of the problems I see with this approach is politics. Politicians, government bureaucracies, and committees will determine which university or company gets government grants, leading to the possibility of corruption, charges of corruption, and rancorous partisan politics.

Perhaps. But (and this is damning with faint praise, believe me) I’d trust a politically driven committee to make a better decision over an ad-saturated consumer. Especially when consumers have making “fuel efficiency” a fairly low priority on their car-buying checklist.

And don’t forget that this particular tax credit seems to have plenty of oppurtunities for politics to sway things, given that several different government organizations are going to be determining which cars qualify and how well they do so.

[Fear_Itself]

@xtisme

In addition I thought the provision of “first 60,000 qualifying vehicles that your automaker sells” was…odd.

Odd is one way of putting it, though I would say 'halfhearted". Why limit the tax credit at all, unless you really don’t want to piss off the American car makers, who aren’t the major beneficiaries of this promotion? So, you sunset it so you can look green without really making any waves among your friends and campaign contributors. Color me cynical, but I think it is a political ploy with no real impact on energy policy.

On the one hand this goes against my own philosophy of how government should work…and what it should do. I’m skeptical that the government, any government, can make good decisions with regards to this kind of thing.

If Liberal were here*, he would say, “Look out for the Law of Unintended Consequences!” Somehow, someway, no matter how good the intentions, this will bite the consumer in the butt, while enriching the wealthy.
*I bet he is too, HI LIB!!

[Gorsnak]

Of course, the Law of Unintended Consequences cuts both ways. There may be unexpected disastrous consequences to doing nothing, too. All the phrase means is that we can’t predict the future perfectly. But you take your best estimate of what will result from your alternative courses of actions, and make your decision. Doing nothing for fear you’ll make things worse is a surefire recipe for eternally failing to make things better.

[John_Mace]

Hybrids are in high demand almost everywhere, with waiting lists being the norm. The problem is supply, not demand. I don’t see how stimulating demand in a supply constrained market makes sense. But then, I’m not a Washington lawmaker, either.

There’s a new law passed in CA to allow hybrids in the carpool lanes, which again will stoke demand. With gas prices going higher almost every day, demand for hybrids is not going to drop.

If we want to use the government to reduce oil consumption, then place a higher tax on oil consumption, or have some sort of sliding scale tax credit based on fuel consumption regardless of technology used.

[Sam_Stone]

@John Mace

Hybrids are in high demand almost everywhere, with waiting lists being the norm. The problem is supply, not demand. I don’t see how stimulating demand in a supply constrained market makes sense. But then, I’m not a Washington lawmaker, either.

Best reason not to support the subsidy yet - If higher fuel prices have already pushed the cost of ownership equation over the line to favor hybrids, then you’ll see mass acceptance of hybrids anyway. Therefore, a subsidy just leads to shortages and punishes taxpayers to reward hybrid drivers for making a purchase they were going to make anyway.

@Fear Itself

Why limit the tax credit at all, unless you really don’t want to piss off the American car makers, who aren’t the major beneficiaries of this promotion?

A limit would make sense if the goal is simply jump-start the industry and put enough hybrids on the road to overcome the ‘stigma’ of hybrids in terms of fears about quality and performance.

The problem is that the industry doesn’t look like it needs jump-starting. Hybrids are already a hot market trend.

@Metacom

Perhaps. But (and this is damning with faint praise, believe me) I’d trust a politically driven committee to make a better decision over an ad-saturated consumer. Especially when consumers have making “fuel efficiency” a fairly low priority on their car-buying checklist.

Smarter than a single ad-saturated customer? Maybe. Smarter than 10 million customers? Not a chance. If you really believe that small government committees can make better decisions about the market than can the market itself, then you should be in favor of an economy completely run by the government. That’s been tried. Didn’t work so well.

[even_sven]

@Sam Stone

You are never - never- going to move Americans away from mass use of personal transportation. Do you have any idea what it would cost to re-shape all our cities so that mass transportation could be used everywhere? It’s simply impossible. It’s pie-in-the-sky. Mass transit is already price competitive with cars. In fact, it’s more than competitive. I can get a mass-transit pass here in my city for something like $65/mo. I pay more than that just for my downtown parking, let alone gas, depreciation, interest, insurance, and maintenance on a car. Yet our LRT trains run half empty almost all the time. Why? Because for most people it’s REALLY inconvenient. Subsidies won’t change that. You can build trains all over the suburbs, and they’ll all lose money and run mostly empty. They just don’t fit in well with the suburban lifestyle, which is largely built around the car.

It’s got to happen one day. Cars have ruled for a hundred years, but in a planet with a growing population, it simply is not sustainable. Already in the Bay Area public tranportation is often faster and more convienent than driving. There are simply too many people here for each person to have their own mobile bit of paradise. They can add lanes, build new freeways, build HOV lanes and do whatever they want, but it will never alleviate the traffic problems- it will just bring more people off of the busses and in to the roads to clog it right back up. We are reaching the personal-transit breaking point here, and frankly the money we throw in to road improvments etc. is just prolonging an unworkable system. It’s time to invest in the future, not keep trying to revive an unworkable past.

And it IS possible to build transit friendly suburbs. From San Francisco to Sacramento there are new subdivisions being built every day. Have no doubt that one day this stretch will be housing. They can build these suburbs traditionally, or they can build them with transit corridors every 1/2 mile from houses, avoid long spirals and dead ends, place schools, commerce, parks and other public facilities in central locations instead of on the outskirts, and generally come up with a transit plan before they start pouring the foundations. Already they have to plan for schools, public utilties and traffic. Why shouldn’t public transit already be a concern?

[John_Mace]

@Sam Stone

Smarter than a single ad-saturated customer? Maybe. Smarter than 10 million customers? Not a chance. If you really believe that small government committees can make better decisions about the market than can the market itself, then you should be in favor of an economy completely run by the government. That’s been tried. Didn’t work so well.

It continues to amaze me that some people still think a few government policy makers can outsmart the market. Look at the evidence in this very thread. The government is behind the curve on the hybrid issue. A tax credit might have made sense 5 years ago, but now it’s ridiculous.

We should be looking more towards market based solutions, which I thing are much more straightforward for transportation than most other areas. A gas tax is a fairly efficient way of spreading transportation costs fairly (ie, by amount of use), since part of the 'cost" is the pollution produced. Transportation spending (for automobile support) shoudl be funding directly from gas taxes and not from general revenues. I know we do this to some extent, but not nearly as much as we should. If people want to buy gas guzzling vehicles and are willing to foot the bill, then let them. The market will shift to more gas efficient vehicles if people have to directly pay the cost of the infrastructure to support that vehicle and can make informed decisions about how they want to spend their money.

[ExTank]

@John Mace

Hybrids are in high demand almost everywhere, with waiting lists being the norm. The problem is supply, not demand. I don’t see how stimulating demand in a supply constrained market makes sense. But then, I’m not a Washington lawmaker, either.

Thanks for the link; the hybrids appear to be a lot more sanely priced than I had imagined. The one thing I still see going against them is that they’re compacts, which really doesn’t make them all that family friendly.

The “stimulating demand in a supply constrained market” makes sense if you want to help convince auto makers that this isn’t a flash-in-the-pan trend driven by “the gas blip of ought-five.”

@John Mace

There’s a new law passed in CA to allow hybrids in the carpool lanes, which again will stoke demand. With gas prices going higher almost every day, demand for hybrids is not going to drop.

Excellent! Someone had their thinking cap on. I hope other cities and states follow suit.

@John Mace

If we want to use the government to reduce oil consumption, then place a higher tax on oil consumption, or have some sort of sliding scale tax credit based on fuel consumption regardless of technology used.

Hmmm. Not a huge fan of using higher taxes as a means of channeling consumer trends, as it disproportionately impacts the lowest income levels. Higher taxes on petroleum products will show up as higher prices for just about any consumer goods: the grocery bill, the electric bill, the cost of commuting, etc. And, the lower income levels have the least options for “switching up” to a new car, even if the gas savings translate almost immediately into significant savings.

[ExTank]

@Metacom

Perhaps. But (and this is damning with faint praise, believe me) I’d trust a politically driven committee to make a better decision over an ad-saturated consumer. Especially when consumers have making “fuel efficiency” a fairly low priority on their car-buying checklist.

As the price of the item goes up, so does the consideration level tend to trend upwards, as well. Perhaps not evenly across the market, but every market has its “trendsetters,” people who can see which way the future’s going, and are ahead of the consumer curve. This opens the door. The rising cost of gas at the pump will usher millions through that door over the next few years.

With the stiff overseas competiton in the auto market, hybrid technology may (I think probably will) improve to offer larger, more comfortable, and more family-friendly models of hybrids, to appeal to a wider base of consumer demand. Hell, I can even see a “performance hybrid” coming down the chute in a decade or so.

Then again, the American consumer may decide $5 a gallon is worth it, and I’m shooting rubber bands at shadow puppets.

@Metacom

And don’t forget that this particular tax credit seems to have plenty of oppurtunities for politics to sway things, given that several different government organizations are going to be determining which cars qualify and how well they do so.

Well, look at it like this: by adding in 150 million tax-paying registered voters (and that’s just in the USA alone), you give the consumer the opportunity to vote with more than just their pocket book.

As well: the auto industry has powerfull lobbyists, as an industry and as individual corporations, and neither Toyota, Mitsubishi, or the WTO is going to stand for too much hanky-panky if Congressional Committees and political appointees try to shelter the domestic market with biased tax incentives.

[DougC]

• • • I think the hybrid program is a dumb idea, because there’s very little good evidence that a hybrid car does less damage to the environment over its useful life than a gasoline-engined vehicle would.
• What would be better is a new class of vehicle that had lower crash standards than regular cars have now, but that also has restrictions on total power and weight. Say perhaps an upper weight limit of 1,800 lbs, and a power restriction of 60 horsepower. Other than the engine power, it would have no restrictions on engine type–because it would still be best to use a simple gasoline engine. There’s nothing much wrong with the efficiency of gasoline engines, it’s just that cars are as heavy as they are. And much of the cause of that weight is federal crash standards.
  …
• Aerodynamics has been done already, you’re not gong to see any more drastic gains in efficiency by altering a car’s basic shape–so the only factor left that will make a difference is to reduce the empty vehicle weight. Auto companies cannot do that now because cars have to maintain federally-mandated crash standards. You would see more injuries in accidents involving these vehicles it is true, but then if fuel gets to expensive that people are forced onto motorcycles you’d see more injuries as well–and motorcycles are already legal.

…There are Pacific Rim cars made right now that could fit this technical requirement, but they are wrong for the US market. They are very cramped, and quite expensive considering their small size. I seriously doubt that you could sell a Japanese microcompact to most US car buyers–the US type of microlight would have to be larger and have more internal space.
~

[Magiver]

@F. U. Shakespeare

I need to digest the details of this incentive. Can someone explain why it phases out? I realize that we hope hybrids will get cheaper, so it may become less needed.

But if the government offers a tax break to encourage people to buy a more fuel-efficient car, they are trading tax revenue to decrease demand for oil. Until fuel prices start to level off, this sounds to me like a worthwhile tradeoff.

It phases out because it’s a time-sensitive redistribution of tax dollars. Put another way, it’s a short term solution to a short term problem. The older rebate was due to expire soon. This is both a re-issue and and a substantial raise. If it’s true that Toyota and Honda are eating some of the costs of the hybrid to gain market share then maintaining a high demand for them (with a rebate) is useful for both the manufacturer and the consumer.

I’m in the same position you are. I get a minimum of 30-33 mpg around town and 36 on the highway so it doesn’t make sense for me to buy a new car. I’ve got quite a miles left on my car so it would take a big incentive to get me to switch.

I would expect the next generation replacement for gasolene to carry a similar rebate until it is popularized.

[mike1dog]

I’m not a big fan of hybrids. There are too many questions. One is how long will these batteries last? If you’ve had a laptop, which uses the same basic battery technology, you’ll notice that as time goes on the batteries lose some of their efficiency. I know they are warranteed for 100k miles, but I don’t know at what point Toyota would consider the battery “dead” and in need of replacement. If it’s beyond the warranty period, the battery pack would cost about five thousand dollars. More than the car will be worthat the time. Will you be able to even drive the car without replacing the battery if it needs it? What will your fuel efficiency be then? The Prius costs about three grand more than the corolla, which will get forty miles to the gallon. I’ve never seen anyone in any road test of the Prius get the 61 mpg. The best I’ve seen is around 50, with some dipping into the high thirties. I’ve read that there are some fire departments that have said they won’t rescue people in hybrid cars if they’re significantly damaged out of fear of electocution. All in all, I’d rather get a conventional car that gets 40 mpg.

Plus, nobody has ever said what will be done with these battery packs after the car has ended its useful life. Is there a recycling program for them? Will junkyards be able to handle them?

[kanicbird]

Bush actually has a energy policy, which has been unusual in recent history.

Not that it was apparent that we needed one before Bush, but now that the $#!+ has hit the fan, so to speak, it is really needed, and only the responsible thing to do.
Hybrids hav etheir benifits and drawbacks, and not practical (yet) for highway driving. I personally would like to see a different type of hybrid for city dewellers, one that opperates as a plug in electric for most of the activities, but has a onboard generator which can be activated for long trips.

[Metacom]

@Sam Stone

If you really believe that small government committees can make better decisions about the market than can the market itself, then you should be in favor of an economy completely run by the government. That’s been tried. Didn’t work so well.

:rolleyes: I’m not talking about a small government comittee making better decisions then the market itself. I’m talking about the most efficient way for the government to stimulate research on new kinds of power plants for cars. Ain’t the same thing.

Do you really that, all else being equal, these tax credits will lead to more research then simply taking the money that we’d spend on the tax credits and giving it to companies and universities that currently have relevant research centers? Or even offering the money as a prize to the group that can produce the most fuel efficient power plant?

[John_Mace]

[QUOTE=ExTankHmmm. Not a huge fan of using higher taxes as a means of channeling consumer trends, as it disproportionately impacts the lowest income levels. Higher taxes on petroleum products will show up as higher prices for just about any consumer goods: the grocery bill, the electric bill, the cost of commuting, etc. And, the lower income levels have the least options for “switching up” to a new car, even if the gas savings translate almost immediately into significant savings.[/QUOTE]

Well, maybe I wasn’t clear. I’m not talking about “channeling consumer trends” in the sense of social engineering, but making the price of fuel contain the cost that fuel conspumption has on society (building roads, pollution, what-have-you). It’s directing the taxes at the actual act of consumption. This allows standard market mechanisms to kick in. The price you pay for something is the critical piece of information you need to have to make the appropriate choices. Poor people need to know the price of a commodity, too. We have a way of ammeliorating the effects of poverty (ie, welfare) and we can ajust that mechanism accordingly.

[Sam_Stone]

@ExTank

Thanks for the link; the hybrids appear to be a lot more sanely priced than I had imagined. The one thing I still see going against them is that they’re compacts, which really doesn’t make them all that family friendly.

I think you’re a little behind the curve on where hybrid technology is at. There are now hybrid SUVs, half-ton pickups (next year), and sports cars. Some hybrid vehicles perform better than their standard counterparts.

If you want to see what you can do with a hybrid today, have a look at the Lexus RX400h.

I’m a huge fan of hybrid, because it contains one enabling technology: It separates the drivetrain from the fuel source. In a standard gasoline engined car, everything depends on gasoline. If it’s not available, the car is useless.

But hybrid adds a layer of abstraction. The real motive force is electricity, with the gasoline engine charging the batteries and providing extra power. This means that if we come up with, say, a hydrogen fuel cell, we’ll be able to make a fuel cell electric vehicle very easily. The gas engine is just one component that can be plugged into the drivetrain or not.

[Sam_Stone]

@DougC

• • • I think the hybrid program is a dumb idea, because there’s very little good evidence that a hybrid car does less damage to the environment over its useful life than a gasoline-engined vehicle would.

It’s still early in the hybrid world. Wait until plug-in hybrids show up in a couple of years. They’ll get more like 80-100 mpg in city driving, with no loss in utility or performance.

• What would be better is a new class of vehicle that had lower crash standards than regular cars have now, but that also has restrictions on total power and weight. Say perhaps an upper weight limit of 1,800 lbs, and a power restriction of 60 horsepower.

There’s nothing stopping people from building such vehicles now. A Lotus Elise weighs 1800 lbs. The reason you don’t see them all over the place is because we like vehicles that have a lot of mass. We like heavy frames that can take the pounding they get from poor roads. We like sound isolation, and we like to have room.

There’s already a vehicle you can buy in the U.S. that’s basically a motorcycle with a hard body around it. It has outrigger wheels that deploy whenever the vehicle slows enough to make it unstable, and this is totally transparent to the driver. It seats two plus luggage, and is quite luxurious. It performs like a Ferrari and gets 80 mpg. And the company can’t sell them.

The only thing preventing the widespread adoption of such vehicles is the fact that no one wants to buy them.

[Metacom]

@Sam Stone

There’s already a vehicle you can buy in the U.S. that’s basically a motorcycle with a hard body around it. It has outrigger wheels that deploy whenever the vehicle slows enough to make it unstable, and this is totally transparent to the driver. It seats two plus luggage, and is quite luxurious. It performs like a Ferrari and gets 80 mpg. And the company can’t sell them.

Er, that sounds pretty cool. What is it?