2 ms·
I don't disagree with the main point of your post, but I do disagree on this minor statement here: > electric car subsidies go to car owners, > not man
by notdonspaulding 10y ago
I don't disagree with the main point of your post, but I do disagree on this minor statement here:
> electric car subsidies go to car owners,
> not manufacturers
I don't know the specifics of buying an electric car, but most tax-break subsidies like this do in fact end up going to the manufacturer, just indirectly.
How? Say it costs $10K to make an electric car, and the manufacturer thinks the market will support a 50% profit margin, so they price the car at $15K. Now the government wants to induce consumers to buy this car, so they offer a $5000 tax rebate if you purchase one. The goal is to incentivize customers to think "Wow, I can get this car for 2/3 of what it would otherwise cost me." And if the only two actors in the scenario were the government and the consumer, it would work that way. But the manufacturer is not naive. If they thought consumers were willing to purchase it at $15K outright, they'll still be willing to purchase it at $20K (less the $5K tax rebate). In effect, the price of the subsidized good goes up by some amount close to the subsidy.
I'm not merely theorizing here. I built a house in 2011 and was pricing out HVAC solutions. My subcontractor said conventional heat+AC would cost me $7,000. Geothermal (the energy-saving option) would cost me $21,000. The hard costs of a geothermal system are twice as much as a conventional system (it costs the HVAC subcontractor ~$3,500 in materials for conventional and ~$7,000 for geo), yet the cost to me was 3X! I got similar quotes from multiple subs.
I questioned this price difference, and all the subs said, "Yeah, it's 3X, but there's currently a 30% tax break if you buy the geo system, so it's like it's really only $14K, or 2X".
There should be an economic proficiency test that all legislators are required to pass. sigh